Krugman slams TPP trade deal

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By Leith van Onselen

Professor Paul Krugman won the nobel prize in economics in 2008 for his 1979 paper proposing a new trade model that changed the way economists view the international exchange of goods.

Given Krugman’s expertise in trade policy, it is telling that he is also a strong opponent of the Trans-Pacific Partnership (TPP) trade agreement – the US-led trade deal currently being negotiated between 12 countries, including Australia.

Last year, Krugman slammed the TPP noting that it would “increase the ability of certain corporations to assert control over intellectual property [including] drug patents and movie rights”. He also claimed that “there isn’t a compelling case for this deal, from either a global or a national point of view” and that the “economic case is weak, at best”, with “the push for T.P.P… weirdly out of touch with both economic and political reality”.

Overnight, Krugman posted an article on his New York Times blog in which he once again questioned the merits of the TPP and warned of the dangers lurking in the intellectual property chapter (leaked by Wikileaks):

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So why do some parties want this deal so much? Because as with many “trade” deals in recent years, the intellectual property aspects are more important than the trade aspects. Leaked documents suggest that the US is trying to get radically enhanced protection for patents and copyrights; this is largely about Hollywood and pharma rather than conventional exporters. What do we think about that?

Well, we should never forget that in a direct sense, protecting intellectual property means creating a monopoly – letting the holders of a patent or copyright charge a price for something (the use of knowledge) that has a zero social marginal cost. In that direct sense this introduces a distortion that makes the world a bit poorer…

Why, exactly, should the Obama administration spend any political capital – alienating labor, disillusioning progressive activists – over such a deal?

As I keep saying, with the TPP likely to be signed by trade ministers at a meeting in Hawaii next month, Australians should be very concerned about the secretive sell-out that is occurring, which will place US political and corporate interests ahead of our own.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.