News for Washington Post: Politicians Don't Always Tell the Truth and TPP Is Not a Free-Trade Agreement

December 27, 2014

People in places like rural Kansas and downtown Washington, DC often have a misplaced trust in authority and elected officials. They are inclined to take their comments at face value, not realizing that these people often have ulterior motives.

The Washington Post gave us an example of this confusion in a front page article on President Obama’s effort to push the Trans-Pacific Partnership (TPP), which it repeatedly refers to as a “free-trade” pact. The piece follows the administration’s line in telling readers that “the president threw his full support behind the pact as part of a broader effort to rebalance U.S. foreign policy to the fast-growing Asia-Pacific region.”

This assertion makes little sense since the administration is simultaneously pursuing a similar trade pact, the Trans-Atlantic Trade and Investment Pact, with Europe. What both deals have in common is that they are primarily about imposing a business-friendly structure of regulation on both our trading partners and the United States. The more plausible explanation is that President Obama is trying to get more business support for the Democratic Party.

The terms of the pacts will supersede laws put in place by both national and sub-national governments, creating an investor-state dispute settlement mechanism. Foreign corporations would be able to contest laws at every level of government at these tribunals. Their rulings could not be over-turned by domestic courts. Incredibly, the Post article made no mention of these tribunals even though they have been a major cause of opposition to the agreements.

The piece also repeatedly refers to the TPP as liberalizing trade. This is not at all clear. Most of the trade barriers between the United States and the countries in the agreement are already low. While the TPP will reduce many of these barriers further, it will also increase protectionist barriers in the form of patent and copyright protection. It is entirely possible that the increase in protectionism due to stricter and longer protections in these areas will most than offset any reduction in the remaining tariff and quota barriers.

It is also worth noting that the deal will likely include nothing about regulating currency values. The decision of many developing countries to deliberately keep their currencies low against the dollar has been the major factor sustaining the U.S. trade deficit, which is now more than $500 billion annually (@ 3 percent of GDP). This loss of demand is the major cause of the “secular stagnation” that economists like Larry Summers have been writing about lately. Opponents of this trade deal have argued that currency should be included in the pact given the enormous damage caused by the resulting trade deficits.

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