It would have been worth reminding people of this fact in an article on a proposal in California to lower drug prices. The piece might have led readers to believe that the proposal was interfering with a free market. Actually, it is limiting the ability of companies to take advantage of a government granted monopoly.
It would have been worth reminding people of this fact in an article on a proposal in California to lower drug prices. The piece might have led readers to believe that the proposal was interfering with a free market. Actually, it is limiting the ability of companies to take advantage of a government granted monopoly.
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The Washington Post is at it again, using a front page piece to repeatedly tell readers that the protectionist pacts crafted by recent administrations are “free trade.” The phrase appears in each of the first two paragraphs.
Of course, the deals are not about free trade. They do deliberately place U.S. manufacturing workers in direct competition with low-paid workers in the developing world. This has the predicted and actual effect of lowering their wages. However, the deals leave in place the protections for highly paid professionals like doctors and lawyers.
It is still illegal to practice medicine in the United States unless you go through a U.S. residency program here. As a result of protectionist measures our doctors earn on average more than twice as much as doctors in other wealthy countries. This costs us roughly $100 billion a year in higher health care bills. “Free traders” would be upset about this.
The trade deals also put in place longer and stronger patent and copyright protections. As a result of these protections, we will spend over $430 billion this year on prescription drugs that would cost around one-tenth of this amount in a free market. Of course, protectionism like this is not free trade.
Educated types think they have to support free trade, so labeling these trade deals as “free trade” pacts undoubtedly wins them support among a substantial segment of the population. However, it is not accurate.
The Washington Post is at it again, using a front page piece to repeatedly tell readers that the protectionist pacts crafted by recent administrations are “free trade.” The phrase appears in each of the first two paragraphs.
Of course, the deals are not about free trade. They do deliberately place U.S. manufacturing workers in direct competition with low-paid workers in the developing world. This has the predicted and actual effect of lowering their wages. However, the deals leave in place the protections for highly paid professionals like doctors and lawyers.
It is still illegal to practice medicine in the United States unless you go through a U.S. residency program here. As a result of protectionist measures our doctors earn on average more than twice as much as doctors in other wealthy countries. This costs us roughly $100 billion a year in higher health care bills. “Free traders” would be upset about this.
The trade deals also put in place longer and stronger patent and copyright protections. As a result of these protections, we will spend over $430 billion this year on prescription drugs that would cost around one-tenth of this amount in a free market. Of course, protectionism like this is not free trade.
Educated types think they have to support free trade, so labeling these trade deals as “free trade” pacts undoubtedly wins them support among a substantial segment of the population. However, it is not accurate.
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Mark Landler used his “White House Letter” column to tell readers that President Obama will “need his oratory powers to sell globalization.” This assertion is wrong. Landler is referring to the Trans-Pacific Partnership (TPP) which can more accurately be described as a protectionist agenda than globalization.
The reality is that the trade barriers between the United States and the other countries in the TPP are already very low. The U.S. already has trade deals with six of the other eleven countries in the TPP and even in the case of the other five most of the barriers are already at or near zero. This is why the International Trade Commission (ITC) projected that in 2032, when the gains from the deal will be mostly realized, it will have increased national income by just 0.23 percent, a bit more than one month’s growth.
While the deal does little to reduce traditional trade barriers, the TPP increases protectionism in the form of stronger and longer copyright and patent protection. The provisions in the TPP will cause people to pay more for everything from prescription drugs and computer software to recorded music and old books. The impact of the protectionist measures in the TPP are likely to be much more important in slowing growth than the tariff reducing measures are in enhancing growth. (The ITC did not include the impact of stronger protections in its analysis.)
New Zealand’s government estimated that the copyright extension required by the TPP, from 50 years to 70 years, would cost the country 0.023 percent of its GDP annually. This assessment implies that this one narrow provision, in a country that already has strong copyright protection, will cost the country one-tenth as much as what the ITC projected the United States will gain from the deal. The impact of the stronger protections for drugs and other products will almost certainly be many times larger than the impact of this copyright provision.
