Krugman slams TPP

imgres

From Paul Krugman comes the assessment that Andrew Robb should have made many months ago:

It’s less well known that the administration’s international economic agenda is also stalled, for very different reasons. In particular, the centerpiece of that agenda — the proposed Trans-Pacific Partnership, or T.P.P. — doesn’t seem to be making much progress, thanks to a combination of negotiating difficulties abroad and bipartisan skepticism at home.

And you know what? That’s O.K. It’s far from clear that the T.P.P. is a good idea. It’s even less clear that it’s something on which President Obama should be spending political capital. I am in general a free trader, but I’ll be undismayed and even a bit relieved if the T.P.P. just fades away.

…What the T.P.P. would do, however, 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 we’re talking about here can alternatively be described as legal monopolies. True, temporary monopolies are, in fact, how we reward new ideas; but arguing that we need even more monopolization 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 American. But this doesn’t mean that the T.P.P. is in our national interest. What’s good for Big Pharma is by no means always good for America.

In short, there isn’t 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, abroad or at home.

…So what I wonder is why the president is pushing the T.P.P. at all. The economic case is weak, at best, and his own party doesn’t like it. Why waste time and political capital on this project?

My guess is that we’re looking at 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 weren’t old-style liberals by going all in for globalization. Whatever the motivations, however, the push for T.P.P. seems almost weirdly out of touch with both economic and political reality.

So don’t cry for T.P.P. If the big trade deal comes to nothing, as seems likely, it will be, well, no big deal.

Australia has been blindly supporting the TPP supposedly to chase sugar exports as well as bizarrely supporting China’s exclusion from it. Max Suich had a much better explanation last week for why:

…we are provoked by these uncertainties about American commitment:to get ostentatiously closer to the US, so as to be seen as an ally joining “ a firm stand” against China so as to encourage the US to stay engaged in north Asia and to that end to volunteer assistance there in “treaty networking” and ultimately military assets. And to look for encouragement from like minds in Washington -among others, among the veterans of the Bush administration.

The TPP is not a trade document at all, it’s strategic one, probably damaging to our Chinese trade in the long run, not to mention the Budget via higher PBS costs.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Latest posts by Houses and Holes (see all)

Comments

  1. It does kinda make sense that the LNP saw throwing our economic interests under the bus as the price to be paid for hiding more deeply under the coat tails of Uncle Sam.

    As the ideological obsessions of the government become clearer – think US neo-conservative circa 2000-2004 – it is like we are living in a policy time warp.

    Could some one wake them up please!

    The world has moved on from that brief moment in time.

    • GunnamattaMEMBER

      There is a strategic divide opening up on this too though courtesy of the Russians in Ukraine.

      What odds China coming out with some words offering mild support for a nation protecting the ‘interests’ of those speaking its language elsewhere?

      With Russia now back as some form of serious threat (though not the ideological threat the Soviet Union was) are the Americans going to be as focussed on reaming Europe [could they?] with the transatlantic version of the TPP? seen here (H/T Migtronix) http://leaksource.info/2014/03/02/eu-us-transatlantic-trade-and-investment-partnership-ttip-draft-leaked/

      If the Europeans ask more questions would the Torynuffs? maybe not but it will raise the political costs of them not doing so.

      and if the neocon element of the Torynuffs does indeed want to fall in line behind the US then it may want to ask some questions about if there are any strategic risks of so many Chinese buying houses in Australia.

      My early morning thoughts….

      …..but of course if China should be offered a G8 seat with Russia booted, then Russia can go back to being a complete international pariah, with the boys from Beijing becoming fully fledged club members.

  2. sydboy007MEMBER

    I don’t quite understand why we’re trading away so many rights for access on agricultural products that take may benefit a decade or more in teh future.

    If you believe the climate is warming (note i’m not saying it’s due to humans, just that we do seem to be going through a warming phase) and that agricultural production will become more variable as droughts and floods occur on a more extreme level, then it’s quite likely that in 10-15 years most countries will no longer be able to afford to use tariff protections as food in general is going to be expensive anyway.

    We’ve already been sold out for the Korean FTA which seems to have little immediate benefit for Australia, and the TPP would have to be the worst managed trade deal currently waiting for a grovelling Coalition Govt to sign. The US FTA has been such a resounding success…for the Yanks, not Australia!

    • casewithscience

      I think we are just getting ahead of the curve. Eventually (2030 or so), all countries will be subject to regimes like the TPP. It is inevitable that commercial interests will require free trade. It frees up the economy to minimize costs to the consumer. The unfortunate result for those “ahead of the curve” on this gloablisation is that traditional industries suffer as the rest of the world catch up. That said, it gives the opportunity to go into new industries and take the lead in manufacturing streams (ie R&D and technology). The US seem to be doing it right. Australia just isn’t playing the game properly.

      • The Free Trade rational does not hold. From what we have seen the TPP is like most modern trade agreements in that it almost exclusively proposes restrictions to trade rather than freedom. The US negotiators might promise to remove some tariffs of their own but this will prove as hollow as every other time. It’s about changing laws to suit a few businesses, it’s not about free trade at all.

  3. I think you’re absolutely right this is the NOT Free Trade agreement. It’s actually an Empire wide Tax the US is imposing on Pacific partner countries for provision / inclusion in a US led security allegiance. So stop looking for Australian trade advantage where none is to be expected.

    • Yes, “realpolitic” is behind our FTA with USA, and probably explains the slow progress wrt China. But, there would appear to be more genuine comparative-advantage reasons behind the Sth Korea FTA. It must be win-win to get huge flat screen TV’s in exchange for our minerals and beef!