TPP: Who do you believe?

Friends, Romans, Countrymen- Lend me your ears. I come to bury Ceasar, not to praise him.

Monday Barack Obama placed an OpEd in the Washington Post (Pravda, meaning “Truth” and the Party organ of the Communist Party of the Union of Soviet Socialist Republics, as opposed to Izvestia, meaning “News”, the Official, State Sanctioned, Public Record- that would be The New York Times) praising the virtues of the Trans Pacific Partnership.

He hath brought many captives home to Rome whose ransoms did the general coffers fill. Did this in Caesar seem ambitious? When that the poor have cried, Caesar hath wept.

Here lies Ceasar’s link.

At least he names the villian, though he lies and lies and lies about almost everything else.

China’s greatest economic opportunities also lie in its own neighborhood, which is why China is not wasting any time. As we speak, China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk.

This past week, China and 15 other nations met in Australia with a goal of getting their deal, the Regional Comprehensive Economic Partnership, done before the end of this year. That trade deal won’t prevent unfair competition among government-subsidized, state-owned enterprises. It won’t protect a free and open Internet. Nor will it respect intellectual property rights in a way that ensures America’s creators, artists, filmmakers and entrepreneurs get their due. And it certainly won’t enforce high standards for our workers and our environment.

As for our plan to thwart the nefarious Yellow Menace, “(A) high-standard Trans- Pacific Partnership, a trade deal that puts American workers first and makes sure we write the rules of the road for trade in the 21st century”, (and by the way Barack, it’s possible to be racist against Orientals too) I think I’ll let Dean Baker take you down.

President Obama Pushes a Weak Case on TPP
by Dean Baker, Center for Economic and Policy Research
03 May 2016

President Obama continued the administration’s boasting about how the Trans-Pacific Partnership (TPP) will eliminate Vietnam’s tariff on exports of U.S. whale meat. You may have missed it, but this tariff, along with Malaysia’s tariff on U.S. exports of shark fins, and Japan’s tariff on our ivory exports, are among the 18,000 tariffs that President Obama said would be eliminated by the TPP in a Washington Post column today.

This 18,000 tariff figure was intended to sound very impressive, but according to Public Citizen the United States doesn’t export at all in more than half of the categories and in almost all the ones in which it does export the tariffs are already low. One important exception is tobacco. Several of the countries in the TPP have high tariffs on U.S. tobacco exports, so the TPP will be making cigarettes cheaper for kids in Vietnam, Malaysia, and elsewhere.

That’s right folks, not enough children in Asia are dying from Cancer Sticks. Hurray for RJ Reynolds and Philip Morris!

Baker notes Obama’s jingoistic appeal to American Exceptionalism (from Obama)-

As we speak, China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk.

then Baker continues.

Actually, this is not the way the economy works. If China reduces trade barriers with other countries in Asia, allowing the region to grow more rapidly, then it should also make the United States more prosperous. The region would be a bigger source of demand for U.S. exports and a more efficient provider of goods and services to the United States. That was exactly the logic of the Marshall Plan that helped to rebuild West Europe after World War II. Greater economic integration in the region, even if engineered in part by China, is something that the United States should applaud, not fear.

President Obama argued that the big difference between the TPP and the trade deals pushed by China is that the TPP will impose our rules. At the top of President Obama’s list was stronger and longer patent and copyright protection. These forms of protection raise the price of the protected items by several thousand percent above the free market price, in the same way that a tariff of 5,000 or 10,000 percent raises the price far above the free market price.

Higher prices due to increased copyright and patent protection can impose large costs on economies and slow economic growth. To give an example, the New Zealand government estimated that the increase in the length of copyright protection required by the TPP, from its current 50 years to 70 years, would cost it 0.024 percent of GDP, the equivalent of 4.3 billion annually in the U.S. economy. This figure is striking since this is a relatively small change for a country that already has strong copyright protection. The cost in developing countries like Malaysia and Vietnam would almost certainly be much larger.

The biggest cost from the increased protectionism in the TPP is likely to be with prescription drugs where it imposes stronger and longer patent and related protections. The goal is to make these countries pay as much for their drugs as the United States. Currently we spend more than $420 billion a year (@2.2 percent of GDP) on drugs that would likely cost about one-tenth this amount in a free market. If we succeed in making drugs as expensive in the TPP countries it will both be an enormous drain on their economies and also jeopardize the health of their populations.

