What would it take for me to change my mind on TPP?

by on May 19, 2015 at 1:21 am in Current Affairs, Economics, Law | Permalink

I’m familiar with studies showing estimated economic gains from TPP in the neighborhood of $1.9 trillion (pdf).  Given the past performance of trade models, I am willing to believe that might be an overestimate.  So let’s cut those gains roughly in half to say a trillion.  (That said, if I understand the Peterson document correctly, they are not even trying to incorporate gains from reallocation on the production side, as might result from comparative advantage or dynamic specialization; in this sense $1 trillion may be a considerable underestimate of the upside.)

That is still a sizable sum of economic gain.

What would convince me to oppose TPP if is somebody did a study showing the following: when you use a better trade model, use better data, and/or add in the neglected costs of TPP (which are real), those gains go away and indeed become negative.

Then I would change my mind, or at least weigh those economic costs against possibly favorable geopolitical benefits from the deal.

What does not convince me is when people simply list various costs and outrages associated with TPP.  Furthermore if one of those problems with TPP is addressed, or partially addressed, often these commentators circle around to another possible problem.  In fact that response pattern is a sign the critics don’t themselves have a very good comprehensive estimate of global costs and benefits.  By the way, it also fails to convince me when the critics attack those who support TPP for being craven, superficial, lackeys, and so on.

I say let’s just have a two-way button and ask everyone to press it: do you believe that TPP would lead to a net gain in economic welfare or not?

If those costs and outrages associated with TPP are so bad, it ought to be possible to do a study which makes the trillion in benefits go away.  Has anyone done such a study?  Would such a study survive the commentary from the NBER annual macro conference?

I am not suggesting that economic welfare should be the only criterion for evaluating a policy.  But making everyone press this two-way button — and in the process citing their favorite comprehensive policy study of TPP – would do wonders to bring clarity to the debate.  Commentators still would have the liberty of accepting the reality of the economic gains while disfavoring the policy, as indeed I do with forced kidney extraction and transplant.

In the meantime, the more desultory lists I see of possible negative consequences of TPP, the more likely I am to think it is a good idea after all.

1 TD May 19, 2015 at 1:48 am

As an initial disclosure, I would press the button on the net benefit side.

That being said, I think there’s a plausible case to be made against it (from the Dem perspective) when you consider it in terms of opportunity cost. Maybe it’s possible to create durable political coalition that will block trade deals (as least so long as Dems have filibuster power, etc) so long as they have certain “costs and outrages” embedded in them. So, when Dems block TPP for containing said “outrages,” it communicates that including those provisions in trade deals comes with political risks. Even if trade deal proponents think that those costs and outrages are arguably positive, they care more about other provisions and would probably be willing in the long run to just strike trade deals without those provisions to avoid the political risk. So if you’re only thinking about this in terms of an up-or-down vote on TPP, maybe it’s hard to see a net cost, but if you think of FTA politics as a repeated game there might be some logic to opposing TPP as a way of positively influencing future trade deals.

As an aside, if Congressional meddling led to anti-“currency manipulation” provisions in the TPP, how bad would the mechanisms/language have to be to make TPP a net cost?

2 Cooper May 19, 2015 at 1:53 am

What about the distributional impact?

What if 99% of the benefits go to foreigners and only 1% go to Americans?

And what if there’s an alternative proposal that yields greater aggregate benefits with a large slice going to Anerican workers?

Under those scenarios it might make sense to oppose the TPP.

3 Kevin May 19, 2015 at 7:28 am

Not only is there the inter-state distributional issue to consider but the intra-state ones too. Who within the U.S. will benefit and by how much and who will lose and by how much?

Then there is the structural issue affecting security resulting from changes in inter – Will the resulting changes increase or reduce the relative power of states favoring an open international system or will it under one their ability to do so?

4 MG May 19, 2015 at 7:54 am

Well, and it gets even uglier if our political system found not more efficient way than to address the consequences than through massively inefficient redistribution, If the model estimated costs at market value of displaced/lost output, but the political economy addressed them by redistribution/welfare costs costing 3x of lost output, what are the costs tallied?

5 Dan Weber May 19, 2015 at 9:21 am

If we are just concerned about economic impacts, I’d happily accept a deal in which 99% of the benefit goes to (poorer) foreigners and 1% to Americans. We are both better off.

6 Hoosier May 19, 2015 at 9:39 am

But many wouldn’t, and the point of this post seems to be that there is no rational reason to reject the deal. We’re presenting one here. (not my opinion, but my gut tells me the distributional impact would be pretty uneven if you care about such things)

7 decklap May 19, 2015 at 12:17 pm

You would not favor a deal whose benefit to the world was $1.9 trillion dollars or even *only* $1 trillion? On what basis and at what level of benefit distribution would you find that more acceptable

8 collateral May 19, 2015 at 5:01 pm

No one rational would reject what Dan Weber suggested. There’s no downside to a Pareto improvement. Either you misread him or you are a psychopath.

9 Greg May 23, 2015 at 2:26 pm

Please. In standard psychology studies, people in many cultures routinely reject scenarios where they get less than 30-40% of a two-person payout. Most cultures look askance people who try to get most of the gains, even if it’s a Pareto improvement. You’re wishing away human nature by calling it psychopathy.

10 Lord Action May 19, 2015 at 10:31 am

Not if you could potentially get a deal in which 90% of the benefit goes to foreigners and 10% to Americans.

