Senate deal puts Obama trade plan back on track

Republicans and pro-trade Democrats have helped US President Barack Obama find a way around one of the biggest obstacles facing a Pacific Rim trade pact by keeping tough new currency measures aimed at China out of key legislation.

The Senate on Thursday voted to begin debate on a bill to grant the president the "fast-track" authority he needs from Congress to both wrap up negotiations on a Trans-Pacific Partnership with Japan and 10 other economies and guarantee its smooth passage through Congress.

That vote came just two days after Democrats in the Senate handed Mr Obama a stinging rebuke by blocking the bill's progress. But more importantly it was the result of a deal that kept a provision to impose punitive trade measures on any country found guilty of currency manipulation out of the main trade bill.

As part of that compromise, the Senate on Thursday voted to pass a customs bill that includes the currency measures.

The consensus view, however, is that the provisions pushed by Democrats and a small number of Republicans were unlikely to become law as they would struggle for support in the lower House of Representatives and be vetoed by the president if they ever reached his desk.

Charles Schumer, the New York Democrat who has pushed the currency provisions hardest, insisted that Thursday's vote remained meaningful. "China seems to feel that they can get away with any kind of trade misdeed," he said ahead of the vote. "This currency bill will be finally the first real shot across the bow to China that you can't keep getting away with it."

Republicans held their nose as they prepared to vote for the customs bill on Thursday. "This is a clear road to trade wars and currency wars replete with competitive devaluations," said Orrin Hatch, the Republican chair of the Senate Finance Committee.

But the procedural dance in the Senate brought Mr Obama's trade agenda back on track while also offering a way around what had been one of the knottiest issues facing his trade agenda.

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The administration has opposed those demands vehemently, arguing that currency politics were better dealt with via diplomacy and in other forums such as the G20. It has also argued that trying to insert currency provisions into the TPP would cause the deal to collapse.

With the manoeuvre to keep the punitive currency provisions out of the bill to grant the president fast-track authority the Senate appears to have at least temporarily forestalled the currency push.

Thursday's vote in the Senate over the bill to grant Mr Obama what is formally called Trade Promotion Authority technically only opens debate on the legislation. A more definitive vote to pass the bill is expected in the coming days, although that now appears a foregone conclusion.

The legislation also still faces a tough fight in the lower House of Representatives, although Republican leaders and administration officials say they are confident they can garner enough support.

The Obama administration needs fast-track authority in order to guarantee Japan and other TPP countries that Congress will not simply reopen any deal it negotiates when it comes time for ratification.

It wants to conclude negotiations in the coming weeks in order to return to Congress later this year to ratify the pact ahead of the 2016 election year.

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