If there were $3 trillion sitting on the sidewalk, would you stoop to pick it up? That is the main question facing advocates of the Trans-Pacific Partnership — a proposed treaty to liberalize trade and investment among a dozen nations including the United States, Australia, Canada, New Zealand, Singapore, and Japan — and the trade-and-investment accord’s antagonists, too.
“The first thing you need to know is that almost everyone exaggerates the importance of trade policy,” writes TPP critic Paul Krugman in the New York Times. That may seem a strange sentiment for a man who won the Nobel Prize in economics (*) for his work on trade — perhaps the Sveriges Riksbank exaggerated the importance of trade economics? — but Professor Krugman has a point. The effects of large-scale international accords in trade and other economic areas are difficult to forecast, and such deals interact with other economic realities in ways that are not always entirely obvious. When NAFTA was under consideration, we were warned about that infamous “giant sucking sound” by Ross Perot and other protectionists, while the free-traders predicted that the accord would prove a massive boon to the U.S. economy, as well as to those of Mexico and Canada. The reality, as measured by the Congressional Budget Office and others, is that NAFTA has had a small positive effect on U.S. economic growth. Human progress is made up mostly of small positive effects. Beware policymakers offering dramatic promises: As Daniel Hannan points out, those advocating the adoption of the euro promised that it would add 1 percent GDP growth to each participating nation in perpetuity and that it would also provide a check on political extremism — wrong and wrong.
The dispute over TPP finds Barack Obama at odds both with congressional Democrats and with progressive activists, and making uncomfortably common cause with the most reliable partisans of free trade: most everybody who hates his guts.
Some Republicans have reservations about investing the president with “fast track” authority — meaning that he would be empowered to negotiate a deal that would then get a simple yes/no vote in Congress, which turns out to have a say in international affairs after all — because they are mindful of this imperial president’s habitual infliction of violence on the Constitution and of his seething contempt of the legislative branch in which he served for approximately eleven minutes. But it is unlikely that Republicans will in the end say no to a trade deal.
Professor Krugman’s case against TPP is, in brief, “meh.” He offers very little in the way of substantive criticism of the proposed accord, instead pooh-poohing it as modest, something that might add no more than 0.5 percent, and probably not even that, to the incomes of the participating nations. Those nations represent more than one third of the world’s economic output, though. Brad DeLong of the Washington Center for Equitable Growth addresses Professor Krugman’s sniffing directly: What if the additional growth were only half that 0.5 percent number? “In a Pacific region whose GDP is now approaching $30 trillion/year,” he writes, “that is $75 billion/year. Capitalize that at 4 percent/year and we get a net addition to world wealth of $3 trillion. That is indeed a very small number relative to the wealth of the world both now and discounted into the future. But that is a rather large number compared to other things the U.S. government might do this year. So why not grab for it?”
Because we are not talking about economics, or even about politics – we are talking about hatred. The Left hates international trade, especially with the sweaty Yellow Peril that haunts its fever dreams — get more than five Democrats in a room and it turns into a meeting of the Asiatic Exclusion League — and Professor Krugman hates the Republicans who are enthused about international trade. Thus the abundance of his sneering and the scantiness of his analysis.
Professor Krugman’s secondary exercise in intellectual scantiness consists of an objection that the deal — which has not been negotiated yet — will probably include many protections for patents and copyrights, intellectual property of the sort produced in vast quantities by American firms and pillaged in roughly equal quantities by overseas pirates, particularly in China. Professor Krugman takes a dim view of such protections, as do most progressives and a not-insignificant number of libertarians. But his case is not a case against the intellectual-property provisions likely to be a part of TPP — his case is against intellectual property per se: “Protecting intellectual property means creating a monopoly — letting the holders of a patent or copyright charge a price for something (the use of knowledge) that has a zero social marginal cost.” If the Left wants to make copyright the hill to die on, well, then, “Ph’nglui mglw’nafh Napster R’lyeh wgah’nagl fhtagn!”
Back in the real world, Professor Krugman’s main objection is political: Why annoy congressional allies to do something that warms Republican hearts but chills those of Berkeley-dorm-room autarkists and union bosses? Professor DeLong translates: “The argument here is that in the long run America will be better off if there is a more unified liberal base more enthusiastically behind the Democratic party, and that that outweighs whatever the small and uncertain net benefits of TPP might be.”
A few trillion in extra wealth from liberalizing trade, maybe a few trillion from liberalizing the domestic energy industry, a few trillion from improvements in human capital . . . the unprecedented material prosperity of our age was built, like Johnny Cash’s Cadillac, one piece at a time.
My own preference for trade relations is a series of bilateral Goldberg Treaties. (You don’t know what a Goldberg Treaty is? Instead of a multi-thousand page beast such as NAFTA, it is a one-page treaty reading: “There shall be free trade between . . . ”) But American politics is not organized around the preferences of right-wing Catholic Eisenhower-loving semi-anarchists from Texas, so we have TPP and other imperfect, compromised specimens of that sort. When the economics of the thing is less than thrilling, that’s on the “pro” side of the ledger: If a proposed economic policy promises to be thrilling, it probably should be strangled in its crib. And as Tyler Cowen argues, the political aspect that Professor Krugman ignores — the role of China — is an unspoken central issue. “Either this deal happens on American terms, or an alternative deal arises on Chinese terms without our participation,” he writes. “For rather significant foreign policy reasons we prefer the former, and the pragmatic side of President Obama understands this pretty well.”
I do not have the economic sophistication of Paul Krugman or the political sophistication of Rick Manning, who opposes giving the president fast-track authority. Instead, I endorse the simpleminded view that if there is $3 trillion waiting on the United States and some of its most important allies and trade partners to claim, then they should claim it. And when Barack Obama has one of his semi-diurnal episodes of chance horological accuracy, conservatives ought to seize the moment. The thing about politicians who are clever but not quite as clever as they imagine themselves to be is that they end up outsmarting themselves.