It matters what your benchmark is, and the alternative world isn’t necessarily one in which no deal of any sort exists.

I’m not sure this is a practical objection, but if the facts supported it, it certainly could be.

11 Urstoff May 19, 2015 at 11:10 am

Well if TPP opponents want to propose an alternative trade bill, I’d like to see it.

12 Lord Action May 19, 2015 at 11:36 am

I’m not in that camp. I just thought Tyler was vague about who exactly was getting those benefits, and Dan said “any old allocation is fine.” I don’t think that’s right.

I’m generally pro-trade and have been for a long time. But to the extent there’s anything to Tyler’s stagnation story and the massive rise in developing world wealth, that suggests we’ve failed to bargain smartly over the past few decades. I’m not fully convinced by this argument, but I’m at the stage of questioning my prior beliefs.

13 Thomas B. May 19, 2015 at 10:07 pm

My quick alternative TPP is the current TPP minus provisions on temporary copies and parallel imports, as well as elimination of restrictions on anticircumvention.

Art. 4.9(a)(ii)(C) is similar to the DMCA, but goes farther, prohibiting any device that “enables” or “facilitates” protection circumvention. That is frighteningly broad and could imperil the development of huge swathes of benign and useful technology.

The drafters of the DMCA knew they were playing with tech they didn’t understand, so, imperfect as it was, they included a little pressure valve. The restrictions on circumvention are reviewed periodically for exemptions (using notice and comment procedures through the Copyright Office and Library of Congress). This mechanism helps identify flaws in the law’s impact and allows affected groups to petition for periodic targeted exemptions. TPP is unlikely to capture this dynamic mechanism.

I’m highly skeptical that Sonny Bono set the copyright term at the perfect number of years, and would like jurisdictions to have a little more flexibility. TRIPS had minimum 20, or author’s life plus 50. We can haggle over numbers, but TRIPS seems fine to me.

Article 5 allows rightsholders a copyright claim even when no copies were actually made, which just seems bizarre to me.

Essentially, I’d like to see the entire IP section reworked.

I’m not an IP nihilist, there are definitely some benefits to standardizing intellectual property provisions under international agreements. I don’t even expect this to contain anything short of TRIPS, which we’re already beholden to. This seems like an IP-maximalist’s approach though, and I’d like to see it negotiated a little more carefully to ensure some US traditions, such as fair use, are preserved. And I don’t see the need to continually ratchet up beyond what TRIPS protects, extending minimal copyright terms and placing additional restrictions on digital devices poorly understood by the drafters.

I’m fine with the secrecy, it allows controversial provisions to be considered as bargaining chips without sparking global outrage against the whole deal, even when those provisions won’t survive to final. I’m fine with the arbitration, deLong made great points there. The IP provisions I can’t square though.

14 William May 20, 2015 at 1:10 am

You can improve your position by negotiating in secret and leaving your ego at the door. I totally understand the dynamic of sensitive bargaining chips in principle. That idea breaks down and doesn’t stand up to scrutiny when you apply it to TPP and use specifics. I don’t want to delve into a thought experiment. So I’ll jump to my conclusion; unless I’m party to negotiations, my position won’t improve from secret bargaining chips. Only people present at the negotiating table stand to benefit from such arrangements and I’m not one of them.

15 Hoosier May 19, 2015 at 9:36 am

Good point that Tyler doesn’t cover in his original posting. Would like to hear his response.

16 ckb May 19, 2015 at 9:37 am

Right. Or moreover: how about a policy that makes America’s richest 10% a trillion dollars, and poor Pacific nations two trillion dollars, but leaves the remaining 90% of Americans a trillion dollars poorer? The total economic benefit is still two trillion dollars, but it is far from clear that we would want to do this.

Economists always put a paragraph somewhere in chapter one of their textbooks that the winners can be made to compensate the losers and everyone is better off then before, but somehow they forget about that part as soon as they’re done teaching chapter one.

I don’t have a lot to say either way about the TPP, but reducing “economic impact” to a single number is unbelievably facile.

17 Sigivald May 19, 2015 at 7:06 pm

What if 99% of the benefits go to foreigners and only 1% go to Americans?

If there’s net benefit to Americans, why should we care?

Otherwise it sounds a lot like pure spite, which is terrible policy.

(Now, the “what if we could gain more?” scenario is a great reason to support that proposal … if we had good reason to think that the other players would agree to it; obviously they would prefer greater benefit to themselves, if that alternative reduced it.

If there was an alternative that benefited every player more, that’d be a no-brainer to support.

But one assumes if that alternative existed – and was politically possible – we’d have something like it, simply from each agent’s desire to maximize its gain*.

* Which brings up the horrible problem of what happens when spite bcomes a significant factor; if people are ever willing to take less for themselves to hurt the other guy, we end up in a very bad feedback loop…)

18 Nathan W May 19, 2015 at 10:04 pm

And never mind that there could also be losers in the bargain, who join only because they could be even worse off if left out of the club.

19 William May 19, 2015 at 2:13 am

I wish I could comment or debate your post on TPP. But neither me nor my congressman, Johnson has the opportunity to read it. I would prefer someone read it before it becomes international law.

20 JoeF May 19, 2015 at 3:00 am

But William these people have read the document. Don’t you trust them?

