On the TPP
: Brad Delong on the TPP: “In this short preview of my interview with economist Brad Delong…
…we discuss the economic and social impact of the trade deals currently being negotiated by the US Trade Representative, including the Trans Pacific Partnership (TPP), Trade Promotion Authority and related bills under consideration in Congress this month. The full interview will be available next week…
http://traffic.libsyn.com/windcastle/Brad_Delong_Excerpt_on_Trade.mp3
Scott Gosnell: Let me ask about the Trans-Pacific Partnership and other trade deal that are going on right now. What do you think of them?
Brad DeLong: The actual deal seems to have a set of important tariff reductions and export-import restraint reductions. That is worth $4 trillion to the people of the Pacific basin over its expected lifetime. But it is also worth -$1 trillion to people–like the people of Bangladesh–who are left out, who are excluded from things like the textile market access provisions.
Normally I would say: adding up a +$4 trillion for some people and a -$1 trillion loss for other people–that looks like a winner. Except that the people outside–the people in Bangladesh–are poorer on average than the people inside. Bangladesh is a lot poorer than even Vietnam right now. And so the utilitarian calculus tells us that even the trade part is not nailed down. The longer it goes without pro-TPP people doing the work to nail down the utilitarian calculus of the trade benefits, the more antsy I get.
My first instinct would be to say: $4 trillion – $1 trillion = +$3 trillion. There is a $3 trillion bill lying on the sidewalk in this thing. We should pick it up and utilize it. We can figure out how to redistribute it later. But the important thing is to pick it up.
So my first instinct is to say that I am for the “trade” part–100% in favor. But the fact that the distributional argument has not been made drops me down to 75%.
Then there is the dispute resolution aspect. The dispute resolution aspect worries me a lot. I don’t understand it. The case for it–arguing that this is a good thing–has also not been made. And, as best I can tell, once this dispute resolution framework is set up it is then next to impossible to modify. We may be doing the equivalent of what the European Union did in setting up the European Central Bank: creating institutions without having any reasonable means of changing its modes of operation should they be wrong.
I think Europe has suffered significantly over the past eight years because the European Central Bank is not subject to enough political control. I fear this is what we are getting into with the dispute resolution mechanism. That drops me from +75% down the +25%.
Then there are the intellectual property provisions. I tend to think we should be, on balance, loosening intellectual property protection in the world rather than tightening them. That drops me from +25% to -25%.
So at the moment I am slightly opposed to the Trans-Pacific Partnership. I am in favor of passing fast-track, so Obama can actually finished negotiating it. Then we can look at it. But if what he negotiates turns out to be what I expect he will negotiate, I will wind up being opposed then on the final vote. Unless, that is, someone can convince me that the intellectual property protections are not as bad as I fear, or that setting the dispute resolution mechanisms in stone is not as dumb-ass a move as I fear.
Scott Gosnell: I’ve noticed that the Europeans are now working to take out the dispute resolution. Is that good?
Brad DeLong: The fact the Europeans are invited to share my worries about this makes me even more slightly negative about the thing, as it is portrayed right now.
I generally feel like more trade is a good thing–if you do it right. If you trust your social democracy, the fact that trade may have bad distributional effect is something you really should not worry about that much. You can always fix that.
One wonder here is this: If this thing passes, it is going to pass the House with 170 Republican and 50 Democratic votes. And, if it passes, it passes the Senate with 50 Republican and 10 Democratic. This is a Republican priority. So why isn’t there something attached to the package to make the entire package a distributional win rather than a distribution loss or a distributional zero? If Obama is going to support this, why hasn’t he extracted a price in negotiations–something, you know, like a Food Stamp enhancement, a minimum-wage increase, an extension of the Earned Income Tax Credit to childless workers, something to do with family and medical leave. Any of the huge number of priorities that are not getting passed in the next year and a half with a Republican Congress, unless they are linked to something the Republican Congress really likes.
Here is something the Republican caucus in Congress really likes. Yet there has been no attachment.
This causes me to wonder: Is there minimal understanding of what game they are playing on the part of White House congressional relations, and indeed on the part of Obama’s inner circle and the president himself right now? That there has not been a price extracted for White House agreement?
Scott Gosnell: If you had make a guess, what what do you think that about?
Brad DeLong: I do not know. I don’t really understand the guy.
It does seem that if you are negotiating a bill… That i, President Bill Clinton thought that NAFTA was by and large a good thing. He may have been wrong in there. He may have been right. In retrospect I still think the jury is out–although I’d probably say a slight minus now. But Clinton certainly thought it would be a good thing. It was already negotiated. And so Clinton went off and negotiated labor and environmental side agreements, added them to what Bush had, and submitted the thing as a package.
Why didn’t Obama name a Mitt Romney to be Special Trade Representative for negotiating the Trans-Pacific Partnership, let Romney negotiate it, and then gone to Boehner and McConnell and say: “Look. Here here’s what your guy as STR has negotiated. I’m worried about the distributional consequences. What will you give me in return for my signature to ease those worries?” Yet that’s not what he did at all.