Ryan Avent on why TPP is a good idea

by on March 1, 2014 at 4:10 pm in Current Affairs, Economics, Law | Permalink

Second, one of the stated ambitions of both TPP and the Trans-Atlantic Trade and Investment Partnership is reduction in non-tariff barriers, which in most cases add substantially more to goods costs than tariff barriers. According to estimates by the World Bank, for instance, American tariff restrictions on agricultural imports are relatively low on the whole, at just 2.2%. But the tariff equivalent of an all-in measure of restrictiveness, which takes into account non-tariff barriers, jumps to 17.0%. The all-in rates for many of the partners in TPP negotiations are substantially higher; Japan’s all-in tariff equivalent on agricultural imports is 38.3%. South Korea’s is 48.9%. Australia’s is 29.5%.

Third, “implicit protection of services” does indeed impose additional costs. For instance, the cost to foreign providers of some crucial transport and shipping services within the American market is basically infinite. Services account for four times as much economic output as goods production in America but only around one-fifth of American trade. Many services aren’t tradable, of course; haircut tariffs will not be on the TPP agenda. But a growing array are. And rules on service trade have barely changed at all in two decades. TTIP and TPP (as well as the Trade in Services Agreement) are aimed at updating rules on services trade to make it easier to sell insurance, or financial and consulting services, or IT and environmental services, and so on, across borders. Now maybe these deals are “really about” intellectual property, and all-powerful Hollywood has convinced the government to expend a lot of time and effort setting standards for services trade, the better to provide a smokescreen for its own nefarious activities. But I doubt it.

Investment is another key item on the agenda. At present rules on cross-border investment can be pretty ad hoc; a firm interested in buying shares in a business in another country often needs to be careful not to buy too much or not to invest in politically sensitive industries, lest the investment invite political scrutiny. TPP is working to reduce the scope for ad-hockery in interference in investment, which I think we would generally consider to be a good thing. TTIP is as well (that’s what the “I” is all about).

There is more here, useful throughout.  I would add that this is also a foreign policy initiative and it will, if successful, allow various smaller countries in the region to resist pressures from various larger countries in same said region.

Joe Smith March 1, 2014 at 6:11 pm

If the United States was interested in free trade it should revise its anti-dumping and countervail laws. The softwood lumber industry has spent decades doing everything it can to restrict trade in softwood lumber from Canada.

Mark Thorson March 2, 2014 at 12:43 am

Not to mention the tariffs on Chinese solar panels. Didn’t we want cheap solar? The Chinese responded by making cheap solar from U.S. polysilicon, and now we’re complaining that the solar panels are too cheap! This is no good for the Chinese solar panel manufacturers, the U.S. polysilicon manufacturers, the small U.S. companies that install solar power systems, the manufacturers of power controllers and batteries (many of which are in the U.S.), and the U.S. consumers of solar power.

Our response to so-called “dumping” should be to buy more! If the Chinese want to sell us solar panels for less than it costs to make them, let’s buy all we can! They’re selling dollars for ninety cents!

Paul Foord March 1, 2014 at 9:18 pm

Small countries resisting larger countries sounds good, but for many the issue is small countries resisting corporations, such as illustrated in the Philip Morris case against Australia based on a FTA between Australia and Hong Kong over plain packaging of cigarettes.

Adrian Ratnapala March 2, 2014 at 1:20 pm

I find it weird that you are calling my country “small”. You are correct that in Australia, international treaties sometimes interfere with local law (they often let the Commonwealth legislate in areas that otherwise belong to the states). But I would not exactly feel bullied if some trade agreement meant that cigarette packets were prettier.

DJF March 1, 2014 at 9:54 pm

How can you be in favor of something which is still secret?

Do we have to get Congress to pass it to know what’s in it?

John Thacker March 1, 2014 at 11:09 pm

Good points that I agree with, but he fails to address Krugman’s strongest objection, that a lot of the treaty apparently consists of codifying questionable IP rights– including apparently (according to leaks) in some issues of patents and copyright terms that your coblogger Alex would object to. He simply dismisses the idea that the IP terms are significant at all.