Reminds me of something a raging loony lefty economist once said:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

21 JoeF May 19, 2015 at 3:02 am

Drat! Messed up the second link!

22 Nathan W May 19, 2015 at 10:06 pm

I doubt there are any consumer or labour advocacy groups party to the text. Y’know, the kind who would actually pick through the text to see whether there could be downsides rather than just worrying about whether or not some specific clause gets inserted for the benefit of the particular industry (and for that matter damned whether the general economic effects are positive so long as the expected effects of the clause would be beneficial to their company).

23 Alan May 19, 2015 at 5:31 am

Thank you, William.

Over to you, Tyler.

24 Dan Weber May 19, 2015 at 9:30 am

This kind of exaggeration leads me to want TPP to pass just out of spite to watch the people who freak out gnash their teeth.

1) There have been many leaks of the document, so I’m sure Johnson could read it if he wanted.

2) Congress isn’t currently voting on whether to “make it international law [sic]”. They are voting on fast-tracking it, which means that when they do vote, it has to either be accepted as is or rejected as is. The only sensible way to do any international deal is via an up-or-down vote (filibustering counts as a down vote). This still gives Congress the right to reject it, but they can’t nibble out pieces here and there.

My biggest issue is still probably the size of the bill. Anything that huge needs to be studied for weeks to understand what’s in it.

25 Bob from Ohio May 19, 2015 at 10:07 am

“only sensible way to do any international deal is via an up-or-down vote”

Why? We, and other countries, put reservations and conditions on ratification of treaties all the time, even important ones. Trade is no different.

26 Dan Weber May 19, 2015 at 10:29 am

What do you mean by “reservations and conditions on ratification”? Congress can still reject the treaty. But giving each member of Congress a seat at the negotiating table by saying “hey Singapore, let’s add in this little bit” means no trade deals.

And perhaps you want no trade deals. Okay.

27 Bob from Ohio May 19, 2015 at 11:56 am

“A reservation in international law is a caveat to a state’s acceptance of a treaty. A reservation is defined by the 1969 Vienna Convention on the Law of Treaties (VCLT) as:

a unilateral statement, however phrased or named, made by a State, when signing, ratifying, accepting, approving or acceding to a treaty, whereby it purports to exclude or to modify the legal effect of certain provisions of the treaty in their application to that State. (Article 2 (1)(d))[1]”
“The Vienna Convention did not create the concept of reservations but codified existing customary law. ” wikipedia

“And perhaps you want no trade deals.”

I do not have an opinion on this trade deal but negotiating complex international agreements and ratifying it thru Senate advise and consent works. Why is trade different?

28 Jim McNally May 19, 2015 at 1:50 pm

Of course congress is voting on law! I have read the Fast Track legislation, which is H.R. 3830. Section 3 “TRADE AGREEMENTS AUTHORITY” gives the President a blank check to make trade agreements until 2018, or 2021 if extended. She would be able to change tariffs, conditions, and agreements without congressional approval after H.R. 3850 becomes law.

29 Sigivald May 19, 2015 at 7:19 pm

A blank check within exactly prescribed limits, per the text of HR3830.

The President basically gets carte blanche to enter deals that reduce foreign duties on US goods or reduce US duties and tariffs, to increase trade.

… and the Congress still has to pass the enacting bill to make it law. (Sec 6. (a)(1)(D))

So, no, “able to change … without Congressional approval” simply isn’t true.

(It appears that the President can unilaterally modify duties under sec. 3(a) without such approval, but that’s pretty weak tea.)

30 carlospln May 19, 2015 at 2:41 am

Talk about ‘mood affiliation’!

The bat signal from Wichita must be goin’ OFF! http://i.imgur.com/AaAmB.png


Both Obama & Cowen ‘strongly in favour’: RUN!

ps what William said-if its so fucking great, why the complete secrecy?

31 Nylund May 19, 2015 at 2:53 am

i don’t doubt that there will be a net benefit. The winners will gain more than the losers lose. I’d still like to know more about who/what is winning and losing, in what ways, and what the distributional effects will be. I don’t think it’s unreasonable to hold off final judgement until those questions are more thoroughly answered.

32 Nathan W May 19, 2015 at 10:08 pm

It’s hard to know who’s winning and losing when you don’t even know what’s at stake.

33 prior_approval May 19, 2015 at 5:11 am

‘and outrages associated with TPP’

People dying from a higher cost of medicine is just another one of those roadbumps toward a much better world, it would seem. And not outrageous at the least, apparently.

‘The negotiations, which began in 2010, are being conducted in secret, without the opportunity for public scrutiny. However, leaked drafts of the United States government’s proposals for some sections of the agreement reveal the inclusion of dangerous provisions that would dismantle public health safeguards enshrined in international law and restrict access to affordable generic medicines for millions of people in developing countries.

In the field of health, generic competition saves lives. As a medical treatment provider, MSF relies on affordable generic medicines to treat a wide variety of diseases, including tuberculosis, malaria, HIV/AIDS and other infections that afflict the poorest and most vulnerable populations. And we are not alone in this – the major treatment initiatives, including the Global Fund to Fight AIDS, Tuberculosis and Malaria, the US government’s PEPFAR programme and many others depend heavily on affordable generics.

