I’ve been getting a fair bit of correspondence wondering why I haven’t written about the negotiations for a Trans Pacific Partnership, which many of my correspondents and commenters regard as something both immense and sinister. The answer is that I’ve been having a hard time figuring out why this deal is especially important. … The big talk about TPP isn’t that silly. But my starting point for things like this is that most conventional barriers to trade — tariffs, import quotas, and so on — are already quite low, so that it’s hard to get big effects out of lowering them still further. The deal currently being negotiated involves only 12 countries, several of which already have free trade agreements with each other. It’s roughly, though not exactly, the TPP11 scenario analyzed by Petri et al (pdf). They’re pro-TPP, and in general pro-liberalization, yet even so they can’t get big estimates of gains from that scenario — only around 0.1 percent of GDP. And that’s with a model that includes a lot of non-standard effects.
The answer to why TPP counts is sort-of buried in Paul’s argument about why it doesn’t. He’s absolutely right that TPP doesn’t do much to liberalize trade. But the dirty secret about most trade negotiations today is that they aren’t really about “conventional barriers to trade” any more. ‘Non-tariff barriers,’ which get most of the attention in trade talks these days are a euphemism for differing national approaches to regulation. ‘Eliminating’ these non-tariff barriers involves regulatory changes that are often (a) highly politically controversial, and (b) devoid of obvious trade liberalization payoffs. Trade agreements also provide an opportunity for various business interest groups to get provisions that have nothing to do with trade onto the negotiation bandwagon.
One excellent example of this is the obscure seeming question of data exclusivity (I owe nearly everything I know on this topic to Gabriel Michael, who is working on this and other intellectual property issues for his Ph.D. dissertation, while doing great data visualization work on TPP in his spare time). The aim of data exclusivity is to give pharmaceutical companies exclusive control over test data that they have used to persuade regulators of the safety of particular drugs. This in turn makes it much easier for them to keep on fending off competition from manufacturers of generic drugs in countries with different approaches to patents.
There are no obvious trade benefits to data exclusivity. Yet this hasn’t stopped Senator Orrin Hatch from effectively threatening the deal if the US doesn’t shove it down the throats of other states.
The US should consider dropping countries from Trans Pacific Partnership trade talks if they fail to accept its demands on data protections for drugs and unrestricted cross-border data flows, a senior Republican senator has warned. Orrin Hatch, a veteran lawmaker from Utah and the top Republican on the Senate finance committee, sent a letter to Michael Froman, the US trade representative, urging the Obama administration to hold firm on tough intellectual property provisions in the negotiations, which are entering their final stage. Mr Hatch said he was “increasingly concerned” that some of the 12 countries in the negotiations – spanning Asia, Latin America and North America – may not be willing to “undertake the high level of ambition to conclude a high-standard agreement” and urged Mr Froman to only “move forward” with the countries that were on board.
“It is possible – and preferable – to conclude a strong agreement, rather than allowing a small number of countries to weaken the agreement for all,” Mr Hatch said. Mr Hatch has long insisted that the US pushes for 12 years of data exclusivity for biologic drugs, a position supported by pharmaceutical manufacturers but opposed by groups such as Médecins Sans Frontières who say it would restrict access to affordable medicine around the world.
More generally, as Gabe’s visualization work demonstrates, the US negotiating position on intellectual property issues is a relatively extreme one.
So, in one sense, Paul is absolutely right – the TPP’s actual effects on trade liberalization are likely to be very modest. But trade liberalization rhetoric is the packaging of the TPP, not the content. This hasn’t stopped the usual crowd of multilateralism zombies from arguing that TPP is teh awesome – but their support is a programmed reflex buried somewhere deep within the ruins of their cortexes; it certainly isn’t the result of serious analysis of the putative trade benefits.
Update: Looks like I’m inadvertently recapitulating Dean Baker.
Anyhow, Krugman is on the money in his assessment of the impact of the TPP on trade. But the point is that the TPP is not really about trade, it’s about changing the regulatory process in ways that would almost certainly be opposed by the people in most of the countries included in the deal.