The slow, painful death of the TPP
from Dean Baker
In spite of the hopes of many elite types for a last-minute resurrection, it appears that the Trans-Pacific Partnership (TPP) is finally dead. This is good news, but it took a long time to kill the deal, and the country is likely to pay a huge price for the execution.
The basic point that everyone should know by now is that the TPP had little to do with trade. The United States already had trade deals with six of the 11 other countries in the pact. The trade barriers with the other five countries were already very low in most cases, so there was little room left for further trade liberalization in the TPP.
Instead, the main purpose of the TPP was to lock in place a business-friendly structure of regulation. The deal was negotiated by a series of working groups that were dominated by representatives of major corporations. The regulatory structure was to be enforced by investor-state dispute settlement tribunals. This is an extrajudicial system that would be able to override US laws with secret rulings that were not bound by precedent or subject to appeal.
In addition, the TPP would strengthen and lengthen patent and copyrights and related protections. This is protectionism: It is 180 degrees at odds with free trade. These protections can raise the price of protected items, like prescription drugs, by a factor of 10 or even 100. This is equivalent to tariffs of several thousand percent, with the same waste and incentives for corruption. Free-traders oppose such protections, if they are honest.
The dishonesty used to push the TPP continued with the post-mortems. Both The New York Times and The Washington Post gave us stern warnings about how China is likely to capitalize by pushing ahead with its own trade deal for East Asia and the Pacific. This appeal to anti-China sentiments is striking, since it completely contradicts everything that the “free traders” ordinarily say about trade.
First, we ordinarily believe that more prosperous trading partners are good for the United States. If China and other countries in the region reduce their trade barriers, it should lead to faster growth, making them better customers for US exports and better suppliers of high-quality imports. This is the reason that the United States generally supported the growth of the European Common Market, and later, the European Union.
There is an argument that we may not want to see China, a country without a democratic government or respect for basic human rights, get even stronger. But it is not clear what the alternative proposal is. Furthermore, almost without exception, the current group of China fearers was 100 percent supportive of admitting China into the World Trade Organization without imposing conditions like respecting the rights of workers to organize. In other words, no one should take these people’s concerns on China very seriously.
If we do want to push forward on “free trade,” we should take the concept seriously and not just use trade pacts as a tool to redistribute income upward. A good place to start would be to focus on removing the barriers that prevent foreign workers in highly paid professions (e.g. doctors, dentists, lawyers) from working in the United States.
It is illegal to practice medicine in the United States unless you complete a US residency program. As a result of such restrictions, our doctors earn on average more than $250,000 a year, twice as much as they get in other wealthy countries. Free trade in doctors could save us roughly $100 billion annually (around 0.6 percent of GDP). There might be comparable gains from free trade in the other highly paid professions. We can design international standards that ensure high quality, but open the door to people trained in other countries.
When it comes to technology, instead of patent and copyright monopolies, how about instead developing mechanisms for freely disbursing new innovations all over the world? There is a lot to the argument for the benefits of free trade. Let’s apply it to innovations in medicine, software and other areas. We know how to develop mechanisms for financing research where the cost could be parceled out among countries.
If our trade deals were actually about free trade instead of increasing profits for the pharmaceutical, software and entertainment industries, this is the direction trade negotiators would be looking. But given the fealty of our politicians to major corporate interests, they don’t even want to see alternatives to government-granted monopolies discussed. There’s no time for real free trade in these people’s minds.
If the politicians want to get serious about real free trade agreements, it is easy to come up with progressive directions for such deals. In the meantime, we can celebrate the well-deserved death of the TPP, which has proved to be enormously costly for the country.
The decision by proponents of the TPP to push ahead with their deal almost certainly cost Hillary Clinton the election. Trade was a big issue in swing states like Michigan and Pennsylvania, and the people who cared about trade overwhelmingly voted for Donald Trump. So the TPP might be dead, but we will have to deal with its legacy in the form of President Trump.