But the TPP is threatening to cut off the lifeline that generic drugs provide for people living with HIV/AIDS and many other diseases. The availability of generic medicines in a particular country depends on a complex structure of national rules and regulations governing patents and other intellectual property rights. Trade pacts and other international agreements can impact these domestic regulations, and governments have long recognized the need to balance public health interests with intellectual property (IP) demands when negotiating trade agreements. In fact, multiple multilateral commitments have reaffirmed the importance of this balance, including the 2001 WTO Doha Declaration on TRIPS and Public Health and the 2008 WHO Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property.

However, despite these commitments, the US government is pushing policies in the TPP that represent the most far-reaching attempt to date to impose aggressive IP standards in a trade agreement with developing countries – policies that further tip the balance towards strong IP regimes favoring commercial interests and away from public health.’

And the fact that one can safely assume that Prof. Cowen has not read this still secret treaty means he is willing to push his benefit button without even knowing what pushing it will actually cause to happen.

34 bob May 19, 2015 at 5:25 am

Doesn’t the fact that the TPP is 40,000 pages negotiated in secret by bother you? What are the incentives of the people who are writing the TPP? Why should one expect that the product of bureaucrats’ secret negotiations will improve human welfare?

With respect to your question, the models do not account for the slowdown in innovation that would result from making permanent the US intellectual property regime. The Digital Millennium Copyright Act, the Computer Fraud and Abuse Act, and other travesties criminalize the tinkering that’s the engine of innovation. The TPP entrenches this and makes it illegal for the US to unilaterally reform its IP laws. (Have you watched Cory Doctorow’s lecture on the coming war on general purpose computing?) If the beneficiaries of the TPP are Vietnamese peasants, the cost is to every future generation due to slower technological growth. Even a small slowdown in technological improvement renders the TPP a net harm to human welfare. Remember the famous Lucas quote on the determinants of productivity growth: “the consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.”

35 Dan Weber May 19, 2015 at 9:36 am

“Negotiated in secret” is not a problem. I know Obama campaigned on doing everything publicly, so I get the grief he’s getting on this, and he owns that particular headache he invited on himself. But you can’t negotiate deals with other countries that way. (Even domestically, PPACA probably would have been a lot better if Obama had privately negotiated with Republicans on what would be necessary to get them to support it.)

When a union and a business negotiate a deal, they don’t do it in public. Negotiating involves a lot of give and take, maybe offering things that you don’t really intend to give up, or staking out various stalking horse positions. It’s a very specialized field and some people go to college just to study it.

40,000 pages is the bigger worry. When will it be opened to the public?

36 derek May 19, 2015 at 10:13 am

How much did it cost in donations to the Clinton Foundation to get a clause written in that 40,000 pages of clauses?

37 Dan Weber May 19, 2015 at 10:32 am

I dunno, but “negotiated in the open” wouldn’t have uncovered that kind of deal.

Supposedly there will be 4 months after the TPA when the full text of the TPP will be available to the public. It about 40x the size of PPACA. How long would it take to simply read it out loud?

38 Chris Geary May 19, 2015 at 8:42 pm

But you can’t negotiate deals with other countries that way

False. Even NAFTA was debated pretty openly.

39 Nathan W May 19, 2015 at 10:10 pm

I’d hope that they’d take at least a good few years to mull over all that content. But instead certain interests will try to collude to get it through in some particular form before other interests get a chance to mobilize and make their positions/interests known on the matter.

40 Marko May 19, 2015 at 5:33 am

” If those costs and outrages associated with TPP are so bad, it ought to be possible to do a study which makes the trillion in benefits go away. Has anyone done such a study? Would such a study survive the commentary from the NBER annual macro conference? ”

Ah yes , the mathiness Gold Standard Review. By all rights , you guys should be absolutely covered in pimples.

“In the meantime, the more desultory lists I see of possible negative consequences of TPP, the more likely I am to think it is a good idea after all. ”

When I see lists of those in favor , like the Chamber , the Business Roundtable , Brookings , Manhatten , Third Way , Mankiw , you , I say shoot that fuckin’ TPP ! Shoot it again ! Again , with silver bullets !

41 Art Vandalay May 19, 2015 at 1:10 pm

You are not very smart, are you?

42 bob May 19, 2015 at 5:47 am

“What would convince me to oppose TPP if is somebody did a study showing the following: when you use a better trade model, use better data, and/or add in the neglected costs of TPP (which are real), those gains go away and indeed become negative.”

Why would that convince you? I could easily write such a model — start with an endogenous growth model with the positive knowledge externality, make the right assumptions about the incentives to invest in knowledge, calibrate with the right data, and bingo, the TPP is harmful. (I would do it, but have more pressing things to work on.) Don’t we all know that that’s how economics works, including this Peterson study you’ve cited? You can rationalize anything you want to with a model and data.

43 chuck martel May 19, 2015 at 6:07 am

Models of the effects of trade policy, like models of global climate change, can’t actually predict anything. They’re simply talking points used to legitimize viewpoints.

44 rayward May 19, 2015 at 6:08 am

There’s an internal inconsistency to Cowen’s argument: he supports TPP in the absence of a conclusive study of negative effects, but there’s no conclusive study of the positive effects. Sure, there’s plenty of theory suggesting positive effects (comparative advantage, etc.), but no conclusive study on this particular trade agreement (Cowen says that the studies, such as they are, that claim positive effects may overestimate the postive effects by 100%). That’s not to say that I oppose TPP because I support it; and I support it because theory overwhelmingly supports it. And that’s not to say there won’t be some losers, because there always are winners and losers; only children believe in happy endings for everyone. Which brings me to my point: economists are no different from everyone else, and they pick and choose their theories not based on this or that conclusive study but based on policy preferences that have as much to do with political economy as the economy. And that’s okay. What’s not okay is to use this or that study on small data points to oppose policy that theory and history overwhelmingly supports (and vice versa).