Baker in The Washington Post Says Doctors Without Borders Is Silly to Worry About the Impact of the TPP on Drug Prices, April 25th-

The humanitarian group, Doctors Without Borders, along with many other NGOs involved in providing health care to people in the developing world, have come out in opposition to the Trans-Pacific Partnership (TPP) over concerns that the deal will make it more difficult to provide drugs to people in the developing world. Their argument is that it will raise drug prices by making patent protection stronger and longer and by making it more difficult for countries to scale back protections that they may come to view as excessive and wasteful.

But the Washington Post editorial board tells us not to fear, that the TPP is actually “a healthy agreement.” The gist of its argument is an analysis by Council on Foreign Relations Fellow Thomas Bollyky, which finds that there were few incidents of large increases in drug prices for countries following the signing of previous trade deals.
…
Bollyky looked at changes in drugs prices immediately after a trade deal took effect.
…
(T)his before and after approach is a bit like weighing people the day after they gave up drinking sugary soda to determine whether this decision will affect obesity. It’s not serious stuff.

There is evidence that prior trade agreements have affected drug prices.
…
(A) process of creating ever stronger and longer patent protections, which mean ever larger gaps between the protected price of drugs and their free market price. (For some reason, none of the modelers ever factor in the negative impact of higher drug prices into their analysis of the economic impact of these trade deals.)

In this sense, the TPP should be understood as working alongside other steps, like the Obama administration’s pressures on the Indian government to give up flexibilities granted under TRIPS, to ensure that U.S. drug companies can get ever higher prices from their drugs as protections are extended more broadly around the world. For people who are concerned about public health and would prefer a less corrupt and more efficient mechanism for supporting drug research, this sounds like a really bad deal.

Really. To continue with his analysis of Obama’s OpEd-

It is also important to understand that in standard trade models, the more money that Pfizer gets for its drugs and Microsoft gets for its software, the less the U.S. gets for its other exports. The standard assumption is that the overall trade balance will not be changed if these companies get another $20 or $30 billion annually in royalties and licensing fees. This means that our trade deficit in everything else will rise by $20 or $30 billion.

There is no Team America in this story. If Team Pfizer gains from stronger protection, the rest of the country loses.

One other important rule that the Obama administration pushed in the TPP is the Investor-State Dispute Settlement (ISDS) mechanism. This is an extra-judicial process that is open exclusively to foreign investors. Under this process, foreign investors, including foreign subsidiaries of U.S. corporations, can challenge any law at the federal, state, or local level. It can impose large fines, which can make it impractical to keep the laws on the books.

These tribunals can rule on any regulations put forward for protecting labor, the environment or public health and safety. The ISDS tribunals are not bound by precedent, nor are their rulings subject to appeal. For those who think that the U.S. legal system does an adequate job of protecting foreign investors, it is difficult to see why we would want to establish this extra-judicial process.

As I and many others have previously pointed out.

Dean Baker’s Big Wind Up

In short, there is not a credible story that the TPP will be a big boost to U.S. prosperity. It does pose a threat to the countries of the region (including the United States) in the form of higher prices for prescription drugs and other protected items. It also creates a whole new extra-judicial system that can threaten regulations designed for important public purposes.

This is a hard deal to sell, which probably explains why President Obama is trying to promote fears of China. That should not be allowed to help his case.

It’s important when you consider Julius Ceasar as a play to remember the historical facts of the late Republic. The economy was based on plunder from Wars of Aggression with just enough to keep the Proletariat in Bread and Circuses siphoned off and the rest personally enriching any Senator ambitious enough to buy an Army and lucky enough to win. Ceasar was ambitious, he wanted to be President for Life and the Senate felt their own elite status was threatened (which it was). Brutus was an honorable man (at least to the extent he was defending his own self interest and that of his class against Revolutionary centralization of power) and Marc Antony was a traitor who betrayed Ceasar’s chosen heir, Octavius, at the first opportunity, shagged his former girl friend, Cleopatra, and raised armed rebellion against his own country.

And he was a lousy General too, Octavius beat him like a drum.

Now let it work. Mischief, thou art afoot. Take thou what course thou wilt!