Why Obama Is Wrong and Warren Is Right on Trade Bill Quarrel [View all]

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"...Elizabeth Warren has warned leery Democrats that a fast-track trade bill could undo U.S. laws such as the Dodd-Frank banking regulations later. A number of constitutional scholars and other legal experts say she’s right..."

In her quarrel with President Barack Obama over trade legislation, Elizabeth Warren has got the law on her side. The Massachusetts senator has warned leery Democrats that a fast-track trade bill in Congress now could undo U.S. laws such as the Dodd-Frank banking regulations later. A number of constitutional scholars and other legal experts say she’s right. The reason: An arcane provision of the trade legislation would make it easier for a future president and Congress to team up to undercut existing statutes, even ones with little to do with trade. The risk to Dodd-Frank is “real and meaningful and worth worrying about,” said Michael Barr, Obama’s former assistant Treasury secretary for financial institutions and an architect of the law.


The fight pits two of the most popular Democrats in the country against each other. Obama’s support of fast-track trade authority and regional free-trade deals under negotiation with Pacific Rim and European nations places him sharply at odds with most of his party. Warren says she’s concerned that Republicans could include provisions in a future trade deal undercutting Dodd-Frank. They could then pass it with a simple majority in the U.S. Senate because the fast-track bill would prevent Democrats from blocking the legislation through a filibuster. Normally, it takes 60 votes to break a filibuster.

“In the next few weeks, Congress will decide whether to give the president fast-track authority,” she said in a May 5 speech to the Institute for New Economic Thinking in Washington. “This is a long-term problem -— a six-year problem. If fast-track passes, a Republican president could easily use a future trade deal to override our domestic financial rules.”

‘Absolutely Wrong’

Obama called Warren’s contention “absolutely wrong” in an interview with Yahoo News and said he’d “have to be pretty stupid” to agree to a trade deal that would undermine the Dodd-Frank law he signed himself. The law, intended to rein in banks considered responsible for the 2008 financial crisis, is deeply popular with Democrats, and Warren’s contention that a trade deal might undermine it could help rally Democratic opposition. “Our priority has and continues to be defending against any attempts to undermine these critical protections,” Whitney Smith, a spokeswoman for the Treasury Department, said in an e-mail. “Our trade agreements would not weaken our ability to implement the law now or in the future.” On Warren’s side: One of the nation’s preeminent constitutional law scholars, Laurence Tribe of Harvard University, who counts Obama as a former student. “Any act of Congress or duly ratified treaty overrides any contrary prior federal legislation,” he said in an e-mail. The bill to grant the president fast-track authority for six years is expected to pass the Senate next week. It faces greater resistance from House Democrats.

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Sovereignty Provision

White House Press Secretary Josh Earnest said Wednesday that no trade agreement concluded under the fast-track authority would change any U.S. laws. “I will show you the specific text that’s included in the legislation that specifically, word for word, bars the agreement from being used to change U.S. law,” Earnest said. “That’s written into the bill. That is a concern that people do not have to have.” The so-called “sovereignty” provision Earnest cited indeed exists, preventing the trade agreement itself from overriding U.S. laws. The fast-track authority, however, doesn’t just govern the trade deal; it would speed consideration of legislation Congress must pass to implement the pact. That legislation could change U.S. laws. “It is possible it could undermine Dodd-Frank,” Krist said. European officials and financial industry executives are itching to loosen key requirements the Dodd-Frank law established to reduce the threat of another financial collapse, Barr said. Their targets include regulations on derivatives trading by bank affiliates outside the U.S.; a ban on proprietary trading, named after former Federal Reserve Chairman Paul Volcker; and the rules on capital requirements, he said. The Europeans also want banks to be able to count as acceptable capital higher-yielding assets that carry more risk, Hufbauer said.




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http://www.bloomberg.com/politics/articles/2015-05-15/warren-claim-that-trade-bill-could-undermine-dodd-frank-is-right