45 Sigivald May 19, 2015 at 7:30 pm

Well, unless we’re just going to throw away Ricardo, we might assume that voluntary trade is good for both entities involved, yes? Or at least that that outcome is very, very likely.

And thus any trade agreement that many nations enter into voluntarily is thought to be in the best interest of each nation – even if they might be wrong about that.

Thus we should assume that any giant multilateral treaty is viewed by those with the most knowledge of it as beneficial to their own ends; that is, the nations negotiating it believe it will do good things for them*.

Thus it’s a tolerable default position that any trade deal with broad buy-in will be beneficial overall.

(This does not guarantee that every policy agreed to will be good overall or in general or in specific; many bad things are quite popular, and trade agreements are not unalloyed good. Hell, historically we’ve seen some nasty cartels, haven’t we? [Though those were, equally, not as broad as TPP – the more players, the less you can have a cartel!]

But it does mean that every player will think it’s gaining, and self-interest is a very useful motive.)

(* This assumes no Shadowy Cabals Running The Process For Personal Benefit And General Loss.

But it’s hard for such a cabal to both exist and rig a deal that is bad for every or even most nations involved.

If they were that powerful already, they wouldn’t need treaties… they’d already rule the world.)

46 MikeP May 19, 2015 at 7:15 am

Nowhere is politics more not about policy than in trade agreements. In the long march of freedom, the signal of rejecting such bloated rent-seeking free trade agreements is still worse than the signal of passing them.

It’s tragic, but the opponents of free trade agreements aren’t against them because they are not free enough.

47 Art Deco May 19, 2015 at 8:22 am

No. We need to be against this one because its provisions and their effects are unknowable.

48 Nathan W May 19, 2015 at 10:13 pm

There are some ways in which it can make sense, but I think it’s worth pointing out that “rent-seeking free trade agreements” would generally be an oxymoron because in free trade there should be no “rent” to speak of, being under free trade trade and all.

49 MikeP May 20, 2015 at 8:13 am

To most of us here, the alternative to bloated rent-seeking free trade agreements is unilateral free trade.

To most of them out there, including the media who report it, the alternative to bloated rent-seeking free trade agreements is protectionism.

50 ibaien May 19, 2015 at 7:16 am

as has been noted above, I’d like to see a detailed model of who benefits. if it’s a massive trade deal bartered in secret and heavily weighted in favor of the global oligarchy, count me out.

51 Steve Sailer May 19, 2015 at 7:24 am

What are the expected immigration effects? Or is that too Top Secret to be revealed?

It turned out that one intention of NAFTA was to ruin small Mexican corn farmers for the benefit of American corn growers, with the expected side effect of increasing illegal immigration.

Mission accomplished!

52 Kris May 19, 2015 at 7:42 am

Different situation, different outcomes. Unless a (broad) land bridge somehow materializes across the Pacific, I don’t think you need to worry. Nor about millions of Kon-Tiki voyages, for that matter.

53 Will Weeks May 19, 2015 at 2:16 pm

History doesn’t repeat itself, but it does sometimes rhyme. Past performance is no guarantee of future results, so we should give TPP a chance and forget any other trade agreements that didn’t go as planned.

54 Art Deco May 19, 2015 at 8:21 am

It turned out that one intention of NAFTA was to ruin small Mexican corn farmers for the benefit of American corn growers, with the expected side effect of increasing illegal immigration.

Let go of everyone’s leg.

55 Sigivald May 19, 2015 at 7:31 pm

An intention of NAFTA was to ruin small Mexican corn farmers?

Citation, please?

(Note: Citation for intent, not effect; I am absolutely willing to believe it happened.

I am dubious as Hades about it being a specific intent.)

56 Just Saying May 19, 2015 at 7:31 am

If you’re American, and the US suffers 1 trillion in economic loss, and foreign countries gain 2 trillion in economic gain, for a net effect of a 1 trillion gain, would that convince you?

57 ac May 19, 2015 at 7:41 am

>In the meantime, the more desultory lists I see of possible negative consequences of TPP, the more likely I am to think it is a good idea after all.

There is a word for this, and I’m pretty sure it isn’t “rationality”…

58 Art Deco May 19, 2015 at 8:18 am

If it’s 40,000 pages long, you haven’t a clue what it’s going to do because there are too many moving parts. Don’t sign anything that cannot be delineated in less than a shelf full of phone books.

59 Art Deco May 19, 2015 at 8:20 am

in the neighborhood of $1.9 trillion

Is that re-expressing posited annual gains from trade as a lump sum? It sounds like a mess of nonsense out of the same bin as Bryan Caplan’s ‘trillion dollar bills on the sidewalk’.

60 Art Deco May 19, 2015 at 8:27 am

I say let’s just have a two-way button and ask everyone to press it: do you believe that TPP would lead to a net gain in economic welfare or not?

