13 November 2018

Measuring the Geopolitical Fallout From the U.S. Midterm Elections

The Democrats' newfound control over the U.S. House of Representatives probably won't translate into greater control of the president's foreign trade powers. With vocal critics of Trump's trade policies out of the Senate, the new House will instead try to influence congressional approval for future trade negotiations. The president has significant clout over foreign policy, but Congress can still try to build momentum for heavier sanctions against Russia or measures to rein in Saudi Arabia. Gridlock will dominate some parts of the policymaking process under a divided Congress. The House probably won't be able to go after the tax reform that has already passed, but White House priorities such as immigration reform and additional tax cuts are now likely off the table.

The Nov. 6 U.S. midterm elections delivered the mixed result for Congress that had been widely anticipated. The Democratic Party won control of the House of Representatives, while the Republican Party's advantage in the Senate widened slightly. The divided control of Congress means that White House policy priorities in some areas will face more resistance from lawmakers, with the inevitable partisan gridlock providing fodder for both parties ahead of the 2020 presidential race. Here's what to expect over the months ahead in terms of the election's most relevant geopolitical implications.

The Big Picture

Midterm elections delivered the U.S. House of Representatives to the Democrats, but their electoral advances will affect only a portion of President Donald Trump's policy priorities. There are places in U.S. foreign and domestic policy where Trump can still continue to try to achieve his aims independent of Congress. However, the Democrats' victory will give them more leverage over federal funding and the ability to approve (or vote down) pending legislation.

Little Change on Trade

A divided Congress will not increase the potential for a stronger check on the trade powers being exercised by President Donald Trump. For the most part, Democratic candidates who campaigned on a message of opposing Trump's trade agenda did not fare well in the election.

A number of proposals have been floating in Congress over the past several months that focus principally on curbing presidential authority granted under Section 232 of the Trade Expansion Act of 1962, under which Trump has exercised broadly to impose tariffs and quotas in the name of national security. However, those proposals were largely a reaction to Trump's threat to withdraw the United States from the North American Free Trade Agreement without a replacement agreement and to impose auto tariffs on its North American partners. The 11th-hour deal reached on the United States-Mexico-Canada Agreement (USMCA) to supplant NAFTA largely neutralized that threat, robbing momentum from the movement to institute a congressional check. Democrats will gain a stronger presence on the House Ways and Means Committee, but two of the Senate's most vocal critics of the president's trade policy, Sens. Jeff Flake and Bob Corker, will not return to their seats.

The White House is still holding onto the threat of auto tariffs as a point of leverage in its trade negotiations with the European Union and Japan, but any negative domestic reaction from auto tariffs slapped on partners outside North America will be more muted. The best hope for the European Union and Japan on trade at this point is that a Commerce Department report on auto tariffs, expected to come out by mid-February, will clarify the extent of expected White House action on the auto tariff threat so they can adjust their own negotiating strategies accordingly.

House approval will be required to pass implementing legislation for any free trade agreements the White House may negotiate. A Democratic-controlled House will be more forceful in demanding that the White House conduct trade negotiations in line with priorities outlined through the Trade Promotion Authority process, including pushing for high labor and environmental standards. Democrats are not likely to derail approval of the USMCA, but their concerns may weigh on the trade deals that the White House is attempting with the European Union, Japan and the United Kingdom that would require bipartisan support.
The Effects on Foreign Policy

Though Congress generally has limited clout over U.S. foreign policy, there are a few areas where congressional intervention could have an impact.

On Saudi Arabia: There are few defenders of Saudi Crown Prince Mohammed bin Salman remaining in Congress in the wake of the disappearance and apparent murder of journalist Jamal Khashoggi. Now that the midterms are complete, Congress will be free to again focus on Saudi Arabia policy and solidify the bipartisan forces needed to pass legislation. A review of the extent of U.S. cooperation with Saudi Arabia in Yemen's civil war will be first up, and the likely result in Congress will at least be some restriction — a vote in March to limit aid for the Saudi war effort narrowly failed despite bipartisan support. Beyond Yemen, moves to sanction Saudi officials, delay or cancel arms deals, or block cooperation on development of a Saudi civilian nuclear program — will require Congress to navigate between the imperatives of maintaining the Saudi alliance and the need to mitigate the excesses of the crown prince's rule.

Key Democratic Sens. Bob Menendez and Chris Murphy, who both won their re-election bids, have backed legislation that seeks to limit arms sales to Saudi Arabia. Newly elected U.S. Rep. Ilhan Omar, a Democrat from Minnesota, criticized U.S. arms sales to the Saudis throughout her campaign. Another incoming freshman representative, Tom Malinowski, a former assistant secretary of state for democracy, human rights and labor, has been a strong voice against the U.S. arming Saudi Arabia in its Yemen campaign.

On Iran: The current U.S. policies toward Iran likely will not face much in the way of congressional action. Congress is not going to be a significant check to the aggressive sanctions policy underway, as almost every significant aspect of U.S. policy on Iran falls under the purview of the executive branch. The Trump administration has floated the possibility of seeking a treaty with Iran, which would require bipartisan support, but at this point, the prospect of Iran coming to the negotiating table is extremely low.

On China: Trump's broad assault on China has largely garnered bipartisan support, as evidenced by Congress' approach to subjecting Chinese trade and investment in the United States, particularly in sensitive sectors like technology, under more oversight and restrictions. Now that some political pressure on Trump has eased with the conclusion of the midterms, and trade negotiations face more obstacles ahead, China will be bracing itself for more tariffs.

