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Ricochet and the TPP
Ricochet began as a podcast and a subscription-based website, but quickly became a community that extends well beyond. Perhaps it would be more accurate to say it began with the unlikely friendships of its founders — @peterrobinson and @roblong — so the ensuing meet ups and social media interactions of members should not be surprising. Via Facebook, Twitter, or face-to-face, the debates and conversations don’t end here.*
Nor do they always begin here. And sometimes, that’s regrettable because I learned a thing or two that others could certainly appreciate. Case in point, @jamielockett proposed elsewhere that President Donald Trump’s decision to withdraw from the Trans-Pacific Partnership was a mistake. That led to the following exchange including myself, Jamie, and @jamesofengland, reprinted here (somewhat abridged) with their permission.
Me: Nothing prevents [Trump] from renegotiating one-on-one with each country. What were the advantages of the TPP?
No agreement should be thousands of pages. That’s opportunity for mischief.
Jamie: The advantage was the normalization of tariff and IP regulations across multiple jurisdictions making the flow of goods much easier and cheaper. Furthermore, it ensconced America as the central authority figure of the Pacific Rim economies with our standards for regulations and rights central to any participation in a growing pacific free trade zone. Now we have opened the door to China who have already begun the process of establishing their own economic dominance with their evil regime at the center.
Me: And do you believe it was well negotiated by the Obama administration? It’s difficult for me to believe that the errant ideology and priorities that infected his every other policy had no bad influence on the TPP. Again, I would guess that it would make sense for Trump to renegotiate… even if it is the TPP he is negotiating.
Jamie: The TPP has been in the works since the Bush administration. From what I’ve read the tariff reductions were pretty straight forward and well negotiated. I’m a bit less sanguine about the IP protections but that has more to do with my libertarian ideology than it does with real politik.
Me: Well, you have read it and I haven’t, so I’ll trust your judgment.
Jamie: The best person to ask on this is @jamesofengland.
[Cue the bat signal!]
James: The length of the agreement is not an indicator of quality, but if it’s what you’re concerned about, it’s hard to believe that having a dozen similar length agreements instead is helpful in any respect whatsoever.
Me: The length of any agreement is a concern because politicians regularly bury controversial lines to avoid publicity and debate. Perhaps trade agreements are less prone to this corrupt practice than domestic legislation. But we should be wary in any case. Don’t personal lawyers advise that succinct contracts are best? Can the same not be said of corporate and national contracts?
Furthermore, fewer claims within an agreement mean stronger negotiation on the particulars. If I can’t get A, B, C, D, and E unless I accept X, that is a lot of pressure to compromise. But if only A and B are premised on acceptance of X, I have more leeway to negotiate.
Large agreements are more susceptible to deception (more carefully worded clauses not given sufficient consideration) and to pork.
James: You want to know what’s in a contract. There’s two ways that you can achieve this. Firstly, you can make the contract short. Secondly, you can have the contract contain the same language as previous, known, contracts.
If you’re engaging in a personal contract, you probably want it to be short because if you’re drawing something up you’re only going to know what’s in it if you put work into understanding each clause. You probably don’t have a pre-existing lengthy contract. So, there you should make sure that it’s short.
I’ve worked with contracts that were longer than the TPP, though, because in some industries where the relationships are mature and the parties are substantial, they get that way. Oil company contracts are a classic example. It also helps that there are a lot of interested actors (multiple nations don’t increase the number of interest groups all that much, but an individual nation has a lot of different concerns). Because everyone has to pay specialized lawyers considerable sums to understand these contracts, everyone would like it if the contracts could be short and simple, but they want the agreement to be clear and to avoid problematic ambiguity even more than they want brevity.
When Reagan negotiated the CUSFTA with Canada that became the bulk of the NAFTA text, he didn’t make it long because he wanted to hide pork. There was no pork. When Bush added the rest of the NAFTA text, he didn’t add pork. What was there was mostly safeguards against Mexican governmental abuse. As with oil contracts, they’re long because there’s a real chance that you won’t have the parties being friendly and working in good faith thirty years down the line when the clause comes into effect, so you want everything to be spelled out to the greatest extent possible.
Most of the TPP text is taken from the NAFTA and CUSFTA. Rewriting Reagan’s work to make it simpler wouldn’t help provide predictability as well as retaining the language that has already been litigated.
The place where most pork gets hidden is in agency discretion. The most pork filled bill in American history was FDR’s National Industrial Recovery Act, which was pretty short. Obama’s stimulus was only long because people packaged a whole raft of mostly unrelated laws along with it; the stimulus part was small.
James: In terms of the negotiation over particulars, the US promises nothing that I’m aware of in TPP that it has not already promised in existing trade agreements with TPP members. It would expand the scope of those commitments, so Japan etc. would now have tariff free access as well as countries that already have it, but there’s nothing that the US was pressured to give other than giving up pork. Specifically, there’s some industries that negotiate slower implementation of agreements and such; the last NAFTA provision wasn’t fully implemented until 2008. In general, it’s good for America when the US decides not to pick and choose exceptions, so if large agreements had the impact that you suggest that would generally be positive (it would also increase our access to foreign markets). The way that these agreements are negotiated, though, with different teams working on different sectors, means that there isn’t as much cross-issue negotiation as one might have thought and relatively few issues are resolved along the sort of sine qua non lines you suggest.
The governments generally have roughly the same interests; they both want clarity, they both want free trade with proper phytosanitary and other systems in place, they both want to have systems in place to prevent breaches effectively, and so on. The people who are likely to have the A, B, if X issues are the domestic legislators in various countries. In general, it’s undesirable for them to have a lot of negotiation space because we want a clean agreement. There are areas bracketed out for a period of time, but those exceptions should be the few exceptions most important to a country, not every exception that’s important to a representative somewhere.
Me: Why are old agreements folded into new ones? Why not leave or reaffirm the established contract and make the new terms a separate contract? Does folding in the old to make a compilation discourage renegotiation of those old terms?
James: They reuse the language in new, separate, agreements. You want to reuse language as much as you can in part because, yes, renegotiation is a pain, but also because you want to maximize familiarity so that legal precedent is clear and so that you don’t have to retrain all the lawyers.
This is true in trade agreements, but also in personal contracts; you want them to be brief, but you also want to copy and incorporate language that will be familiar to anyone who has to deal with it either as a party to the contract or as an enforcer of it. You’ll find a lot of the Canada-US language in Korea-US not because the KUSFTA incorporated CUSFTA but because everyone in the sector now knows the CUSFTA language and no one wants the legal precedents from previous FTAs to be rendered less clear through novelty.
Just to clarify, most of the language wouldn’t be subject to renegotiation anyway. The great bulk of the language of the TPP, as with all modern trade agreements, is responsible governments limiting the power of irresponsible future governments to engage in bad behavior. When everyone in the room wants the same thing, there just isn’t that big a drive for negotiation.
Caroline: James probably included this in one of replies. More contracts means more people managing the compliance. So more bureaucracy and not just the government’s.
James: Obama’s first USTR was awful, but his second USTR was pretty good. Also, trade agreements are pretty consistently similar to each other; the differences are in the details, which don’t matter all that much in substance. Also, the people Obama was negotiating with were free market capitalists; if you’re a conservative, you shouldn’t want Obama to be negotiating hard, because it’s what the Australians and Japanese and Harper govt. Canadians wanted that you’d want to be law.
Jamie: Don’t forget the Singaporeans.
James: There were several smaller good actors, but it’s the big countries that made the bigger difference. I’d say the next most helpful were Mexico and Chile, but in general TPP was negotiated at a uniquely helpful time for having just about all of the countries being headed by free trading governments.