How ’bout, the fruit to be drawn from the free trade tree has been picked bar at the very top and you’re now in danger of the ladder toppling over and doing you an injury?

61 gregorylent May 19, 2015 at 8:36 am

such a narrow consideration, mr cowen

62 ibaien May 19, 2015 at 8:38 am

also, tyler, what does it tell you when virtually 100% of your very heterodox commentariat – from the dem soc left through the libertarian bulk all the way to the paleocon and nativist right – stands united against a significant piece of policy?

63 leftist conservative May 19, 2015 at 9:21 am

if what you said is true (and it is not, although it may come close), then cowen’s commentariat is highly educated.

64 John Cummings May 19, 2015 at 4:20 pm

Considering the “paleocons” are a scam invented by the Rothschilds(through its Loeb/Kuhn branch), I would not include them in rejection to this “policy”. Since they are a propaganda arm of the bourgeois to keep the crackers in line and don’t hold political power, they can “invent” themselves opposed to this policy, yet it contains what they seek as law: giving commercial interest control of the rule of law against the nation state.

There is a reason before it went public, they mostly supported it. Now, they are just making fools of themselves for their masters.

65 Sam Haysom May 19, 2015 at 5:41 pm

Better the propaganda arm of the bourgeoise (which isn’t actually true but whatever) than the plutocrats thin nerd line that is libertarians.

66 Mr Rothschild May 19, 2015 at 7:00 pm

What’s a thread without the allegation that the We rule the world ?

67 rayward May 19, 2015 at 8:46 am

International trade doesn’t cause a drop in U.S. manufacturing jobs. Says who? Krugman. http://krugman.blogs.nytimes.com/2015/05/19/trade-and-the-decline-of-us-manufacturing-employment/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body. Of course, Krugman has some specific objections to TPP but he supports trade deals that promote international trade. As well he should. It’s one area in which theory prevails among economists, whatever their politics.

68 Peter May 19, 2015 at 8:58 am

Of that $1 trillion, what % will go to the bottom half of of earners in the US and to lower income people in other countries? $1 trillion that is captured by the wealthy in different countries is not necessarily a good deal.

69 leftist conservative May 19, 2015 at 9:16 am

here is another consideration: academia is basically a propaganda factory for the upper class and the corporations.

yeah, so, there is THAT little bitty issue.

70 Nathan W May 20, 2015 at 11:36 am

Do you propose a better way of accumulating and/or analyzing information?

71 Dave Barnes May 19, 2015 at 9:21 am

The issue is NOT what is in or not in the TPP.
The issue IS the secrecy.
I stand opposed until it is made public.

72 Dan Weber May 19, 2015 at 9:47 am

The TPP will be public after the TPA vote.

The TPP bill will be completely public when it comes time for Congress to vote on passing it as law.

73 celestus May 19, 2015 at 9:25 am

I suppose I would change my mind on TPP if the “losers” agreed to compensate the “winners” by $1 trillion or so in exchange for TPP not being passed.

74 Marko May 19, 2015 at 11:19 am

I suppose I would change my mind on TPP if the “losers” agreed to compensate the “winners” by $1 trillion or so in exchange for TPP being passed.

There , now we’re in equilibrium.

This exchange was a total waste of time , wasn’t it ?

75 Another Tom (Though There Are Others) May 19, 2015 at 10:13 am

“In the meantime, the more desultory lists I see of possible negative consequences of TPP, the more likely I am to think it is a good idea after all ”

I think I concur with this statement more generally.

76 R Richard Schweitzer May 19, 2015 at 10:59 am

If individuals and groups were to be free (no constraints on choices of methods in responses to changes in conditions) to adapt to the conditions that will arise under these proposals, we would have differing results from what now seems likely (benefits for some constraints for others).

This is not “new.” But, it is something else to consider.

77 R Richard Schweitzer May 19, 2015 at 11:07 am

Consider also:

What changes are likely in the relationships (not just commercial, but social as well) to occur within our society.

Can those be evaluated by pure “cost-benefit” analysis?

78 FUBAR007 May 19, 2015 at 11:10 am

@Tyler Cowen: “do you believe that TPP would lead to a net gain in economic welfare or not?”

Net gain for whom?

The responsibility of the U.S. government is to look out for the interests of the American people–all of them, not just the elite investor class. In order for passage of the TPP to be the right thing to do, it has to be demonstrably a net gain for the American masses across the board.

Enriching the lives of foreigners is not a U.S. government responsibility or obligation. Period. Do not pass Go. Do not collect $200. How the TPP–or any international agreement, for that matter–benefits people outside the U.S. should be at most an ancillary consideration in U.S. policy-making.

79 Greg May 23, 2015 at 3:06 pm

The idea of a “net benefit for the American masses across the board” is pretty much meaningless. The government does things every day that benefit some groups and harm others. So in my opinion your premise doesn’t provide a meaningful guide to legislation.

This rule of thumb also leads to pretty unsavory conclusions. Does it mean we shouldn’t support HIV/AIDS care in Africa? To take it one step further, what if a trade policy allows a US pharma company to make an extra $1 MM in profits but results in 20 people dying due to lack of medication in other countries? That type of tradeoff seems actually very realistic for considering deals like TPP.

80 Urstoff May 19, 2015 at 11:13 am

So if the ISDS and intellectual property bit were not in the TPP would we see much more support from it’s opponents? I’m guessing not.

