I have written extensively on this point: there’s a big difference between those magical words “free trade” that everyone invokes in this town whenever the topic comes up, and actual trade deals. But I think Rep. Sandy Levin thoroughly nailed this distinction in testimony before the International Trade Commission this morning:
We all recognize that trade can be beneficial. The issue is not whether Members of Congress such as myself could pass an Econ 101 class, as President George W. Bush’s Chair of the Council of Economic Advisers, Gregory Mankiw, recently put it. Instead, the issue is whether we are going to face up to the fact that our trading system today is much more complex than the simplistic trade model presented in an Econ 101 class.
What do David Ricardo and Adam Smith have to say about the inclusion of investor-state dispute settlement in our trade agreements? What do they have to say about providing a five-year or an eight-year monopoly for the sale of biologic medicines? About the need to ensure that our trading partners meet basic labor and environmental standards? How about the issue of currency manipulation? And what about trade in services on the internet or the offshoring of jobs that result from greater capital mobility? Does the theory of comparative advantage address these new issues? No – and yet those are the kinds of issues at the crux of the debate over the TPP Agreement today.
Levin’s full testimony is here and looks very thoughtful.
He points to a new World Bank report that models the growth impact of the TPP by 2030 on both member and non-member countries. The magnitude of the US impact–maybe 0.3-0.4 percent–belies a lot of the noise you hear about this sort of thing, and is surely statistically indistinguishable from no change at all.
But if such modelling is in the ball park at all, the benefits of the deal are substantial to some emerging economies. The Bank predicts that the TPP will boost Vietnam’s exports by 30%. However, to their credit, they also simulated the impact of non-member countries, which lose export share to TPP members, showing that once again, the punchline is that “free trade” is a misnomer, a mixed bag with winners and losers.
World Bank: Impact of the TPP on GDP growth by 2030 in member and non-member countries
[Note: “LAC nei” includes Argentina, Bolivia, Brazil, Costa Rica, Ecuador, Guatemala, Honduras, Rest of the Caribbean, Nicaragua, Panama, Rest of Central America, Paraguay, El Salvador, Uruguay, Venezuela RB, Rest of North America, Rest of South America.“Asia nei” includes Bangladesh, Kazakhstan, Kyrgyz Republic, Mongolia, Nepal, Pakistan, Rest of South Asia, Rest of Former Soviet Union, Rest of Western Asia, Sri Lanka. “EAP nei” covers: Cambodia, Lao PDR, and Rest of Southeast Asia. “SSA” indicates Sub-Saharan Africa.]