Everyone knows that the domestic economic agenda of US President Barack Obama’s administration is stalled in the face of scorched earth opposition from Republicans — and that is a bad thing: The US’ economy would be in much better shape if Obama administration proposals like the American Jobs Act had become law.
It is less well-known that the administration’s international economic agenda is also stalled, but for very different reasons. In particular, the centerpiece of that agenda — the proposed Trans-Pacific Partnership (TPP) — does not seem to be making much progress, thanks to a combination of negotiating difficulties abroad and bipartisan skepticism at home.
Yet you know what? That is OK, since it is far from clear that the TPP is a good idea and it is even less clear that the free-trade deal is something on which Obama should be spending political capital. I am, in general, a free trader, but I will be undismayed and even a bit relieved if the TPP just fades away.
The first thing to know about trade deals in general is that they are not what they used to be. The glory days of trade negotiations — the days of deals like the Kennedy Round of the 1960s — which sharply reduced tariffs around the world are long past.
Why? Basically, old-fashioned trade deals are a victim of their own success: There just is not much more protectionism to eliminate. Average US tariff rates have fallen by two-thirds since 1960, while the most recent report on US import restraints issued by the International Trade Commission puts their total cost at less than 0.01 percent of GDP.
Implicit protection of services — rules and regulations that have the effect of, say, blocking foreign competition in insurance — surely impose additional costs, but it remains true that these days, “trade agreements” are mainly about other things. In particular, what they are really about is property rights, things like the ability to enforce patents on drugs and copyrights on movies, and so it is with the TPP.
There is a lot of hype about the TPP from both supporters and opponents. Advocates of the pact like to talk about the countries at the negotiating table comprising about 40 percent of the world economy, which they imply means the agreement would be hugely significant. Yet trade among these players is already fairly free, so the TPP would not make that much difference.
Meanwhile, its critics portray the TPP as a huge plot, suggesting that it would destroy national sovereignty and transfer all the power to corporations. This, too, is hugely overblown. Corporate interests would get somewhat more ability to seek legal recourse against government actions, but, no, the Obama administration is not secretly bargaining away democracy.
What the TPP would do is increase the ability of certain corporations to assert control over intellectual property — again, think drug patents and movie rights.
Is this a good thing from a global point of view? Doubtful. The kind of property rights being dealt with here can alternatively be described as legal monopolies. It is true that temporary monopolies are how new ideas are rewarded, but arguing that even more monopolization is required is very dubious and has nothing at all to do with classical arguments for free trade.
Now, the corporations benefiting from enhanced control over intellectual property would often be from the US, but this does not mean that the TPP is in its national interest. What is good for Big Pharma is by no means always good for the US.
In short, there is not a compelling case for this deal, from either a global or a national point of view, nor does there seem to be anything like a political consensus in favor of it abroad or at home.
Abroad, the news from the latest meeting of negotiators sounds like what one usually hears when trade talks are going nowhere: assertions of forward movement, but nothing substantive. In the US, both US Senate Majority Leader Harry Reid and House of Representatives Minority Leader Nancy Pelosi have come out against giving Obama crucial “fast-track” authority, meaning that any agreement can receive a clean, up-or-down vote.
So what I wonder is why the US president is pushing the Pacific trade pact at all. The economic case is weak, at best, and his Democratic Party does not like it, so why waste time and political capital on this project?
My guess is that this is a case of a combination of Beltway conventional wisdom — “Very Serious People always support entitlement cuts and trade deals” — and officials caught in a 1990s time warp, still living in the days when New Democrats tried to prove that they were not old-style liberals by going all in for globalization.
Yet whatever the motivations, the push for TPP seems almost weirdly out of touch with both economic and political reality. So do not cry for TPP, if the big trade deal comes to nothing — as seems likely — it will be, well, no big deal.