Historically, Congress has been more assertive than the White House in pushing pro-Taiwan policy, another area that enjoys bipartisan consensus. As part of its broader competition with China, the White House has shown greater willingness to back Taiwan more prominently, though key Cabinet figures like U.S. Secretary of Defense James Mattis have advocated avoiding provocations that could result in a Chinese military response. The key congressional hawks on Taiwan policy to watch include Menendez and Senate colleagues Cory Gardner, Marco Rubio and Ed Markey.

On Russia: With the Democrats in control of the House, the White House will fall under more scrutiny in the probe to determine the extent of Russian interference in the 2016 national elections — an ongoing thorn in the Trump administration's relationship with the Kremlin. Nonetheless, a U.S. imperative to keep a strong check on Russian aggression abroad and hold Moscow accountable for its cyberwarfare campaigns has drawn bipartisan support. The conclusion of the midterms will now bring legislation to expand sanctions like the Chemical and Biological Weapons Control and Warfare Elimination Act and the Defending American Security from Kremlin Aggression Act back into focus. It will be important to watch whether Congress will continue to incrementally build sanctions (targeting specific individuals and entities) or go for the more aggressive option of sanctioning Russian sovereign debt and bank transactions.

On North Korea: Similar to Iran policy, the North Korean portfolio remains largely in the executive branch's hands at this stage. As the White House tries to break out of a negotiation impasse with Pyongyang, any attempt to ease sanctions to further the denuclearization process could be met with tight scrutiny from national security hawks in Congress looking for more visible evidence of North Korea's commitment to denuclearization first. One area to watch is whether Congress may eventually try to impose conditions on any easing of sanctions with legislation, thereby hampering the president's personal guarantees to North Korean leader Kim Jong Un.

Democratic control of the House means the Trump administration will find its push for immigration reform virtually dead.

Forcing an Immigration Policy Shift

Democratic control of the House means the Trump administration will find its push for immigration reform virtually dead. House lawmakers will resist the administration's demands for border wall funding along with its proposals to do away with the diversity visa lottery and to shift the focus of the legal immigration system toward awarding permanent residency to those with the highest professional merits.

Congress will also now be less likely to agree on federal budget cuts to foreign aid to Central America. Threats to cut aid have been a principal means by which the White House has tried to pressure Central American governments to stop their citizens from crossing the U.S.-Mexican border illegally. Faced with the loss of leverage against those governments, the administration's focus will shift to Mexico. It will press the Mexican government to maintain its policy of arresting and removing migrants detained in southern Mexico.
What Will Change for Defense?

Democrats are set to fill some important positions in Congress such as leadership of the House Armed Services and House Appropriations committees. That will put the party's lawmakers in a strong position to challenge the White House over issues they have, on the whole, opposed previously. These include further increases in defense spending, plans to move ahead with the creation of a Space Force military branch, more intervention by the U.S. military abroad and an expansion of the nuclear force.

Furthermore, with Congress divided between the two parties, it becomes more likely that political gridlock will interfere with setting defense budgets and a likely return to overreliance on disruptive continuing resolutions, particularly as automatic spending caps are set to return in fiscal 2020. Such a disruptive process will complicate U.S. efforts to seamlessly shift its strategic focus from the global war on terrorism to the unfolding great power competition with China and Russia.
Spending and Regulation Battles Ahead

Partisan wrangling will also likely derail bills to fund other aspects of government and bring up a wide range of issues that could lead to a potential showdown between Trump and Congress. A recurring standoff between Democrats and the president over funding for the border wall will elevate the threat of a government shutdown as the lame duck Congress comes up against a Dec. 8 deadline to fund parts of the government, including the Department of Homeland Security. After the next session of Congress convenes in January, Democrats will be unable to make substantial changes to the tax reform measures passed in 2017 and reverse the course of widening budget deficits, but Trump is also unlikely to get his wish of another tax stimulus ahead of 2020 elections.

Technology policy will be another key area to monitor, especially as a split Congress seeks common ground in developing legislation to address data privacy concerns (an issue that will resonate more among Democrats) and to push antitrust enforcement for big tech firms.

In the months ahead, Saudi Arabia and other major oil producers will have more reason to worry about a pending bill that would strip away sovereign immunity in antitrust laws for OPEC members and their national oil companies. Democrats could try to use the No Oil Producing and Exporting Cartels Act (NOPEC) proposal to pressure the White House to take a harder line against Saudi Arabia. Trump, who has criticized the cartel over oil prices, has not stated his position on the bill, but the White House generally tends to try to neutralize legislative moves that could risk serious disruption of U.S. relations with Gulf allies.

White House Watch

A Democratic House could add insulation to the ongoing investigation by special counsel Robert Mueller into possible Russian interference in the 2016 U.S. elections. Should that investigation turn up evidence of collusion between the Trump campaign and Moscow or any other offense providing grounds for impeachment, House Democrats could possibly launch the process against Trump. However, without the two-thirds Senate majority that would be needed to convict him, many Democrats would be wary that such an aggressive strategy could backfire in the 2020 race.

A shuffle of key White House positions could also follow the end of the midterms. Just hours after the midterm votes were counted, Trump forced Attorney General Jeff Sessions to resign, and more Cabinet moves are expected ahead. The administration will spend a great deal of energy in trying to win confirmation of Sessions' replacement. And any move to replace Mattis or Treasury Secretary Steven Mnuchin would weaken some of the moderating elements in the White House on foreign, defense and trade policies.

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