June 02, 2016
Roger Cohen tells us it does. In a column drafted in Vietnam, he tells us that the Trans-Pacific Partnership (TPP) is all about shoring up East Asian countries in their resistance to China.
That’s an interesting thought. After all, the hardest battles at the end were about getting longer and stronger patent-related protections for the pharmaceutical industry. It’s not obvious how that helps us gain solidarity among the people of the region against China.
There is much else in the deal that doesn’t obviously help us vis-a-vis China. For example, the Investor State Dispute Settlement mechanism, which institutionalizes the far-right wing legal doctrine of regulatory takings (we have to compensate foreign investors for any law or regulation that reduces their expected profits), doesn’t seem like the sort of thing that advances an anti-China coalition.
Nor is it obvious why we would not have had stronger rules of origin requirements. As the TPP is written, China will be able to hugely increase the amount of goods it can export to the United States tariffs free by having them assembled into products in one of the TPP countries. This is not to argue that we should be looking to construct a trade deal to marginalize China, but if that were the point, the TPP would probably not be that deal.
There are some items that Cohen doesn’t get quite right in his column. He tells readers:
“The Peterson Institute for International Economics, in a report issued this year, found the accord would stimulate job ‘churn’ but was ‘not likely to affect overall employment in the United States,’ while delivering significant gains in real incomes and annual exports.”
Actually, the report did not “find” that the TPP would not lead to substantial job loss, that was an explicit assumption in its modeling. The model assumed that the TPP did not affect the trade balance. If one or more of the TPP countries deliberately hold down the value of their currency to increase their trade surplus, this could lead to substantial job loss, but this possibility was ruled out by assumption in the Peterson Institute’s analysis.
Their modeling also did not incorporate the negative effects of higher prices for drugs and other items as a result of stronger and longer patent and copyright protection. These protections will decrease the purchasing power of consumers throughout the region thereby acting as a drag on growth.
It is also important to note that the “significant gains in real incomes” were equal to 0.5 percent of GDP by 2030. That’s equal to roughly three months of growth. (The International Trade Commission projected gains of less than half this size in its recent report.) Cohen also neglected to mention that the Peterson Institute report found that the TPP would lead to “significant gains” in imports. It assumed that the change in imports and exports were equal.
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