It is also worth noting that stronger patent and copyright protection shifts income upward. Not many low-income people own patents and copyrights. By making these protections stronger, under standard economic assumptions, the United States trade deficit in manufactured goods and other items will increase. (It is worth noting that the TPP does nothing to weaken the protections for highly paid professionals like doctors and dentists. These protections add over $100 billion a year to the country’s health care bill.)
The TPP would also make the far-right legal doctrine of compensation for regulatory takings part of U.S. law. Under current law, if Congress or a state legislature determine that a company’s pollution imposes a health or environmental hazard, they can simply prohibit the company from polluting. However, under the TPP governments would have to compensate foreign investors for the profits they would lose if they are not able to pollute.
NAFTA already has a similar provision, but TPP would greatly expand the number of companies in a position to sue for regulatory takings. It could also create a situation in which U.S. companies pressure Congress to grant them the same treatment as foreign companies in getting compensation for regulatory takings. (U.S. companies could also transfer divisions to a foreign based subsidiary or sell them to a foreign company if they thought it was likely that they could face a reduction in profits due to regulatory measures.)
It is very generous of Mr. Landler to call the push for greater protectionism and the advancement of a right-wing legal doctrine “globalization,” however these actions do not fit the normal meaning of the term.
Note: this was altered slightly from an earlier version to clarify the issue on regulatory takings. Thanks to Robert Salzberg.
Mark Landler used his “White House Letter” column to tell readers that President Obama will “need his oratory powers to sell globalization.” This assertion is wrong. Landler is referring to the Trans-Pacific Partnership (TPP) which can more accurately be described as a protectionist agenda than globalization.
The reality is that the trade barriers between the United States and the other countries in the TPP are already very low. The U.S. already has trade deals with six of the other eleven countries in the TPP and even in the case of the other five most of the barriers are already at or near zero. This is why the International Trade Commission (ITC) projected that in 2032, when the gains from the deal will be mostly realized, it will have increased national income by just 0.23 percent, a bit more than one month’s growth.
While the deal does little to reduce traditional trade barriers, the TPP increases protectionism in the form of stronger and longer copyright and patent protection. The provisions in the TPP will cause people to pay more for everything from prescription drugs and computer software to recorded music and old books. The impact of the protectionist measures in the TPP are likely to be much more important in slowing growth than the tariff reducing measures are in enhancing growth. (The ITC did not include the impact of stronger protections in its analysis.)
New Zealand’s government estimated that the copyright extension required by the TPP, from 50 years to 70 years, would cost the country 0.023 percent of its GDP annually. This assessment implies that this one narrow provision, in a country that already has strong copyright protection, will cost the country one-tenth as much as what the ITC projected the United States will gain from the deal. The impact of the stronger protections for drugs and other products will almost certainly be many times larger than the impact of this copyright provision.
It is also worth noting that stronger patent and copyright protection shifts income upward. Not many low-income people own patents and copyrights. By making these protections stronger, under standard economic assumptions, the United States trade deficit in manufactured goods and other items will increase. (It is worth noting that the TPP does nothing to weaken the protections for highly paid professionals like doctors and dentists. These protections add over $100 billion a year to the country’s health care bill.)
The TPP would also make the far-right legal doctrine of compensation for regulatory takings part of U.S. law. Under current law, if Congress or a state legislature determine that a company’s pollution imposes a health or environmental hazard, they can simply prohibit the company from polluting. However, under the TPP governments would have to compensate foreign investors for the profits they would lose if they are not able to pollute.
NAFTA already has a similar provision, but TPP would greatly expand the number of companies in a position to sue for regulatory takings. It could also create a situation in which U.S. companies pressure Congress to grant them the same treatment as foreign companies in getting compensation for regulatory takings. (U.S. companies could also transfer divisions to a foreign based subsidiary or sell them to a foreign company if they thought it was likely that they could face a reduction in profits due to regulatory measures.)
It is very generous of Mr. Landler to call the push for greater protectionism and the advancement of a right-wing legal doctrine “globalization,” however these actions do not fit the normal meaning of the term.
Note: this was altered slightly from an earlier version to clarify the issue on regulatory takings. Thanks to Robert Salzberg.
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The Washington Post had a piece assessing the power relationships in the European Union after the departure of the United Kingdom. The piece discusses whether Germany will play an even more important role. When it turns to potential rivals the piece tells readers:
“France is mired in economic woes and a war on terrorism. Spain and Italy face massive unemployment and political instability.”