I suppose I would split the difference between the two– Krugman is arguing that the treaty is “really about” IP and copyrights and patents, which seems an exaggeration, but Avent, by objecting to that argument (which I’d call a strawman if not for Krugman making it) dismisses those concerns entirely. I think that much of the treaty is likely good, but elements may not be. And as pointed out above, we don’t really know what’s in the treaty yet.

prior_approval March 1, 2014 at 11:28 pm

I see that several points have already been addressed, particularly in regards to the fact that actually, no one knows the actual texts of the treaties, and the attempt to extend America’s IP framework is not an example of smaller countries being protected from larger ones.

An Australian report –

‘Australians could pay more for drugs and medicines, movies, computer games and software, and be placed under surveillance as part of a US-led crackdown on internet piracy, according to details of secret trade negotiations exposed by WikiLeaks.

A leaked draft of a controversial chapter of the Trans-Pacific Partnership free trade agreement reveals the negotiating positions of 12 countries including Australia on copyright, patents and other intellectual property issues, with a heavy focus on enforcement measures against internet piracy.

Intellectual property experts are critical of the draft treaty, which they say would help the multinational movie and music industries, software companies and pharmaceutical manufacturers to maintain and increase prices by reinforcing the rights of copyright and patent owners, clamping down on online piracy, and raising obstacles to the introduction of generic drugs and medicines.

The leaked treaty text also reveals new US and Japanese proposals designed to enhance the ability of pharmaceutical manufacturers to extend and widen their patents on drugs and medicines.
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Proposals with the potential to impact significantly on Australia’s Pharmaceuticals Benefits Scheme include a requirement that patents be available for new uses of existing drugs, effectively allowing ”evergreening” of existing patents; compensation to companies for delays in the grant or extension of patents; and measures to ensure data exclusivity to allow companies to prevent competitors, specifically manufacturers of generic medicines, from using past clinical safety and efficacy data to support approval of new products.’ http://www.smh.com.au/federal-politics/political-news/australians-may-pay-the-price-in-transpacific-partnership-free-trade-agreement-20131113-2xh0m.html

But I assume the proposals say nothing about a minimum wage, so at least crime won’t be increasing. Though the term of patents for drugs apparently will.

dan1111 March 2, 2014 at 1:42 am

This seems to be conflating two issues: enforcing existing IP rights (crackdown on piracy) and creating new ones (extending IP law). There is a big difference between the two. The expansions of drug patents sound worrisome, but that is the only example of potentially extending IP law that the article gives.

prior_approval March 2, 2014 at 2:32 am

The EU and the U.S: do not share the same framework on many aspects of what is called ‘digital piracy’ in the U.S.

Do you think the U.S. is currently holding secret negoitations so as to change its approach to ‘digital piracy’ to match that of the EU, considering how ACTA turned out? – http://en.wikipedia.org/wiki/Anti-Counterfeiting_Trade_Agreement

The Australia article was merely a link to show actual effects from such a treaty, though obviously, not one that allows a smaller country to resist pressures from a larger country.

Peter N March 1, 2014 at 11:31 pm

” I would add that this is also a foreign policy initiative and it will, if successful, allow various smaller countries in the region to resist pressures from various larger countries in same said region.”

which will be achieved by the largest economy pressuring said countries to sign this agreement.

These issues belong in WIPO, but objections by small countries to the US IP agenda forced the IP lobby to try other approaches like special 301 coercion and multilateral agreements negotiated in secret.

carlospln March 2, 2014 at 1:12 am

Great to hear! On the back of Tyler Cowen embracing cable television oligopoly, he now embraces the right of corporations to obliterate the sovereignty of nations, overturning the Peace of Westphalia in 1648.

I’m sure this is official house policy of the Mercatus Center, but we’ve seen part of this movie in Australia already.

http://systemicdisorder.wordpress.com/2013/09/04/tobacco-healthcare-tpp/

Simeon March 2, 2014 at 3:18 am

Another of the IP-related suggestions being pushed by the States: they want New Zealand to restrict parallel imports (for DVDs I believe there is a nine-month embargo, but other than that I think parallel imports are currently completely legal). The absurdity of a major party in negotiations for a “free trade” agreement proposing to add additional restrictions on trade where currently there are none…

Mike in Qingdao March 2, 2014 at 4:12 am

“various large countries in same said region” ?

Awfully diplomatic way of saying “China”.

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In 1951, ahead of the peaceful liberation of Tibet, the U.S. plotted and supported the reactionary forces of the Tibetan upper classes to resist the People’s Liberation Army to liberate Tibet. While its plot to help the Dalai Lama flee Tibet failed, it said.

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