For those who aren’t familiar, there’s been increasing talk coming from the Obama administration about utilizing a fast-track path to get a wide-reaching trade agreement between several countries around the Pacific Ocean. These countries are, tentatively, Taiwan, Phillipines, Laos, Columbia and Indonesia, with several other potential members, including India. Together, this coalition makes up an overwhelming portion of total world-GDP, and helps to set some kind of trading rules in place with the idea that no individual nation ends up losing out too badly. The general wisdom of economics states that free trade is always a good thing, as was argued by Gregory Mankiw of the New York Times. However, there is considerable dissension going on in the field about this specific deal, at least in the public economic sphere.
One of the biggest opponents of the Trans-pacific partnership (though not free-trade in general) is probably the most well-known present day economist, Paul Krugman. In his blog, he asserts that the actual gains over free trade from this agreement are relatively small, because trade is relatively free already. Of the trade-protections currently in place, none really drag heavily in the world economy, and so it’s reasonable to assert that making trade freer in the pacific likely won’t provide a whole lot of benefit to the nations involved. Krugman’s assumption then, is that this trade agreement has little to do with trade, and much more to do with protecting intellectual property rights overseas. The IMF seems to line up well with Paul Krugman’s belief that a ‘pure’ TPP would be wonderful, but that special interests have hijacked the agreement with property-rights and union-based amendments.
However, those assertions assume that there is no benefit to having any sort of intellectual property protection. While it is possible that those controlled monopolies can lead to issues, and certainly drive prices upwards, the additional revenue can help provide incentives for further innovation whose business model is at a disadvantage when there are dozens of firms who are willing to produce your product at a lower price because they don’t have to undertake the prohibitively high research and development costs.
In addition, it’s not entirely clear that these low projections of GDP growth are totally accurate. The Peterson Institute for International Economics seems to believe that this trade deal will boost US output by about .4%, which is an enormous amount considering how large the US economy is. Depending on who’s right in terms of the TPP’s impact, there are a huge range of potential benefits or costs to this deal.
Oddly enough, the more-commonly seen counterargument comes not from economics at all, and in fact is rooted in the political idea that America has become increasingly absent in Asian affairs. An article in the Economist argues that of the current trade agreements that could come to light, the TPP is the most ambitious, and that not enacting this trade agreement will signal an absence of power in the region. The question is however, why would the US be the one to take all the credit when they certainly aren’t the only nation involved in the deal?
This deal is multifaceted, and features a number of very complex intricacies that make it very hard to determine its eventual impact, but that doesn’t mean the economics world isn’t trying. But if you’re looking for a specific conclusion about what economists think this trade deal will do for the US and the world, the answer seems to be at this point ‘unsure,’ or ‘try again later.’