August 04, 2015
The NYT had an article reporting on Secretary of State John Kerry’s promotion of the progress made in reaching a final agreement between the twelve countries on the terms of the Trans-Pacific Partnership (TPP). At one point the piece quotes Kerry:
“No country can expect its economy to grow simply by buying and selling to its own people …. It is just not going to happen. It defies the law of economics. Trade is a job creator and prosperity builder, period.”
Of course no one is proposing that countries not trade, so this is sort of a bizarre counter-factual. It would be bit like responding to opponents of a highway plan by saying that people depend on cars to get around. The assertion doesn’t have anything to do with the merits of the highway, just as the fact that countries trade has nothing to do with the merits of the TPP.
As a practical matter it is entirely possible that the TPP will lead to less trade. The rules that the United States is trying to impose on patents and copyrights and other forms of intellectual property claims will lead to considerably higher prices for the protected items. For example, the hepatitis C drug Sovaldi would sell for less than $1,000 per treatment without protection, but sells in the United States for $84,000 per treatment with patent protection.
As a result of these higher prices for a substantial category of goods, the total volume of trade may actually be lower with the TPP than without it. For this reason, those who want to see more trade may have good reason to oppose the TPP. (The various studies that analyze the impact of the TPP have not incorporated the impact of higher prices due to stronger patent and copyright related protections.)
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