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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
I should note that we’ve talked about your suggestion that I’m not fond of the flyover right before. I’m not sure what more I could do to demonstrate my affection.
On this issue in specific, though, the flyover right is overwhelmingly on my side. The people who voted for TPA weren’t just Republicans voting against Democrats. They were flyover Republicans voting against North Eastern Republicans and Democrats. Flyover Democrats were roughly evenly split.
Suggesting that my affection for Kansas over Bernie Sanders and Peter King is about my dislike of Kansas is perverse, even if you suspect that the latter have it right this time.
I agree that I’d prefer not to have these chapters, but I feel like you don’t have to rely on my word for their being of essentially symbolic harm only. McCarthy wouldn’t complain about their reinforcing a myth as the harm being done if there was real harm. I don’t think that they do much to reinforce the myth, since relatively few people will ever discover that they exist, let alone do so and then misread the passages that support trade an an environmental good within them.
Regarding pushing stuff onto others, I should note that all of the countries that negotiated TPP already have the protections required. Where there have been successful developing country labor suits they have not been about the laws not existing but about corrupt non-enforcement of the laws. Even if you believe that labor laws shouldn’t exist, there’s a lot to be said for supporting the rule of law and equitable treatment (both of workers and of investors in comparison with each other). If you want to stand up for the rights of Vietnamese factory owners to bribe officials to permit them to operate outside Vietnam’s incredibly low safety standards, then you have a principled libertarian basis for opposing TPP.
Now I kind of want to find libertarians willing to make that argument and get them to go to anti-TPP rallies with banners and literature.
That website doesn’t show what the alternative economics would have been. All it shows is the growth that ensued. Well, I can pick to the 1920s and say under tariffs we had a heck of an economy. All that proves is the 1990s had economic growth. Well so did lots of decades. Bill Clinton will tell you his tax increase was the reason for the growth. Newt Gingrich claims it was Congress’ balancing the budget. There was one disconcerting paragraph in that link:
Well, who cares about economic integration? Economic integration means loss of sovereignty. That wasn’t what it was sold to be. And not reaching the inflated promises of politicians is exactly what all these trade deals do. That’s my point. The economic benefits are minimal while the turmoil is high.
I can play dueling internet links to prove my point. There are plenty out there that state NAFTA was a failure. But this one was probably the most fair, here. Perhaps it was marginally beneficial by the numbers alone, but how many losers were there versus winners. Were the profits consolidated under a few people? The gross numbers don’t show the number of hardships.
Very good Pilli.
5,554 pages????
80% of 5,544 amounts to 4,435 pages. *cough, cough* Either you have no life or that’s a bunch of crap. You really read that many pages?
Manny, the company I work for licenses software to businesses that operate in Asia. I’d appreciate it if you didn’t call me a liar.
What can I say, it sounds far fetched, even if that’s your job. How long did it take you to read 4435 pages of trade laws?
Jamie’s read the actual text of the agreement. You get to those sorts of numbers by including stuff like this which is a record attached as an annex to the agreement listing all the many categories of things that Australia charges zero tariffs on.
Again, if you went and looked at the text you’d not have any difficulty in finding out what it looks like. It’s reasonably clear and you’d understand what takes time to detail and why.
A few months off and on. It’s been available for a very long time. I don’t think I read over 4000 pages though. There is a lot of fluff in it, replication of language etc.
Jamie, if you didn’t know that the longer claims about the length were silly then your claim would be implausible. The Putin media on both left and right spends a lot of time claiming that no one has or could read it, so it’s reasonable for people who haven’t looked at the primary source to understand your claim to be akin to claiming to have bench pressed a truck and having dated two Kardashians, only sadder.
Even if it sounds implausible, it’s not. My wife is an attorney and easily reads that many pages a week. I read a 600 page licensing agreement from Wells Fargo over two days this week – it’s just what people do. That people can’t grasp that in no way means it didn’t happen.
@manny, @jamesofengland peaked my curiosity, so I took a look at the document in the link. It’s 445 pages devoted to one long table, showing the various Australian customs rates on different types of products, and their change over time following implementation of TPP. I quickly skimmed through it, maybe a few minutes of scrolling down. It shows that Australia is willing to drop most of their existing customs rates (where one is levied) within 4 years. This is just one nation. If other nation-specific sections are as long, it’s no wonder it got this big.
