July 04, 2016
Mark Landler used his “White House Letter” column to tell readers that President Obama will “need his oratory powers to sell globalization.” This assertion is wrong. Landler is referring to the Trans-Pacific Partnership (TPP) which can more accurately be described as a protectionist agenda than globalization.
The reality is that the trade barriers between the United States and the other countries in the TPP are already very low. The U.S. already has trade deals with six of the other eleven countries in the TPP and even in the case of the other five most of the barriers are already at or near zero. This is why the International Trade Commission (ITC) projected that in 2032, when the gains from the deal will be mostly realized, it will have increased national income by just 0.23 percent, a bit more than one month’s growth.
While the deal does little to reduce traditional trade barriers, the TPP increases protectionism in the form of stronger and longer copyright and patent protection. The provisions in the TPP will cause people to pay more for everything from prescription drugs and computer software to recorded music and old books. The impact of the protectionist measures in the TPP are likely to be much more important in slowing growth than the tariff reducing measures are in enhancing growth. (The ITC did not include the impact of stronger protections in its analysis.)
New Zealand’s government estimated that the copyright extension required by the TPP, from 50 years to 70 years, would cost the country 0.023 percent of its GDP annually. This assessment implies that this one narrow provision, in a country that already has strong copyright protection, will cost the country one-tenth as much as what the ITC projected the United States will gain from the deal. The impact of the stronger protections for drugs and other products will almost certainly be many times larger than the impact of this copyright provision.
It is also worth noting that stronger patent and copyright protection shifts income upward. Not many low-income people own patents and copyrights. By making these protections stronger, under standard economic assumptions, the United States trade deficit in manufactured goods and other items will increase. (It is worth noting that the TPP does nothing to weaken the protections for highly paid professionals like doctors and dentists. These protections add over $100 billion a year to the country’s health care bill.)
The TPP would also make the far-right legal doctrine of compensation for regulatory takings part of U.S. law. Under current law, if Congress or a state legislature determine that a company’s pollution imposes a health or environmental hazard, they can simply prohibit the company from polluting. However, under the TPP governments would have to compensate foreign investors for the profits they would lose if they are not able to pollute.
NAFTA already has a similar provision, but TPP would greatly expand the number of companies in a position to sue for regulatory takings. It could also create a situation in which U.S. companies pressure Congress to grant them the same treatment as foreign companies in getting compensation for regulatory takings. (U.S. companies could also transfer divisions to a foreign based subsidiary or sell them to a foreign company if they thought it was likely that they could face a reduction in profits due to regulatory measures.)
It is very generous of Mr. Landler to call the push for greater protectionism and the advancement of a right-wing legal doctrine “globalization,” however these actions do not fit the normal meaning of the term.
Note: this was altered slightly from an earlier version to clarify the issue on regulatory takings. Thanks to Robert Salzberg.
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