Many of the products we now import, like coffee, would either not be available at all, or extremely expensive without trade.
By Dean Baker FAIR September 23, 2016
The Trans-Pacific Partnership (TPP) has little to do with free trade. The trade barriers between the United States and the other countries are already very low, with few exceptions; in fact, the US already has trade deals with six of the 11 countries in the TPP. The TPP is primarily about installing a corporate-friendly structure of regulation, as well as increasing protectionist barriers in the form of stronger and longer patent and copyright and related protections. (It doesn’t matter if you and your friends like patent and copyright protection; they are still protectionism.)
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President Obama is pulling out all the stops in pushing the TPP, and it seems the New York Times has decided to abandon journalistic principles to join this effort. It reported that people in the United States favored trade in a confused article (9/21/16), which randomly flipped back and forth between the terms “trade,” “trade agreements” and “free trade.” As everyone knows, except apparently the people who work for the New York Times, these are not the same thing.
It is hard to believe that many people in the United States would be opposed to trade. Imports and exports combined are more than a quarter of GDP. Many of the products we now import, like coffee, would either not be available at all, or extremely expensive without trade. It’s difficult to believe that many people in the United States would support autarky as an alternative to the current system.
If people are asked about “trade agreements,” it is not clear what they think they are referring to. The United States has been involved in hundreds of trade agreements over the last seven decades. These agreements hugely reduced trade barriers between the US and the rest of the world, leading to large increases in trade and large drops in price. Of course, most of these benefits accrued before 1980, but it seems unlikely that many of the people polled on the topic would have a clear idea of the costs and benefits of the trade deals negotiated since World War II.
When it comes to the TPP, there is very little by way of free trade promotion in this deal. As noted, most barriers between the member countries are already low. This is why the nonpartisan International Trade Commission (ITC) projected that the gains to GDP, when the effect of the deal is mostly felt in 2032, will be just over 0.2 percent of GDP. This is just over a month of normal economic growth.
This projection explicitly did not account for any of the losses associated with the increased protectionism in the TPP. (The ITC said the costs of the protectionism in the TPP would be difficult to estimate.) These costs are likely to be quite high, especially in the case of prescription drugs. The implicit tariffs from the protectionism in the TPP are enormous. For example, the price of a high-quality generic version of Sovaldi in India is $200 per treatment. The list price in the United State is $84,000. This is equivalent to a tariff of more than 40,000 percent.
While a full projection for the costs of the protectionism in the the TPP is not available, New Zealand’s government did provide an estimate of the cost to New Zealand of extending copyright duration from 50 years to 70 years, as required under the TPP. According to the government’s projection, the cost of this one narrow provision to New Zealand would be one-10th as large as all the gains to the United States projected by the ITC from the TPP.
Given that New Zealand already has a well-developed copyright system, this cost would be relatively minor compared to the costs to countries without well-developed systems, like Malaysia and Vietnam. Furthermore, the costs of longer copyright protection would almost certainly be trivial compared to cost of stronger and longer patent and related protections for prescription drugs and other products.
If the impact of these forms of protection are taken into account, the TPP is almost certainly, on net, a protectionist pact. It is unfortunate that the New York Times could not restrict its enthusiasm for the TPP to the opinion pages and instead decided to distort the facts to push the deal in its news section.
Economist Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC. A version of this post originally appeared on CEPR’s blog Beat the Press (9/21/16).
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