Scott Sumner  

Free trade is on the march

Without Government Regulation ... Hanson Underrates Democracy...

The Financial Times reports that the EU and Japan are about to sign a free trade agreement.

Japan and the EU are set to sign a sweeping free trade deal next week after talks in Tokyo made significant progress on the sensitive areas of cheese and car parts.

Although the negotiations broke up around 9pm on Saturday in Tokyo without a formal deal, officials signalled that their political leaders would be able to reach an agreement at a summit on July 6.

A deal would be an emphatic rejection of US President Donald Trump's protectionism on the eve of next week's G20 summit in Hamburg. It would send a message that the liberal world order is still in business and that those who reject it risk losing out on trade opportunities.

The EU also recently completed a free trade agreement with Canada (and a few years earlier an agreement with Mexico.)

Japan is also looking for opportunities:

In a pushback against the Trump administration's protectionist rhetoric, 11 nations in the Trans-Pacific Partnership trade deal have agreed on Sunday to proceed without the U.S.

The 11 nations met on the sidelines of the Asia-Pacific Economic Cooperation (APEC) meeting for trade ministers in Hanoi and agreed to assess options to bring the deal into force "expeditiously."

. . .

TPP had been considered all but dead after U.S. President Donald Trump pulled the U.S. out of the pact, a broad 12-nation trade deal, which he claimed was a "disaster" that would hurt U.S. manufacturing.

Although Japan's Prime Minister Shinzo Abe had initially said that the TPP would be "meaningless" without the U.S., more recently, Japanese officials had begun to second calls from Australia and New Zealand to proceed without the U.S.

Unfortunately, one major country stands on the sidelines pouting while the rest of the world moves toward ever freer trade. Sad.

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COMMENTS (10 to date)
Todd Kreider writes:

TPP didn't have much to do with trade but instead extending the U.S. rules of patent and copyright protection.

With respect to the agreement between Japan and the EU, this is exactly what I suspected but wanted to see if the FT article mentions it:

The Japanese side was more cautious. “There has been meaningful progress but significant issues are still outstanding,” said Fumio Kishida, the Japanese foreign minister. But he said he was considering flying to Brussels to continue the talks.
Scott Sumner writes:

Todd, I don't agree about the TPP--it would have boosted trade in the Pacific region.

BC writes:

Scott has claimed before that the President doesn't really impact the US. This is the global version. Free market ideas, and classical liberal ideas more generally, survive on their own merits and transcend any given individual.

Todd Kreider writes:

Scott, I didn't say that TPP wouldn't increase trade, which is of course good, just that according to Wikileaks 80 percent of the deal was devoted to IP.

In addition, the gains from trade looked quite small since there has been so much lowering of tariffs over the past 60 years. That is, except in the U.S. case of the high 25% tariff for light trucks and SUVs that is directly aimed against Japanese companies. That wouldn't be lowered until 2030.

Scott Sumner writes:

Todd, There are also lots of non-tariff barriers. Trade experts view this as a good deal, despite the IP additions (which I agree are counterproductive.) I'm not sure Wikileaks is as reliable as specialists in international trade.

Countries like Vietnam would have greatly benefited from TPP, particularly if it included the US.

Todd Kreider writes:

Scott, I realize some non-tariff barriers would be eliminated as well, but even including that the TPP wouldn't be that large of a benefit since much of those have also already been eliminated.

I agree that Vietnam would benefit the most but other agreements will get them there anyway. Overall, it looked like a net gain of "zero to very little" or the U.S. but a major gain for Hollywood with ridiculously long copyright protection and the pharmaceutical industry with long (but maybe reasonable) patent protection.

As far as I know, Weakileaks was where information about TPP was, well, leaked. I don't recall specialists in international trade, by which I assume you mean PhD economists who focus on trade, had access to information. But Wikileaks showed that based on page number of the over 1,000 page document only 20% focused on traded foods and services while 80% detailed IP changes.

Todd Kreider writes:

Typo: I meant "traded goods and services"

(No problem with entering "weakileaks" as something subliminal must have been going on when I typed that... )

CS writes:

Some unfavorable outcomes could arise as a result of the United States joining the TPP. The TPP could increase intellectual monopolies around the world due to U.S. intellectual property laws. IP laws could be used as a tool to suppress innovation of competing parties, thus decreasing competition, capital growth, and economic growth.

Alec Fahrin writes:

I would add that although these negotiations are keeping "globalization" (whatever that means) alive, they are by no means concluded.

Malaysia and Vietnam have now expressed misgivings about TPP in its current state. Some members want to remove the US provision, which will make the US rejoining impossible. Abe and the reformist faction of the LDP just lost in Tokyo, badly, and their political capital over the hardline farm interests has weakened.
Likewise, the proposed Japan-EU FTA appears to be rather minor. It is weaker than TPP. Many of the non-tariff barriers will continue untouched.

I am not expecting the TPP- to be concluded for a number of years, if ever. The US was the key to the TPP, and now the agreement has lost 70% of its GDP. The Japan-EU FTA is more likely to happen, but will not be very important. Japan and the EU already have extensive low-tariff trade between each other.

Ari writes:

The TPP is just intellectual monopoly trade, Ask Alex Tabarrok about it.

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