August 21, 2016
Those folks at the Washington Post are so much fun. Now that it looks like the Trans-Pacific Partnership (TPP) might fail, the Post challenges TPP critics, “if not the Trans-Pacific Partnership, then what?”
Let’s see, the Obama administration had how many staffers working how many years to craft the TPP? And the critics working in their spare time should come up with the alternative?
Okay, but we’ll accept that the critics are much smarter and more competent than the TPP team. I’ll at least outline some items I want in my pact.
First, we can accept the actual “free trade” items in the pact. Let’s eliminate the tariffs and quota restrictions as provided for in the TPP. That won’t have much impact, since in almost all cases they are already very low, but no good reason not to go to zero.
There is one item worth noting here. If this is really an anti-China deal, which is the main line these days of TPP proponents, then we would probably want to up the country of origin requirements. As it stands, the TPP provides that if 30 percent of the value added of a product is made within the country, then it can get the preferential treatment awarded to TPP members.
This means that if a Chinese company sends a product to Vietnam, where 70 percent of the value comes from China, it can be shipped to the U.S. under TPP rules. And, having more confidence in the private sector than government bureaucrats, my guess is this Chinese firm can probably find a way to get through with 25 percent Vietnamese content and possibly even less. If the point is to in some way lock out China, having a 30 percent country of origin requirement was probably not the way to go.
A second item would be serious rules on currency. The TPP doesn’t actually include any rules on currency, although there is a letter of understanding from TPP members. This has zero legal standing, meaning that if Australia or Vietnam suddenly start accumulating massive amounts of dollars to prop up the dollar against their currencies, and thereby make their goods more competitive, there is nothing we can do about it.
Since adjusting currencies are an essential part of a “free-trade” regime, a real trade deal should have rules against currency management. While the exact provisions are more than I have time for just now, Fred Bergsten (the president emeritus of the Peterson Institute for International Economics) and his colleague Joe Gagnon give us a good start here.
The third item would to be to reject the archaic protectionism of the TPP in strengthening and lengthening patents and copyrights and instead promote open innovation. This is especially important in the case of prescription drugs. We can provide for a system of open sourced research funding. This means that governments pay companies under contract to research and test new drugs. All findings are posted to the web as soon as practical and patents are placed in the public domain on a copyleft basis.[1] The requirement payments are based on GDP, with richer countries having to pay a higher percentage than poorer countries, with the poorest just having to make a token contribution.[2]
Under this system, instead of the next Sovaldi listing for $84,000, it will be a generic selling for a few hundred dollars per treatment. The same will be true of cutting edge cancer drugs. And, all the test results will be fully available to the physicians and other researchers so we won’t have to worry about companies misleading the public about the safety and effectiveness of their drugs to increase sales.
We can also do open sourced funding of college textbooks so that the texts for college classes can be downloaded at zero cost or printed out for the price of the paper…isn’t free trade wonderful?
Okay, that’s all I have time for now. (My book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer, will have more. Coming soon, to a website near you.) Anyhow, thanks Washington Post for the challenge.
[1] This means that anyone can make full use of them as long as their own work is also made open to the public.
[2] The value of payments can be graded by their outcome. This could mean, for example, that if a country is making payments to a crony company that rarely produces much useful research, then $1 of research funding may only count for 10 cents against its quota.
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