April 29, 2015
That is an important correction to the David Ignatius’ Washington Post column touting the Trans-Pacific Partnership (TPP) as a way to revive Japan’s economy. Unlike President Bush, who published a draft text of the Free Trade of the Americas Agreement before requesting fast-track authority, President Obama has chosen to keep the draft text of the TPP secret. This is not an allegation of TPP critics, it is a fact in the world.
Another point worth mentioning in this context is that when President Obama argued that he was pushing the TPP to help U.S. drug companies, he was effectively saying that he was hurting U.S. workers. There are two reasons this is likely to be the case. Several provisions of the deal will likely raise drug prices in the United States, for example by extending the period of data exclusivity for biosimiliar drugs (12 years in the leaked draft chapter, versus 7 years now). A decision by a future Congress to have Medicare negotiate drug prices may also be a violation of rules that effectively limit countries’ ability to put in place new price controls.
The other issue is that the more money that foreigners pay Pfizer, Merck and other U.S. drug companies for their patents, the less money they will have to buy airplanes and other items produced in the United States. Unless a worker in the United States owns stock in a drug company, they would be better of if foreigners paid less for drugs rather than more. (The drug companies do employ workers, but the marginal increase in employment from higher company profits is likely to be very small.)
In terms of the effort to revive Japan’s economy, it is worth noting that OECD reports that Japan’s employment to population ratio among people between the ages of 16-64 has risen by 3.1 percentage points since 2012. The ratio in the United States has only increased by 1.4 percentage points over the same period.
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