June 11, 2015
Yes folks, it’s desperation time for the supporters of the Trans-Pacific Partnership (TPP). To get this sucker through they will say anything, because hey, making stuff up for the cause always sells in official Washington.
In his Washington Post column, George Will argued for the TPP because we need it to increase growth. He pointed to the 0.7 percent drop in GDP in the first quarter as illustrating the problem. (This decline was of course mostly due to the weather, but whatever.) If we view this reported drop in GDP as the problem, and the TPP as the solution, then according to the most optimistic estimates available, we will have eliminated roughly half the problem more than a decade from now when the effects of the TPP are fully felt. According to projections from the Peterson Institute for International Economics, the TPP will eventually increase GDP by 0.38 percentage points.
This study shows gains that are more than twice as large as an earlier version. An analysis by the United States Department of Agriculture showed minimal gains.
These analyses are all likely to overstate the gains from the TPP since none of them factor in the higher costs for drugs and other products as a result of the stronger and longer patent and copyright protections in the TPP. These protections are equivalent to massive tariffs barriers. In the case of prescription drugs, patents can raise the price a hundredfold, the equivalent of a tariff of 10,000 percent. And, as econ textbook fans everywhere know, tariff barriers lead to distortions and corruption.
It is quite likely that if these higher prices were factored into the analysis, the TPP would be shown to reduce growth. (We spend over $400 billion a year on pharmaceuticals alone, or 2.2 percent of GDP.) But no one would want the evidence to undermine a trade deal that will give more money to rich people.
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