Everyone knows that the Obama administration’s domestic economic agenda is stalled in the face of scorched-earth opposition from Republicans. And that’s a bad thing: The US economy would be in much better shape if Obama administration proposals like the American Jobs Act had become law.
It’s less well-known that the administration’s international economic agenda is also stalled, for very different reasons. In particular, the centrepiece of that agenda—the proposed Trans-Pacific Partnership, or TPP—doesn’t seem to be making much progress, thanks to a combination of negotiating difficulties abroad and bipartisan scepticism at home.
And you know what? That’s OK. It’s far from clear that the TPP is a good idea. It’s even less clear that it’s something on which President Obama should be spending political capital. I am in general a free trader, but I’ll be undismayed and even a bit relieved if the TPP just fades away.
The first thing you need to know about trade deals in general is that they aren’t what they used to be. The glory days of trade negotiations—the days of deals like the Kennedy Round of the 1960s, which sharply reduced tariffs around the world—are long behind us.
Why? Basically, old-fashioned trade deals are a victim of their own success: there just isn’t much more protectionism to eliminate. Average US tariff rates have fallen by two-thirds since 1960. The most recent report on American import restraints by the International Trade Commission puts their total cost at less than 0.01% of the GDP.
Implicit protection of services—rules and regulations that have the effect of, say, blocking foreign competition in insurance—surely impose additional costs. But the fact remains that, these days, “trade agreements” are mainly about other things. What they’re really about, in particular, is property rights—things like the ability to enforce patents on drugs and copyrights on movies. And so it is with TPP.
There’s a lot of hype about TPP, from both supporters and opponents. Supporters like to talk about the fact that the countries at the negotiating table comprise around 40% of the world economy, which they imply means that the agreement would be hugely significant. But trade among these players is already fairly free, so the TPP wouldn’t make that much difference.
Meanwhile, opponents portray the TPP as a huge plot, suggesting that it would destroy national sovereignty and transfer all the power to corporations. This, too, is hugely overblown. Corporate interests would get somewhat more ability to seek