81 Donald A> Coffin May 19, 2015 at 5:02 pm

Tyler: “I say let’s just have a two-way button and ask everyone to press it: do you believe that TPP would lead to a net gain in economic welfare or not?”

Ah, the potential Pareto improvement argument. Pardon me if I insist that we include distributional issues in our considerations.

But, first, what about the “…net gain in economic welfare…”? The argument, as I see it, is that TPP will lead to a net gain in worldwide *output*. Suppose we accept that. Does it follw that we will get a “net gain in economic welfare”? It does not. The welfare losses of the losers–and there will be losers–might well outweigh the welfare gains of the winners. Only if we assume that welfare gains can be measured by–are equivalent to–output gains can we conclude that TPP will definitely lead to “net welfare gains.”

But is it plausible for a potential Pareto improvement worth $1.9 billion of output to lead to a decrease in welfare? Wikipedia provides a 2014 estimate of $77.6 trillion (http://en.wikipedia.org/wiki/World_economy), so $1.9 trillion per year is about 1 2% increase. If all of the gains go to higher-income people, while all of the losses fall on lower-income people, I think it’s easily possible that we would have a net welfare loss.

And that’s even without questioning the estimates of the value of the gains from TPP.

82 Nathan W May 20, 2015 at 11:39 am

If indeed gains go to wealthier people and costs go to poorer people, then in particular when considering marginal utility of money then the net welfare effect could be negative.

This may be relevant for the net benefit effect for USA only. But consider all the poorer countries who may gain from market access and what that means for poverty and inequality (and also overall welfare in those countries).

As for the situation in the USA, it’s the sort of situation that legitimizes progressive taxation, even though you will still have those who complain that the government steals their money.

83 grimace May 19, 2015 at 5:26 pm

Who cares?
Will US median wages change appreciably?

That’s what to focus on.

ps How do I compete with Vietnamese workers who can work for much lower wages than I am allowed to–legally–work for?

84 Daws May 19, 2015 at 5:35 pm

the drug cost consequences seem scary, to me. I don’t know how to count their economic value, tho. the people most affected might not b well represented in economic stats, even if they’re very numerous

85 bob May 19, 2015 at 5:46 pm

Since no one has read the TPP, support or opposition is an intuitive leap, and opposition is like a vote of no confidence in the system. Isn’t just the obvious soullessness and corruption of the political/corporate system, and its track record since 2001 enough to render any sane person skeptical of another of its major initiatives? We have mass spying, mass incarceration, the Patriot Act, TSA groping, militarized police, drone murders of 16 year old innocent American boys, an appalling tax system, a $222 trillion dollar fiscal gap, incomprehensible 40,000 page laws written by lobbyists and passed by brain dead clowns in congress, a brainless mass media, the SOPA episode, isn’t this enough? How can we even be having a debate about whether the product of this system is beneficial for humanity? Congress has what, a 5% approval rating, is Tyler Cowen a member of the 5%? Is Mr. Cowen the last believer? Isn’t it obvious that the beneficiaries of TPP are executives of the Sony Corporation, and the delegates writing this thing at a resort in Hawaii with all expenses paid by the Sony Corporation, and perhaps, (perhaps) a couple hundred Vietnamese peasants who might conceivably replace another hundred slightly more expensive former Chinese peasants?

If you’re not convinced, let me know and i’ll write it down in a mathematical model because I guess only that has credibility. “A Model of a Corrupt Society,” forthcoming, by bob.

86 Nathan W May 19, 2015 at 9:44 pm

Indeed, one can model all you want, but it’s all fabrications if it’s not clear what’s actually at stake.

87 tony cohen May 19, 2015 at 8:01 pm

As a Democrat with no economics training besides personal interest and reading, I’ll explain the argument against. Not a good argument, but one that ‘feels right’

I am sure it will make more money. Some for people in the US, some for people outside.

However, who in the US will it go to? Will the benefits be captured by ‘the wealthy’ who have been the only people getting ahead recently? My ‘mood affiliation’ has me believing that any net benefits are likely to only go to wealthy, and possibly, while in aggregate the US gets more money, there could be further transfer of domestic US worker wealth flowing up to the wealthy.

I have no evidence, no information, nor the ability to gather the truth on my own. My gut tells me that somehow, somewhere, this deal will end up making the US elite wealthier at the expense of domestic workers. A net financial positive, but going to a group that is already doing fine.


88 WVO May 19, 2015 at 8:09 pm

Absolutely no one can estimate the costs and benefits of something as complex as the TPP and frankly it’s not even worth trying.

You can come up with nearly any number you want depending on the assumptions you make and the factors you choose to ignore. And while we can spend years debating the right way to calculate the gains from IP protection, the people making the decisions are plowing right ahead with their negotiations.

So the honest critics of TPP (I am excluding those who automatically criticize every trade deal just because they have some kind of inborn animosity toward trade and globalization) criticize it WITHOUT referencing the numbers simply because the numbers are meaningless and because there isn’t enough time to endlessly debate which discount rate to use in calculating the PV of X, Y, and Z.

What they tend to focus on instead are the prima facie risks to major pillars of the modern world, such as national sovereignty (clearly threatened by the Investor-State Dispute Settlement clause).

They do that because while it is possible for the benefits of TPP to exceed its costs under the right assumptions, no one can say with any kind of certainty whether that is the case.