It would have been worth pointing out that the reason France is mired in economic woes and that Spain and Italy face massive unemployment and political instability is the austerity policies demanded by the Germans. As a result of these policies, countries are being forced to constrain their budget deficits even as long-term interest rates are near or below zero and inflation is under 1.0 percent.
According to a new study from the European Central Bank, the euro zone’s economy is 6.0 percent below its potential level of output. With Germany near or at its potential level of output this means that the output gap in other countries is considerably larger. In discussion of the roles of various countries in the EU it would have been appropriate to point out how the economic policies demanded by Germany have undermined its rivals.
The Washington Post had a piece assessing the power relationships in the European Union after the departure of the United Kingdom. The piece discusses whether Germany will play an even more important role. When it turns to potential rivals the piece tells readers:
“France is mired in economic woes and a war on terrorism. Spain and Italy face massive unemployment and political instability.”
It would have been worth pointing out that the reason France is mired in economic woes and that Spain and Italy face massive unemployment and political instability is the austerity policies demanded by the Germans. As a result of these policies, countries are being forced to constrain their budget deficits even as long-term interest rates are near or below zero and inflation is under 1.0 percent.
According to a new study from the European Central Bank, the euro zone’s economy is 6.0 percent below its potential level of output. With Germany near or at its potential level of output this means that the output gap in other countries is considerably larger. In discussion of the roles of various countries in the EU it would have been appropriate to point out how the economic policies demanded by Germany have undermined its rivals.
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The folks at National Public Radio assume you all know the answer to that question. Why else would they tell listeners in a piece on migrant workers in the UK after the Brexit vote that:
“Analysts estimate that Lithuanian workers abroad send home more than $300 million a year.”
Hmmm, is that a big deal for Lithuania’s economy? If you had to look up Lithuania’s GDP to answer that question, you probably weren’t alone among NPR listeners. The IMF tells us that Lithuania’s GDP will be around $43 billion for 2016, which means that the $300 million in annual wages being repatriated is equal to roughly 0.7 percent of the country’s GDP.
If harsher immigration rules caused this sum to be cut back by a third or even half, that would be bad news for Lithuania’s economy, but not the sort of thing that is likely to send it into a recession. Anyhow, it would not have taken NPR’s reporters too much time to look up Lithuania’s GDP so that they could have presented a meaningful number to their listeners. As it is, they could have just saved some time by leaving this number out altogether. They were not providing information with it.
The folks at National Public Radio assume you all know the answer to that question. Why else would they tell listeners in a piece on migrant workers in the UK after the Brexit vote that:
“Analysts estimate that Lithuanian workers abroad send home more than $300 million a year.”
Hmmm, is that a big deal for Lithuania’s economy? If you had to look up Lithuania’s GDP to answer that question, you probably weren’t alone among NPR listeners. The IMF tells us that Lithuania’s GDP will be around $43 billion for 2016, which means that the $300 million in annual wages being repatriated is equal to roughly 0.7 percent of the country’s GDP.
If harsher immigration rules caused this sum to be cut back by a third or even half, that would be bad news for Lithuania’s economy, but not the sort of thing that is likely to send it into a recession. Anyhow, it would not have taken NPR’s reporters too much time to look up Lithuania’s GDP so that they could have presented a meaningful number to their listeners. As it is, they could have just saved some time by leaving this number out altogether. They were not providing information with it.
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A new study from the European Central Bank (not official bank policy) estimated the size of the output gap in the euro area at 6.0 percent of GDP. Most analyses put the cost to the UK’s from its exit from the European Union at around 2.0 percent of GDP. If the ECB’s estimate of the output gap is correct, then austerity is imposing three times as much harm on the euro zone countries as Brexit is projected to impose on the UK.
A new study from the European Central Bank (not official bank policy) estimated the size of the output gap in the euro area at 6.0 percent of GDP. Most analyses put the cost to the UK’s from its exit from the European Union at around 2.0 percent of GDP. If the ECB’s estimate of the output gap is correct, then austerity is imposing three times as much harm on the euro zone countries as Brexit is projected to impose on the UK.
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