Trans-Pacific Partnership

Trans-Pacific Partnership Trade Pact: Yes, No, and Maybe

The maddening third-best quality of secret international trade pacts for free trade lovers


Sen. Elizabeth Warren (D-Mass.) made news today hitting President Obama over aspects of the pending Trans-Pacific Partnership trade deal. She's complaining about the president's desire to see Congress pre-approve "fast-track" methods for passing the pact, which does not allow legislators to amend, before they've seen its precise content. This seems, regardless of whether you would think the deal is a good idea if you did know everything that was in it, a reasonable request.

Very roughly, the politics of this deal see Obama acting more pro-trade deal than the traditional Democratic constituencies of labor and environmental activists, in whose name Warren speaks.

I've been both supportive of trade deals as a least-bad response to international protectionism, though I find when I have dug deeper into the actual content, as I did for NAFTA in these pages back in 1993, that there's always some bad or unnecessary stuff there. First-best for American citizens is dropping our trade barriers, no matter what our partners/rivals/other nations making, buying, and selling stuff and services do.

Wikileaks released some drafts of the not-quite-public pact back in 2013.

Some recent commentary and reporting from both hither and yon that give a decent picture of where the TPP debate stands:

•Rand Paul, running for president, is for TPP. Ron Paul, not running for president, is against it, and fast-track trade authority and trade pacts in general.

• National Review laments the secrecy, but guardedly advises Congress to pass fast-track authority, but then:

give the thing a careful read before voting on it, especially considering how little they know about the details of the negotiations up to this point. The Obama administration, self-proclaimed epitome of openness and transparency, has conducted TPP negotiations largely in secret, with members of Congress permitted to review documents only in person in the office of the U.S. trade representative, without staff. Most of what the public knows about the negotiations has come through a series of releases from WikiLeaks. The level of secrecy here might be appropriate to missile-defense negotiations; it is excessive for a trade deal, especially one involving mostly free and open societies.

• Mother Jones has a decent "explainer" on what's at issue, including:

As of the most recent round of negotiations, concluded in March, 12 countries are involved: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The deal could eventually encompass half of the world's economies.

The TPP would expand market access between its signatories. Analysts are saying the pact's rules will be even more stringent than those currently used by the World Trade Organization (putting more emphasis on free trade). Some economies may be reformed to meet the criteria. And while a lot of that change would happen in less-developed economies, America could see some restructuring, too. According to areport by the Congressional Research Service, manufacturing stands to take a $44 billion hit, while the services sector (already 80 percent of our economy) can expect gains of more than $79 billion.

• Even some economists who think that globalization has hurt American manufacturing workers-qua-workers are pro-TPP, as they wrote in the Washington Post:

First, the TPP — which seeks to govern exchange of not only traditional goods and services, but also intellectual property and foreign investment — would promote trade in knowledge-intensive services in which U.S. companies exert a strong comparative advantage. Second, killing the TPP would do little to bring factory work back to America. Third, and perhaps most important, although China is not part of the TPP, enacting the agreement would raise regulatory rules and standards for several of China's key trading partners. That would pressure China to meet some of those standards and cease its attempts to game global trade to impede foreign multinational companies….

The World Trade Organization counts 160 members, including every major economy and most importantly China, which joined in 2001. According to the World Bank, WTO members can export manufacturing goods to the U.S. market at an average tariff of just 2 percent. Within the proposed TPP, the United States already has bilateral trade deals that have eliminated all manufacturing tariffs with five of the 11 members: Australia, Canada, Chile, Mexico, and Singapore. Cutting already rock-bottom U.S. manufacturing tariffs to zero for the remaining TPP countries would thus have negligible effects on U.S. producers.

• Scott Lincicome, a trade attorney and Cato Institute adjunct scholar, explains at length at the Federalist why the deal is "third best" from a free trade perspective, but still likely the best politically possible thing to be done now.

• The Electronic Frontier Foundation's objections to the IP protection aspects of IPP.

• Tyler Cowen dings Paul Krugman for opposition to TPP, on the grounds that if we don't shape such a pacific trade deal, China will.

On the Reason front, the magazine editorialized in favor of fast-track authority and passing the TPP in our February issue. Jesse Walker dissented, writing that "Provisions in the leaked drafts would extend copyright terms, impose DMCA-style restrictions on circumventing copy protection, and otherwise take a maximalist approach to intellectual property." 

Bill Watson griped at Reason about how even Obama himself is more prone to argue the special-interest benefits of the pact than to emphasize the wealth-creating-for-all prospects of lowering rules and tariffs that block the free flow of goods and services, concluding that "If Congress refuses to ratify the TPP, it won't be because Americans oppose free trade. It will be because the TPP's supporters never told them about it."

Zenon Evans wrote back in 2013 (this has been a long process) against the pact, fearing early signs that it promises " bigger government, stricter laws, and less accountability." Evans detected signs of a special-interest crony-capitalism extravaganza:

The USTR acknowledges the existence of 29 chapters under negotiation. Only five of these chapters deal directly with trade. The other 24 aim to influence many issues, such as food and environmental standards, intellectual property, and pharmaceutical formularies.

Various special interests groups openly voiced their support for the TPP in a letter to the president. The CEOs of the Recording Industry Association of America (RIAA), Pharmaceutical Research and Manufacturers of America (PhRMA), International Trademark Association (INTA), and many others found common ground in anticipation of more rigorous "protection and enforcement of intellectual property." This, of course, benefits a few businesses, but directly contradicts the notion of liberalization and limited government influence in trade.

Back in July 2013, I had this to say about trade pacts and the process v. content issue of "fast track" that has Warren upset this week:

Process vs. outcome arguments can be complicated from a libertarian perspective; in general autocratic executive power is to be looked down on, though it's possible giving Obama that authority will lead to a better (in terms of trade liberalization and lack of attaching other bad regs to trade deals) outcome than allowing Congress to amend….[But] it ain't business, in general, for whom real free trade is good: it's consumers. (See some recent data on this from Daniel Griswold at Cato.) So the more business interests have ins on shaping these deals vs. consumers, likely the worse.

It is worth remembering that we have in our power as nation the ability to do what's good for American consumers, that is, all of us: cut tariffs and allow us to buy things from foreigners at the price they are willing to sell it, without the government taking a cut.