A New Economic Slowdown?

November 18, 2014

Dean Baker
November 18, 2014, Politico

View article at originial source.

The most obvious place for surprises with this deal is the investor-state dispute settlement (ISDS) mechanism. This sets up an extra-judicial process that can over-ride national or sub-national laws and regulations in areas that have no obvious link to trade. For example, environmental measures put in place at the state or local level to protect air or water quality could be brought before an ISDS tribunal as a violation of the TPP. The same problem could come up with regard to a wide range of laws and regulations. It is also possible that rules requiring paid sick days or paid family leave, for instance, could be contested before these tribunals. Companies could even contest rules on raising minimum wages, as recently happened in Egypt.

The other possible surprise from this deal will be the extent to which stronger patent and copyright protection lead to higher prices for prescription drugs and other products across the Asia-Pacific region. While these forms of protection have the goal of providing incentives to invest in innovation and creative work, their short-term effect is to raise prices just like a tariff or quota. The main difference is that the price increases for the products affected are likely to be much greater than would be the case for plausible tariffs or quotas. The result of higher prices for the protected products will be to pull money out of the economy and to slow growth. It is very plausible that the economic drag from the strengthening of these protections will exceed the boost from the modest trade liberalizations we are likely to see in the TPP. The net result could be that the deal slows, rather than increases, growth.

Dean Baker is co-director of the Center for Economic and Policy Research.

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