And if you can’t really be sure how big the rewards are, it makes no sense to assume huge risks.

For example, suppose I offer you a bet. I will throw a dice in the air. If you correctly guess which side of the dice comes up, I will give you somewhere between $1 and $100,000,000. If you are wrong, you give me $1,000,000.

Oh and by the way, it’s not a fair dice. It’s loaded.

Oh and also, it’s not a regular 6-sided dice. A side can have as many as 10 or even 20 dots on it.

You want to take that bet?

89 Nathan W May 19, 2015 at 9:37 pm

If there might be a trillion dollars in gains out of it, then it might be worth hiring a few people to study whether the bet might be worth taking.

90 Thomas B. May 19, 2015 at 9:11 pm

TPP vs. status quo? Net positive.

TPP vs. TPP without problematic IP provisions? Net negative.

The second is the more relevant comparison, because TPP is a foregone conclusion, the only question is what provisions we push to amend before it’s signed.


91 Nathan W May 19, 2015 at 9:36 pm

If there is so much good to say about the TPP, then how come there is almost no information about what is on the table? It makes it very difficult for the public to play a role as informed participants in what’s going on when such huge deals are negotiated with next to no interactions with the media and/or general public in the process of establishing what are to be the priorities when negotiating a trade deal.

How can we evaluate the potential costs and benefits of the deal when for the most part it is not even clear what negotiators have put in the table?

92 ohwilleke May 19, 2015 at 9:43 pm

Given that the vast majority of the economic activity in the signatory countries is already covered by trade agreements, I am deeply skeptical of the claimed $1.9 trillion benefit.

There can also be detriment when trade treaties produce non-optimal domestic policies, decreasing the quality of domestic economic policy. For example, it is hard to see any genuine economic benefit from a recent WTO tribunal ruling that prohibits people who sell meat from disclosing its place of origin on the labels, on the ground that this, for example, might give Australian lamb makers an edge over Mexican or Canadian lamb makers. When concealing information from consumers is held to be necessary to break down a “trade barrier” one has to seriously doubt the political economy assumptions that go into the policy that the agreement establishes.

Also, it would be very interesting to see how the claimed $1.9 trillion benefit (over what time frame? compared to what base number?) (and any specific number without a large margin of error is necessarily misleading as there are many inherent uncertainties in how the treaty will be applied in practice that can’t be known in advance) break down by components of the TPP. Presumably, some are anticipated to produce great economic gains, while others are anticipated to have a marginal or negative impact. The TPP is notable for having a very broad scope of subject matter covered far beyond the usual for trade treaty, and it is very plausible that Fast Track authority is a bad idea because 90% of the benefit of the TPP might come from 10% of its provisions, with the balance having unproven or dubious value. In that reality, it would be better to dump the TPP because a subsequent “skinner” TPP 2.0 might have most of the benefits with far fewer burdens.

U.S. International Trade is about $2.4 trillion per year, in round numbers, and about $48 trillion over twenty years, and more if you use nominal dollars and make a reasonable estimate of the rate of inflation. If the estimate is an improvement of $1.9 trillion over twenty years (about 4%) or less, that starts to sound less impressive. Suppose that 80% of the benefit comes from reducing tariffs and quotas about which we have the best econometric data. Then, the benefit from the rest of this very “fat” treaty is 0.8% of the volume of trade. It doesn’t take many hidden costs (e.g. the effect of strong IP laws in supporting totalitarian regimes with bad economic policies) to erase the benefits of a “fat” treaty rather than a “skinny” one.

93 Nathan W May 19, 2015 at 9:46 pm

I think that one of the most useful things I recall hearing about theoretical and actual distributions of gains from a trade deal is the simple fact of pointing out that there is a difference between the theoretical fact that gains can be redistributed to ensure that everyone gains and the actual fact of making that redistribution occur. How have previous governments done on redistributing the gains of trade?

94 Nathan W May 19, 2015 at 10:03 pm

The policy brief does not contain any details on the estimation method, which makes it essentially impossible to say much on whether the estimated gains could be accurate.

95 Nathan W May 19, 2015 at 10:19 pm

How can one mount a critique of the possible effects of a secret policy? In the situation, the lack of effective critique should not be seen as evidence that arguments are stronger on the one side. The deck is intellectually stacked for want of information.

Only the yes side has access to info, since presumably negotiators are not opposing texts that they have just negotiated.

96 jorod May 20, 2015 at 10:05 pm

What benefit is NAFTA to Mexico? Or have only the elites benefited? Why are people leaving in droves?

97 William May 20, 2015 at 11:08 pm

about a of the Dallas Cowboy suites are owned by Mexican nationals. So I would say they come to the US in droves to watch Romo.

98 Jason May 22, 2015 at 8:17 pm

I believe in not changing the mind too quickly, it’s better to stick with what we feel it’s going to work and work according to that. I am a decent Forex trader and at the moment I am making good income regularly all thanks to OctaFX broker, it gives me conditions which are always in my favor with low spread of 0.2 pips, high leverage up to 1.500 and great customer service which is ready to help us 24 hours on all 5 working days.

99 Mark P Xu Neyer June 15, 2015 at 3:53 pm

“If those costs and outrages associated with TPP are so bad, it ought to be possible to do a study which makes the trillion in benefits go away. ”

the study you linked does that.


Comments on this entry are closed.

Previous post:

Next post: