Washington Post pushing the TPP and attacking Bernie Sanders
In pushing trade agreements, it is fair to say anything, even if it has no relationship to the truth. Therefore it is not surprising to see Fareed Zakaria (Washington Post, 9/1/16) pushing the Trans-Pacific Partnership (TPP) by claiming that it will boost growth, and attacking Bernie Sanders for opposing “trade policies that have lifted hundreds of millions of the world’s poorest people out of poverty.”
First, the impact on growth will be trivial. According to the International Trade Commission’s assessment, the TPP will boost the annual growth rate over the next 15 years by less than 0.02 percentage points. And this projection does not take account of the negative impact of the protectionist measures in the TPP, such as stronger and longer copyright and patent protection. These measures have the same impact on the protected items as tariffs of several thousand percent.
Zakaria then gets into straight-out confusion when he tells readers that the TPP is a good deal for the United States because
Asian countries have made most of the concessions. And because their markets are more closed than the United States’, the deal’s net result will be to open them more.
Actually, in standard trade theory, most of the benefits from lowering tariffs accrue to the countries that lower them. In trade theory, it benefits their consumers. Overall, trade balances are not affected. This is why the very pro-TPP Peterson Institute shows that by far the largest gains to TPP accrue to Vietnam: It lowers its tariffs the most under the terms of the deal.
In terms of the attack on Bernie Sanders for opposing the world’s poor, Zakaria is again confused. In the standard trade story, capital is supposed to flow from rich countries like the United States to poor countries in the developing world. That would mean rich countries run trade surpluses, and poor countries run trade deficits. This allows poor countries to sustain consumption levels even as they build up their capital stock.