Me and the TPP

April 8th, 2015 at 9:24 am

I somewhat embarrassingly change my mind about three times in this (excellent and carefully balanced) piece on the economics, politics, and legal issues invoked by the prospect of the Trans Pacific Partnership trade agreement by Danny Vinik in The New Republic.

FWIW, I write this not because I think my personal views matter that much but because I seem to be one of many going through this process regarding this furshlugginer multilateral trade agreement.

The reason for our indecision is simple, I suspect, at least I know that’s the case for me. As far as I know, virtually none of us writing about the thing have read the damn thing (Public Citizen’s Lori Wallach excepted, as far as I know–the woman does her homework and has gotten access to some chapters, I’m told). That’s why I’ve been pretty careful not to say much about what’s in the deal, focusing my energies on what clearly not in there, i.e., rules against signatories managing their currencies to subsidize their exports and tax their imports, thus driving the US trade deficits Vinik correctly identifies as a serious problem in terms of labor demand in the US (Bernanke agrees).

Yes, that lack of knowledge of the deal’s content has led me to pull my punches, but it’s also why I’m quite taken aback by those writing strong endorsements of a deal that to my knowledge they’ve never seen (if they have, I sincerely apologize–but if they’ve seen it, why haven’t I?). If we want to have informed debates in this country, then that of which we do not know, we should not speak. Especially if what we do know is coming solely from sources with major skin in the game (e.g., USTR).

So, let me summarize my own position, as in the Vinik piece:

–I largely take the administration’s argument that insisting on a currency chapter would kill the deal.

–However, I’m not convinced that our negotiators tried hard to get such a chapter in the deal. I find some of their objections overwrought. Sensible rules, like those that the IMF has but doesn’t enforce, would never put our own Federal Reserve in the crosshairs (though it would do so to central banks in countries that manage their currency by running large surpluses and buying excess reserves).

–Similarly, it’s hard for me to see why a reciprocity rule which I endorse here would be a deal breaker. This is the idea (following Daniel Gros) that if countries can go into currency markets and buy dollars, then we must be able to do the same re their currency (this has been an issue with China and other countries that employ capital controls). Again, I’m unconvinced our negotiators have seriously pushed for even such a mild partial solution to the currency problem. China’s not in the TPP, but they could conceivably join later.

–All that said, if the TPP is really a good deal for the US, and since I haven’t read it I can’t say, then based on the first bullet above, I understand, conditional on greater effort than I believe has been expended thus far, that a currency chapter could kill the deal. But then, I strongly stand by my position in the Vinik piece re currency:

“What I view as unacceptable is the position that we can’t do anything in the TPP and we can’t do anything out of the TPP and therefore we just have to live with the status quo.”

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10 comments in reply to "Me and the TPP"

  1. foosion says:

    >>rules against signatories managing their currencies to subsidize their exports and tax their imports>>

    I continue to not understand how this could be implemented. Current law requires the US president to certify whether China is a currency manipulator. No US president said it is. Is there an economist who agree? If that doesn’t work, how can the managing currencies provision work?

    >> insisting on a currency chapter would kill the deal>>

    Our main focus, based on widespread reports, appears to be on expanding intellectual property protectionism. The problem is that the administration views this as more important than restricting currency manipulation. Note that IP protections benefit corporations and their owners and managers (generally, the best off), while the benefits of a ban on currency manipulation would be more widely shared.

    This country would be better off with weaker IP protections. We clearly innovated in the past with weaker protections and there’s a good argument protections stifle innovation be making it harder for new inventors to build on prior developments. IP protections raise prices, which is bad for the vast majority, i.e., those who have to pay. That we are trying to increase IP protections worldwide is a step backwards.

    • Smith says:

      Let’s not confuse baby and bathwater. Those who wish to curb abuse of the IP system should not confuse the recent changes over the past 30 years with strengthening protections.
      The biggest change was Obama and the Democrats ending 200 years of successful patent law by switching first to invent to first to file. This favors big corporations, and inhibits sharing of information, one of the prime goals of patent law, hurts research and development, academic and government research, independent inventors and progress in general. I’d hardly call that “strengthening protections”.
      The self-funding of patents gave incentive to allow ridiculous applications because the more granted the more money for the patent office. Now real inventions are threatened by frivolous ones.
      Extending the length of copyrights to give big corporations licensing rights beyond the life of the author or creator, instead of passing into the public domain is not about stronger protection, just longer.
      Many more issues, but calling for weaker protections is very much an over simplification of the problem.
      There are many more problems with the system, that should be

  2. Josh says:

    I’m no economist (not even casually). But it seems to me there are far larger problems with the TPP. These are:
    -The secrecy in which it is being negotiated;
    -The fact that it will further advance the march toward corporate sovereignty at the expense of national sovereignty
    -The fact that previous trade agreements have been disasterous for most U.S. workers, and there is no reason to believe this time will be any different.

    • Dave Allison says:

      Bingo! Excellent comment.TPP is a bad deal and should be examined, reviewed, discussed and amended by the Senate in detail. Review and approval of each section of the TPP is far more important to the people of the USA (and more clearly necessary and valid, since it is a Treaty) than the review that Republicans are insisting on with the Iran peace agreement which is not a treaty but Executive Agreement.

  3. Dave says:

    Let us just forget this. This deal is the wrong deal at the wrong time. I’m surprised that Obama got this so wrong, but he’s not strong on economics…

    Obama is not strong on economics…

    He’s strong on foreign policy, so we support him there. Not on economics.

  4. Smith says:

    You can’t even get trade correct with Germany, Japan, Mexico, and Canada. I’d say the record speaks for itself, no more trade agreements.
    Of the trade deficit, 1/4 is cars, 1/4 is oil, 1/2 if China, roughly speaking.
    So, work with Germany and Japan to encourage them (but keep our troop strength there, 50,000 each to protect against China and Russia)
    Work with Canada and Mexico, NAFTA is not preventing a $100 billion dollar trade deficit.
    Stop letting American companies shift manufacturing to China, which is also causing a manufacturing brain drain here.
    More money for renewable energy research and basic science to support that too. Don’t let China dump government subsidized solar panels here and destroy our domestic production.

  5. purple says:

    People still talk about China like it’s 1998. They will have their own space station in a few years.Their internal market is larger than than United States.

    As far as protectionism, the US got the bulk of its tax revenues from tariffs well past the point of being the world’s largest economy. The country was developed on Hamiltonian protectionism.