In defense of Trump, because there was no change to TPP that he could plausibly make that would improve it (Ross suggested changing the rules of origin a little, but while that would be easy to do it wouldn’t persuade anyone that this was a radically different different deal), he probably had to leave to comply with his promises. It’s true that negotiating and signing individual FTAs with the remaining countries is in every respect inferior to being part of a multilateral accord with the same terms. It is also true that his NAFTA resolution might be nuts and he could seriously harm the WTO. If neither of those things happen, though, and we get Japan, Malaysia, Vietnam, New Zealand, and the UK added to the bilateral FTA network we’ll have a global trading system that is substantially more free and more rules based (i.e., with less scope for arbitrary government action) when he leaves than it was when he came in. Less good than if he’d been an ordinary President, but “only somewhat improved” is a target devoutly to be desired.
And if we get bilateral FTAs and the rest of the TPP signs with each other (not certain, since some of the governments are now less conservative than the ones who negotiated it), it should be pretty easy for Trump’s successor to sign us up.
The End. Or it would be if we left the conversation there. But I knew if I brought it here, y’all would have plenty more to add.
Ricochet isn’t just a site, nor even just a community. It’s also an education.
[* Editors’ Note: Want to become a part of the community Aaron describes here? Membership starts at just $5 a month and we’d love you to join the conversation.]
Published in Economics
When it comes to trade policy I find the adage “When in doubt ask @jamesofengland” to be most helpful.
In the past TTP conversation, I was not convinced it was a good thing.
Why?
I did not find the arguments made by James to be convincing.
This is a great post. No, by itself it doesn’t, and can’t settle the issue of the TPP to everyone’s satisfaction, but it sure settles to my satisfaction the notion that some extraordinarily intelligent conversation happens around here in and between the mayhem.
That much is true, and I appreciated the conversation way back on the thread I was on. It made me think about things differently.
What is it about the TPP that worries you?
Enlightening, thanks for posting it! (Hello, James!)
For myself the changes to intellectual property law were essentially a deal killer. The TPP took an area of US law I view as strongly in need of reform and essentially made the situation worse and enshrined it into a treaty making future reform all but impossible.
Starting from scratch and instead seeking bilateral agreements with the nations involved seems a perfectly reasonable way to go.
That was my biggest issue with the TPP, but if found that the trade liberalization made it on balance a much better deal than no deal at all.
That is certainly still achievable, we simply do it bilaterally county by county. The value of these large multi-stakeholder agreements seems greatly oversold. Why limit the depth and character of mutual cooperation to the nation at the bargaining table we have the least agreement with?
The UK is proposing a new trade arrangement and Trump seems amendable, all things considered there is scope for broad agreement. However let us say tomorrow Venezuela decides it wants in on the deal and in a fit of insanity we agree. So we limit the scope of any agreement we reach with the UK to the level of agreement we can reach with Venezuela simply for the sake of having one more country on board? It would be absurd.
I am not convinced that it would be sucessful in the goal of constraining China. Roberto brought up IP. China steals our IP on a routine basis and we do nothing now, why enshrine it?
China is a corrupt nation, and so far, Trade has not turned them into a non-corrupt nation. We have had my whole life of China being “open”. So far, they are not becoming less of a threat, but more of one. They harvest organs from religious dissidents. They are Evil. We should do everything in our power to crush their economy and drive them into ruin.
James did touch on this, but I think it’s worth reiterating that one advantage of TPP that cannot be replicated via bilateral agreements is that it established largely US norms for inter-member trade in a way that limited Chinese influence.
That’s not quite how the agreement was working. Plus the value of multilateral trade agreements is immense when supply chains run through multiple countries.
I don’t understand what you’re saying here. China was not a party to TPP. The IP protections that were put in place under TPP reflected US law on the matter and in no way enshrined anything related to Chinese theft of us IP. In fact, by roping in most of the major Pacific Rim economies under US led legal standards, China would have been forced to adopt those IP and human rights protections should it wish to join the Free Trade Zone the TPP established. If anything the TPP would have created greater pressure on China to recognize US IP and civil rights protections, not the other way around. In fact, by scuttling the TPP we have allowed China to lead the process of creating a regional free trade pact that will more closely follow their model than ours. Scuttling the TPP achieved exactly the opposite of what you think it did.
