I’m a very strong free-trader, but what I’ve heard about the Trans-Pacific Partnership (TPP) negotiations makes me feel that it’s less to do with any kind of free trade and much more to do with “managed” trade, where favoured companies get sweetheart deals and cronies get their cut of the action. In spite of that, National Review‘s Kevin Williamson says we should all hold our noses and follow behind President Obama and sign the TPP so we can find out what’s in it, so everyone can get their free unicorn … or something:
If there were $3 trillion sitting on the sidewalk, would you stoop to pick it up? That is the main question facing advocates of the Trans-Pacific Partnership — a proposed treaty to liberalize trade and investment among a dozen nations including the United States, Australia, Canada, New Zealand, Singapore, and Japan — and the trade-and-investment accord’s antagonists, too.
“The first thing you need to know is that almost everyone exaggerates the importance of trade policy,” writes TPP critic Paul Krugman in the New York Times. That may seem a strange sentiment for a man who won the Nobel Prize in economics (*) for his work on trade — perhaps the Sveriges Riksbank exaggerated the importance of trade economics? — but Professor Krugman has a point. The effects of large-scale international accords in trade and other economic areas are difficult to forecast, and such deals interact with other economic realities in ways that are not always entirely obvious. When NAFTA was under consideration, we were warned about that infamous “giant sucking sound” by Ross Perot and other protectionists, while the free-traders predicted that the accord would prove a massive boon to the U.S. economy, as well as to those of Mexico and Canada. The reality, as measured by the Congressional Budget Office and others, is that NAFTA has had a small positive effect on U.S. economic growth. Human progress is made up mostly of small positive effects. Beware policymakers offering dramatic promises: As Daniel Hannan points out, those advocating the adoption of the euro promised that it would add 1 percent GDP growth to each participating nation in perpetuity and that it would also provide a check on political extremism — wrong and wrong.
The dispute over TPP finds Barack Obama at odds both with congressional Democrats and with progressive activists, and making uncomfortably common cause with the most reliable partisans of free trade: most everybody who hates his guts.
Some Republicans have reservations about investing the president with “fast track” authority — meaning that he would be empowered to negotiate a deal that would then get a simple yes/no vote in Congress, which turns out to have a say in international affairs after all — because they are mindful of this imperial president’s habitual infliction of violence on the Constitution and of his seething contempt of the legislative branch in which he served for approximately eleven minutes. But it is unlikely that Republicans will in the end say no to a trade deal.
Professor Krugman’s case against TPP is, in brief, “meh.” He offers very little in the way of substantive criticism of the proposed accord, instead pooh-poohing it as modest, something that might add no more than 0.5 percent, and probably not even that, to the incomes of the participating nations. Those nations represent more than one third of the world’s economic output, though. Brad DeLong of the Washington Center for Equitable Growth addresses Professor Krugman’s sniffing directly: What if the additional growth were only half that 0.5 percent number? “In a Pacific region whose GDP is now approaching $30 trillion/year,” he writes, “that is $75 billion/year. Capitalize that at 4 percent/year and we get a net addition to world wealth of $3 trillion. That is indeed a very small number relative to the wealth of the world both now and discounted into the future. But that is a rather large number compared to other things the U.S. government might do this year. So why not grab for it?”