TPP

The Trans Pacific Partnership. Oh boy.

Thinking about international trade is…well, it is a great cure for insomnia. Seriously.

Yet somehow I’ve reached the point where I should take a more informed position on the Trans Pacific Partnership (TPP) trade agreement. I have no intention of reading the over 5000 page document but provide a link to the full text for anyone so inclined.  More likely is that I will use the Wikipedia explanation among other resources. Also valuable is the government U.S. Trade Representative (USTR) information pages dealing with important specific issues.

I also have no intention of becoming an expert on the complex subject of trade and tariffs.  The Free Trade Debate in all its esoteric glory over the last two plus centuries, full of charts and equations, philosophers and economists, is still a topic high on the yawn list.

What I would like to do is get some understanding of the basics that are involved and somehow separate the special interests, political and economic, and the bombast from what serious people are saying.

The person who I have heard speak most eloquently on the subject has been President Obama. In a joint press conference with Singapore Prime Minister Lee:

“This is an opportunity to grow our economies and write the rules for trade in the 21st century in a way that’s equitable.  It gives us a chance to advance American leadership, reduce economic inequality, and support good-paying jobs — all while strengthening critical strategic relationships in a vital region.”

Who can dispute that we should use our leadership to grow economies with fair and equitable trade rules? That we should strengthen strategic relationships in an important area of the world?

Well, Bernie Sanders can:

“The Trans Pacific Partnership is a disastrous trade agreement designed to protect the interests of the largest multi-national corporations at the expense of workers, consumers, the environment and the foundations of American democracy.”

As the old expression goes “the devil is in the details” and with 5000 pages of details a lot of people have taken to dispute the wisdom of this pact. There is contention over environmental standards, pharmaceuticals, labor standards, and provisions for Investor-State Dispute Settlement (ISDS). Even about fish imports. Very smart people with lots of letters after their names can be found on different sides of these issues. Understanding the nuances and evaluating the hypotheticals among all the shouting by politicians and special interests is mind numbing.

LAYING IT OUT – SOME OF IT ANYWAY

Will it cost American jobs? It depends on who you ask. A study from Tufts University projects a loss of nearly 450,000 jobs. On the other hand, according to Peter Petri, a professor at the Brandeis International Business School, overall incomes, exports and GDP would grow.

“Some industries grow, and some industries don’t grow as fast they would otherwise under a trade agreement,” Petri said. In that process, “some people have to leave jobs and find other jobs.”

In this respect it is almost certain that many individuals and whole communities will be adversely affected. It should be a top priority that the government make provisions to help those out in a massive way.

Will TPP harm the environment? According to the Office of the United States Trade Representative:

”TPP includes the most robust enforceable environment commitments of any trade agreement in history. TPP requires countries to play by fair environmental rules if they want to send their goods to the United States”

Criticism of environmental impact is generally centered on the ISDS provision. Basically this is just an international arbitration process to resolve conflicts, avoiding state-to-state conflict. Speculation is whether companies will go to arbitration to get around environmental laws that adversely affect their profits. In The Real Danger in TPP, critics of ISDS such as Jeffrey Sachs, Joseph Stiglitz, Bernie Sanders and Elizabeth Warren, among others assert that

“…with ISDS, foreign companies don’t have to follow those rules. When government action — even action taken for a legitimate and important public purpose — hurts foreign companies’ economic interests, those companies can sue the government for their lost profits.”

The White House responds to this criticism with the facts that ISDS in various forms is a part of thousands of trade agreements; it protects American companies doing business in other countries; and that the US government has won every single case brought against it to an ISDS panel. This fact sheet answers a lot of the questions that critics pose about ISDS.

On the issues of Human Rights, Labor Standards and Governance (bribery and corruption), the TPP is indisputably an improvement over the WTO and current practices in many of the countries involved. It may not live up to certain ideals, but it is definitely a step forward.

For those of you still awake, that leaves the related issues of Intellectual Property and Pharmaceuticals.

According to the U. S. Trade Representative government fact sheet, TPP requires parties to:

• Ensure the availability of mechanisms to effectively enforce intellectual property rights, including civil and administrative procedures and remedies, and criminal enforcement.
• Establish criminal procedures and penalties for trade secret theft, including by means of cyber theft.
• Adopt strong copyright and patent protections.
• Promote access to medicines by facilitating not only the development of innovative, life-saving drugs and treatments, but also the spread of generic medicines.

It is about this fourth point, generic drugs, of which Doctors Without Borders, expressed in November 2015 that they were “extremely concerned about the inclusion of dangerous provisions that would dismantle public health safeguards enshrined in international law and restrict access to price-lowering generic medicines for millions of people.” Progressive American politicians such as Bernie Sanders also condemned these provisions as they would “expand the profits of big drug companies, keep drug prices artificially high, and leave millions of people around the world without access to life saving drugs.”

The USTR contends:

“The TPP includes additional specific rules related to biologic medicines, reflecting the growing importance of these cutting-edge technologies. These commitments are intended to promote innovation and promote access to affordable medicines in developing countries.”

Also fighting vociferously against the TPP is Elizabeth Warren. Speaking in February 2016:

“A rigged process produces a rigged outcome,” she continued, blasting the composition of advisory committees that were made up of industry executives and the cloak of secrecy that surrounded the negotiations. Warren specifically called out the TPP’s Investor-State Dispute Settlement, or ISDS, provisions.”

There were over 20 advisory committee reports, most focusing extensively on various industries covered in the agreement. As one would expect, each were comprised mainly of executives from those affected industries with a smattering of labor leaders. Also, as expected, they expressed approval of the TPP with regards to how it affected their particular industry. Labor representatives were opposed and issued their own 124 page advisory report.

I have no objections to negotiations being held in secret. Otherwise there would be chaos and nothing would ever come to agreement. I also have no objection to industry executives making up much of the advisory committees. This thing is about business and they know the most about their businesses. Of course they want favorable terms that will make their companies more profitable. But overall, it is about expanding trade to reduce costs for consumers and produce more products we can more easily sell abroad. Thriving, profitable businesses are good for the country.

From Wikipedia:

“The literature analyzing the economics of free trade is extremely rich with extensive work having been done on the theoretical and empirical effects. Though it creates winners and losers, the broad consensus among economists is that free trade is a large and unambiguous net gain for society.”

It’s actually pretty amazing that something this comprehensive could be agreed upon by representatives of so many countries (12) and industries. An enormous amount of time and effort was expended; people from many countries around the world working cooperatively to create an agreement they believed would contribute to increasing prosperity and long term international harmony.

Personally it’s not going to greatly affect me. I’m retired and don’t live in a one industry community. Yet I do like to favor policies that I believe are good for the country and good for the world in the long run.

With or without this trade deal, automation and AI will continue to eat at jobs and we will still need to get better at dealing with dislocations, whether through retraining or CCC type programs or even outright subsidies for people affected. Also, the agreement makes at least some incremental progress on the environmental and labor standards fronts. Many of the other areas, even the experts don’t agree.

My inclination at this point is to favor passage of the TPP. So many people worked so hard, so long, so cooperatively, it seems pretty wasteful to outright reject it for what appears to be political squabbling about things that are not even understood. I also trust President Obama. I believe he has done a pretty good middle of the road job, with a lot of integrity, truly cares about the People and the Country, and I will give him the benefit of the doubt on this one. It could be a big factor in his legacy.

:>Howard Flantzer