To elaborate, this is what I find so particularly irritating about Trump’s antipathy toward TPP. For decades, Trump has said that we are getting killed by Chinese trade because the Chinese are not playing by the same rules as us. TPP is the single biggest thing we could do toward compelling China to “play by the rules,” as it would force China to adopt US standards if it wanted to engage fully in East Asian trade. I wish somebody had made this argument to trump before he allowed his reflexive mistrust of free trade to entrenched itself on this issue.
I am not convinced of that. The same people who tell me trade with China will make them more democratic are the ones who liked TPP. I have not seen that trade had mad China more democratic. Nor do I see how the TPP would have forced China to do anything to stop organ harvesting.
The thing is, all this is complex, and no one can really predict outcomes the way you are. Since it is complex, and since I cannot be sure of improvement, I will stick with the status quo and we can start over.
And, Clinton would have scuttled it too. The problem y’all have is, you cannot convince me, and I am predisposed to free trade. You need to make arguments not to change my mind, but to change the mind of the American people. My suggestion is, next time, don’t have something so complex that it cannot be explained in terms the average American can understand, and don’t make moves that give anyone the ability to say “They ™ are doing this in secret”. That would help the cause a lot.
Nothing was going to change Trump’s stance on Trade. He believes it’s a zero sum game.
No the problem we have is that you don’t understand what the TPP was or what it was attempting to do and are apparently unwilling to listen to people who do.
Again, I do not see how this would force China to play by the rules. They will just cheat. They are building islands to extend their waters. They will lie, they will cheat, they will never play by the rules, unless we do something drastic. We won’t.
I have been told my whole life Trade with China will increase their liberty. It has not done so. When those same voices tell me “TPP will help us contain China” I do not believe them.
You think China is uninterested in trading with Australia, New Zealand, Japan or Korea?
Furthermore, why is China the only measure by which the TPP can be seen to be beneficial, especially since they weren’t even a signatory?
No, I understand those things. I do not think they will achieve those goals. Just because I don’t agree with you or with James, does not mean I am not listening. It is a very complex document, and international relationships are complex. You have a view that it will have certain outcomes. I disagree it will have those outcomes. Please don’t accuse me not being “unwilling to listen to people who do.”
I do not think the TPP will have the outcome to contain China that you think it will.
Have you read the document? I have.
Is that the only goal that we should care about when it comes to Trade policy? Does our trade agreement with the EU contain China? What about NAFTA?
No, this is the claimed advantage. I find the argument put forward that the TPP would somehow constrain the PRC almost as absurd as those put forward ages ago that somehow trade with them would make the nation more liberal and democratic.
Even if this were true in some fashion it is a weak argument to make in support, for nations in the Pacific security considerations will far outweigh trade in how those nations weigh their relations with the PRC. The extent to which China appears threatening and the US appears a credible security partner are factors that will trump any influence accrued via regional trade deals.
Jamie,
I understand you don’t like my conclusion. I have not read the whole document, but I have listened to people who have talked about it. You have moved the goalpost there.
The big “selling” point given to me on TPP has been that it will help us contain China, and that is why it was so urgent. I have seen that again and again. It appears you are now abandoning that selling point. Great. Since this is not urgent, let’s start over, and do it out in the open, with the American people being sold on it from day one.
Uh it has done that, maybe not to the degree we would like in the west, but if you don’t think China is more open and free today than it was 30 years ago then you’re not paying attention.
Why is this mutually exclusive to trade deals? If anything bringing us closer economically to these countries can only benefit security alliances.
I’m not, I’m just stating its not the only selling point. It’s still a major selling point. Want counter evidence?
https://www.ft.com/content/8662c3b6-a72b-11e6-8b69-02899e8bd9d1
China is now leading the push for a pacific trade deal. You worry about enshrining Chinese law into international trade pacts. Well congratulations, mission accomplished.
I don’t think TPP was going to stop China getting what it wanted. Also, since I did not scuttle TPP, I am pretty sure congratulations to me are not in order. Had Trump pursued it, I would have been far less excised about it, than you appear to be in losing it. I don’t really care that much about TPP. I just came down against it.