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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
This implies the problem is racism. Now we get to your real feeling, eh? That people are opposed to Free Trade because they are racist.
This is exactly the sort of attitude that people in the GOP voted against.
This is a valuable discussion. Now, a simpleminded question: can we submit an alternate TPP that features IP protection more centrally? This is a key issue in dealing with China and with the Rim.
IP protection was one of the chief planks of the TPP.
I havent read it but have been envolved directly with bi lateral regional and global trade. We were good at them way back when we dominated and were establishing the post war global system. I think what was going on with tpp was regret we didn’t get more reform before we let china into the WTO. So we want something That excludes China so we can try again. Like so much bureaucratic/political/legal/special interest accreations, it’s good to review all bilateral and regional trade agreements. We did GATT when we were serious so should leave it alone. But we need a comprehensive review but we must agree that its goal is the same, to build an open global trading system.
I went the other way on that. I think the implications of the IP provisions are deeply pernicious; not so much because of the problems with China as a bad actor but for reasons I detailed in a previous discussion with @jamesofengland. He didn’t think my concerns were valid, but I also think that we were talking past each other so I remain unconvinced.
I think your issues with american IP regulations are valid, I also think that normalizing IP regulations across jurisdictions is a good thing.
One hopes that they normalize to a more virtuous rather than a more vicious state. Perhaps the benefits of normalization can outweigh the degradation of free scientific inquiry that I saw in the regulations, but that’s only if the degradation is minor. I’m not certain that that’s the case.
There is no substance in this dialogue at all. No specifics, no nothing, just bald assertions that are not supported with any details. Do the parties know that there is a 25% tariff on pickup trucks imported to the US?That due to cultural and obstructionist behavior it is almost impossible to put a Chevy dealership in Japan, let alone sell American cars? Did anyone realize that the tariff on imported pickups doesn’t go away for 20 YEARS under TPP? That’s not a free trade agreement; that’s an agreement to restrain trade. The US tariff on imported pickup trucks makes every such vehicle sold in the US 25% more expensive than it should be. What I have read of the TPP convinces me that it is protectionism disguised as a free trade agreement. I need a new pickup and I’m going to have to wait 20 years to get a reasonable price on one. Some deal. The rhetoric of this dialogue is tendentious and fictitious. The GATT had been ongoing for almost 50 years until it collapsed under GHW Bush. We still have tariffs on Mexican limes, over 20 years after NAFTA went in to effect. This is all nonsense. There is no free trade, and no one is negotiating free trade. Free Trade negotiations are a sham, a ruse, a potemkin village of balderdash. Ricochet should be ashamed of it’s duplicity, ignorance, and avoidance of substance.
The disconcerting thing here is that no one’s read it and still people believe it’s worth signing. I’m with Aaron’s first reaction. Why does it need thousands of pages, and isn’t that a sign that there’s more to this than free trade?
Now if we’re arguing for support of the TPP as a geo-political strategy to isolate China, then there are complicating factors that might warrant me changing my position. But strictly as a trade document, I am completely distrustful. The notion of free trade being a positive has become a religion for some. Would you have joined the European Union? I bet not. UK made a decisive decision not to, and by all accounts it has helped them. Switzerland is not part of the EU and has it hurt their economy? This sort of reflexive free trade mantra is an unexamined assumption.
I put to you this: for the first 150 year of US history, we were a tariff nation and we had huge growth. For the past 30+ years we’ve had abysmal growth. Now that doesn’t prove anything one way or the other, but it better make people start examining assumptions.
I’ve read about 80% of it.
Do not let the perfect be the enemy of the good.
Now those are specifics that I can understand. Of course, reasons not to like it.
And without the TPP when do you expect it to go away?
Why then is it thousands of pages long?
I have heard the argument that TPP directly constrains U.S. sovereignty in many ways. Can someone please expand on / debunk this argument?
Would you have joined the European Union? Were you against the Brexit?
Why does that matter?
The short answer is because it is normalizing tariffs and regulations across 14 countries and that isn’t easy.
Non-sequitors are fun.
I don’t know much about the conditions at the time of its adoption, but my understanding is that the EU has pretty much always been sliding towards quasi-statehood and that’s a bad thing. But that’s because it’s basically never been a free-trade agreement, but a much bigger thing that incorporated a free trade agreement as well as the Schengen Area and, eventually, a common currency (though I realize I’m grossly simplifying).
None of our trade agreements have included any of this, and thank God.
I absolutely favored Brexit. In addition to the general issues of sovereignty, I think there was an excellent case to be made in favor of Brexit based on how the EU limited the UK’s trade. As Matt Ridley said, Brexit gives Britain the chance to better engage the whole world, not just a continent.
Because the devil is in the details, and so far I haven’t seen what the US has gotten out of these deals. A lot of people have had their lives turned upside down from these deals, and perhaps the net dollar is a plus for the country (I’m beginning to doubt that but nonetheless…) but it may be a negative for the overwhelming majority of American citizens.
And why isn’t it easy? All you have to do is state prior laws are now obsolete, all tariffs and regulations from here on in are the following for all countries. If you can’t do that in a couple of hundred pages then countries are politicing for advantage, and I suspect the US gets the short end of the stick.
How is that a non-sequitor? It establishes your position on all these deals. You claimed to have read 80%. I ought to understand where you come from on trade deals to assess the value of your judgement.
Relatedly — Manny did not say this and I don’t want to give the impression he did — I am often frustrated by the assumption that American conservatives who dislike the president would have opposed to Brexit if they’d been British (or, similarly, that only British Cameronites dislike Trump).
Neither need follow from the other and there are countless counter-examples.
Actually I don’t recall any American conservative not supporting Brexit. It would tell me a lot about that person’s opinion on these trade deals if he did support that.
As @jamesofengland said, largely because it imports/borrows from previous agreements that were similarly lengthy and using those well-adjudicated rules actually makes things simpler.
Would you rather go with a one-page contract that was just written-up (and, therefore, does not have a body of precedent behind it) or a 10-page one that’s had all the kinks worked out over 20 years?
Despite my general and strong preference for shorter documents, the latter makes more sense.
The EU and the TPP are not analogous in any way. That’s like figuring out whether I like pizza by asking my if I like soup.
So why did you ask Jamie?
Doesn’t make sense to me, but I’m not a lawyer. Under that logic every single new law would have to be thousands and eventually thousands on top of that pages long. Yes, I think I would want to go with a short document.
You mean other than immense wealth, cheaper products, more jobs and greater security? All economics involves some displacement – there are no certainties in life only tradeoffs. Trade, and especially free trade, is an unadulterated good. Period. That there is some displacement in no way invalidates that fact. The response to displacement is to help alleviate the displacement not to eliminate free trade.
So I assume you watched Trump’s press conference where he brought out thousands upon thousands of pages of contracts dictating the disposition of his businesses during his presedency? Why would you expect an agreement between 14 nations to be less complex than that?
Because I’m not certain about his position. I said I don’t recall, but that doesn’t mean there aren’t any.
What does my stance on Brexit have to do with TPP? They aren’t even close to the same thing.