David R. Henderson  

Is the TPP Good or Bad on Net?

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If you read the latest Econlib Feature Article by Pierre Lemieux, "Free Trade and TPP," you won't have an answer to the title question of this post. So why I did I ask him to write it? Because I knew that Pierre would do a great job of laying out the pros and cons.

Here's what I said in the blurb that goes with the piece:

Free trade is good for almost everyone and so are movements to freer trade. But is that enough for economists to judge that the proposed Trans-Pacific Partnership (TPP) is a good idea? No, argues economist Pierre Lemieux. Lemieux points out that the TPP is an instance of managed trade. Whether the TPP is good or bad depends heavily on how it is carried out. If you want to know how a careful economist with no dog in the hunt thinks about the TPP, this article is for you.

And here are some of my favorite lines from his article:
Contrary to what some critics claim, TPP is certainly not too dangerous to national sovereignty--which amounts often to nothing more than the right of a state to oppress its citizens. Indeed, TPP is not dangerous enough, as, in many ways, it reinforces the legitimacy of states' power of regulation and control.

And:
Perhaps the decisive argument is about signaling. What signal would the approval or the defeat of TPP send? Defeat would likely signal in public opinion that free trade is a dead horse, while approval would hopefully signal that real free trade is still an alternative on the table. If this appraisal is correct, TPP would be a small step--a very small step--toward free trade.

This is, I suggest, how one should think about TPP. But the conclusion, as we have seen, is not clear. As French biologist Jean Rostand wrote, "We are not writing an exam where it is better to write anything than nothing." One thing, however, is certain: economists and educators should continue to present the argument for real free trade, whether agreed to multilaterally or declared unilaterally.


What a great line, and a great use of the line, by Rostand.


Comments and Sharing






COMMENTS (6 to date)
Pierre Lemieux writes:

Thanks, David. Rostand was a fabulous writer and nobody who has read him as a teenager can ever escape his grip. Those who know French will appreciate the original quote, which is at the very end of his book (and to which my translation does not do justice): "Nous ne sommes pas candidats à un examen où mieux vaut répondre n’importe quoi que de se taire." He was speaking about the meaning of life.

MikeP writes:
Perhaps the decisive argument is about signaling. What signal would the approval or the defeat of TPP send?

This has been my argument for a quarter century since arguing for NAFTA on Usenet.

An example from the blog age:

Perhaps the better question is: Is 1000 pages largely targeted toward freer trade in almost every arena better than the 10,000 pages of tariffs and restrictions it replaced?

Should the US simply have unilateral free trade? Yes. Should a free trade agreement be half a page long with a couple pages of appendix for the schedule of phase-out by good or service? Yes.

But NAFTA is better than what preceded it. And NAFTA's defeat or renunciation would make future free trade far, far less likely.

David R. Henderson writes:

@MikeP,
Good point, and well said in your earlier comment. I think, though, that the TPP is iffier than NAFTA.

MikeP writes:

Indeed, TPP is iffier. The more interest groups recognize the Coasian bargain represented by supporters of free trade wanting to signal free trade by passing a free trade agreement, the more pigs show up at the trough to help write it. But given the complete vacuousness of virtually all the electorate's and the media's thinking about trade or free trade, the result is still not bad enough to outweigh the signal.

Thank you for bringing in Pierre Lemieux to write an objective appreciation of TPP.

Mark Brady writes:

"Perhaps the decisive argument is about signaling. What signal would the approval or the defeat of TPP send? Defeat would likely signal in public opinion that free trade is a dead horse, while approval would hopefully signal that real free trade is still an alternative on the table. If this appraisal is correct, TPP would be a small step—a very small step—toward free trade." (Emphasis added.)

Surely the case for either approval or defeat requires us to compare the net benefit from each option. In other words, how does the net benefit from approval stack up against the net benefit from defeat.

I suggest that Pierre Lemieux, who has done a great job of describing and explaining the issues involved, has not provided the correct way of evaluating the two options.

Moreover, "likely" and "hopefully" are not comparable adverbs when evaluating the relative likelihood of different possible outcomes. "Likely", "more likely", and "less likely" would work in this context.

Pierre Lemieux writes:

I agree with Mark Brady: we are after the net benefit (or net cost) of TPP compared to the status quo. I tried to show that it is not easy to calculate. Some faith and some hope ("hopefully") are unavoidable. I suppose one could put his own faith and his own hope in my equations and get a different result. I stand by mine, though.

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