80% would probably needs you to read a good deal more than you’d need for work. If you’d commit to reading more than a few hundred out of a general interest in being an informed citizen, that’s a substantial gesture toward your involvement in the democratic process….. but I guess that would still not be all that implausible.
That said, I can still see how it would seem implausible to many; there are people out there who really can bench trucks, but if a random guy on the internet tells you that he’s a truck bencher, it’s not crazy to express some skepticism.
OK, I believe you. I apologize, but I also feel sorry for you if that’s how you spend your time. Urrgh, I’d rather sit in a dentist’s office having my teeth pulled.
Well I know that now…
That’s what I did; I concentrated on the IP portion. Here’s why I oppose TPP:
One way the scientific literature is being perverted and polluted goes as follows:
A pharmaceutical company comes up with a drug; preliminary studies show it might be a good antidepressant. Placebo typically shows benefit for about 1/3 of the subjects in antidepressant trials.
Development ensues, substantial investment is made, including more initial trials. These may be done in house or by contractors. They consistently show no advantage over placebo to 95% certainty.
But one of the trials shows statistically significant benefit over placebo. (Of course, another one may well have shown statistically worse than placebo, too. If you keep flipping the coin often enough, sooner or later you’ll come up with five heads in a row even though the overall odds are that heads come up half the time.)
The favorable outcome gets published. The other ones don’t. The open data movement in science wants to see all the trials, their methodology and their raw data.
The pharmaceutical industry claims that the unfavorable trials are protected intellectual property.
As I read it, TPP strengthens their hand.
So I too read the IP provisions extensively and I think your analysis is correct here. My personal take was that the extension of us IP protections to member countries was favorable to my business (we constantly worry about licensing our product to subsidiaries or contractors of our clients based in Asia given the propensity for IP theft). Sure that’s a rather selfish reason, but it would vastly simplify our agreements and allow us to expand our client base – a win for the US economy IMO (however small).
I also believe that on balance the economic growth spurred by the incredible reduction in tariff schedules would swamp any downsides – but as with all economic policies, there are only tradeoffs and your personal issues with the IP language may weigh more heavily.
Thanks, @jamielockett. I’m relieved that I’m not making things up. The problem I see with the scientific literature is that suppression and corruption of data is an existential threat to a carefully nurtured system that (of course) has economic implications but it goes way, way beyond that. It is, I think, ultimately a civilizational existential threat.
I had a friend and colleague, now dead, whose company faced this problem for their products. It was an existential threat for them.
Both are definitely problems that need a solution.
So I guess the question is: can the IP provisions be fixed without junking the whole thing?
Another thing that bothers me: this is the only TPP area that I personally have the breadth of knowledge and experience to have a semi-intelligent opinion on. I can’t believe that there is only the one serious flaw and I just happened to see it but everything else is fine. I don’t have any actual information to verify that, but since “Murphy was an optimist,” I still can’t believe it.
While the IP regulations generally support American industry for the reasons Jamie outlines (combined with the fact that there are more Americans in his position than foreigners) and while there are solid libertarian and theoretical economic reasons for preferring a robust IP system, a preference for a more reticent system of enforcement is a sound reason for disliking the approach endorsed by the TPP.
Since IP is not my thing and I have not been able to judge the merits of the smart and wise people who propose stronger or weaker systems or continuity, the defense that I make of TPP’s IP chapter is not the America First argument or the Madisonian argument. Rather, while TPP affirms the current framework, all TPP parties have already committed to that framework in previous treaties.
The TPP does not significantly add to IP enforcement mechanisms enshrined in previous FTAs, which in turn incorporated the rights committed to in WIPO and WTO treaties.
If the US wanted to reform this it could probably do so without enormous problems; most of the world would benefit from cheaper access to US IP, at least in the short term. TPP wouldn’t make things terribly different; the difficult fora would be the WTO and WIPO, in which smaller countries have considerably more power to resist.
@jamielockett, If I might ask, which Asian nations have been most concerning or problematic for your company? China is an easy pick here, just wondering if there are others.
India can be a problem. Vietnam, Cambodia, Thailand, Malaysia.