TPP: Good for America?

Trade bills are massively complex legal and domestic brambles, fiendishly organized by bureaucratic wonks and industry insiders. Pity the poor sods who have to read and sign off on the whole mess. Trade is generally good however for countries, good for industries and good for economies. Competition from abroad forces innovation at home. When countries play by the rules (don’t laugh!) consumers benefit and economies grow. The stated objective with international agreements is to convince countries to agree to lower barriers to trade. This isn’t completely wishful thinking. The current World Trade Organization (WTO) started out after World War II as a sensible framework agreement among partner nations to lower tariffs. Overall trade has increased since and barriers are lower than ever around the world.

The Trans Pacific Partnership (TPP) is the new one that includes much of East Asia, Mexico, Canada and a few countries in South America.

I really just need to know 2 things about the deal:

--What happens is we just ignore the deal?

--How do we ensure the playing field is level?

What is the alternative to the deal? Will ‘US Inc.’ miss out on a contract that leads to increased demand for American produced goods or will this new agreement collapse like a sand castle at high tide? In other words is this something America needs or something the world needs and can’t get done without the largest economy on board? 

We won’t know the details until this summer when congress gets the monstrously large contract and pretends to read it. This is really the crux of opposition to the bill. The sheer size and impact of a trade bill (all of them) almost guarantees a lack of oversight and policing among trading partners. Americans dislike international organizations because they take responsibility away from sovereign countries and surrender it to something (not someone) unaccountable and opaque. They are reluctant to sign up for anything that might curtail U.S jobs and national security. Americans also innovate better than anyone though and by and large reject protectionism. Imagine a company like Uber being forced out of Chicago or Los Angeles because the taxi unions proved too tough a challenge?

Another problem is that nations tend to favor their domestic industries even when ‘favoring’ them is explicitly outlawed in the bill. What mechanism exists for airing grievances between two conflicting parties, one accusing the other of cheating? It can take years to sort out through legal or diplomatic means. China was found in breach, by the World Trade Organization, of limiting their rare earth materials for export in 2014. The United States and others brought the dispute to court in 2012. During the two years when both countries were tied up in litigation, American tech companies that use huge amounts of rare earths had to get it wherever they could find it. When trade is stopped by legal wrangling business suffers.

A quicker way around the legal maze is to use an equally unfair method to benefit your domestic industry. Say, give your American chicken farmers export subsidies, or place quotas on Chinese steel, or slap a bogus safety exemption on wine from France.  This is a terrible option and almost always leads to counter measure upon counter measure until both countries are in a trade war.  Transparent rules and easily understood agreements are the goal in negotiations. Sovereign democratic nations will always have trouble in satisfying the home town industries through tax breaks and other financial incentives while making counter deals with trading partners.

Free traders will support this deal because the word ‘trade’ is in the title. Union types will oppose the deal because the word ‘trade’ is in the title. No one knows at this point what kind of deal it is but one thing is for sure, it will be massively complex.