TPP: some economists

Eric Crampton had a post this morning drawing attention to recent posts on TPP by Brian Easton (“to the left of the NZ economist punditsphere”) and me (“to the right of the same”).

In our posts we primarily asked slightly different questions.  Brian posed the question “Can we afford not to adopt the TPPA?” .  He doesn’t express a strong view one way or the other on the economic merits of the deal itself (but, as Eric notes, he doesn’t come across as overly enthusiastic).  Instead, his focus is on the fact that the deal has already been agreed, and that if New Zealand were not to ratify it now, it could be deeply damaging to a range of international relationships.

The logic in this column is that we now do not have much choice about the TPPA. The government is trapped into agreeing to it because rejecting it has implications for other trade deals and our wider international relations.

That is probably right.  I didn’t give that dimension much attention in my post, as I take for granted that having signed the deal the current government will ratify it.  It doesn’t need a vote in Parliament to do so, but would have the numbers even if it did.

My focus was different –  more about the question of whether we, as New Zealanders, should welcome, or regret, that the deal was done at all.  Given that the deal has been done, the implications are quite different if it eventually falls over because the US political process rejects it (neither a President Sanders nor a President Trump might even submit to Congress), than if a single minor country (eg New Zealand) were to walk away unilaterally.

I suspect we’d be better off if the deal had not been done.     But I’d feel more confident of any view  –  positive or negative –  if we had had a proper independent evaluation of all the aspects of the agreement from a capable independent agency (such as the Productivity Commission).

I was also interested in Eric’s own take on the deal

I’ll remain a fence-sitter as it would take just too much work to come to a strong view on it. My confidence interval on whether the thing’s worth signing spans low/mid positive and low negative figures, and it wouldn’t be easy to tighten that up. If Congress decided not to pass it and the other partners could then clear out the worse parts on copyright, it wouldn’t bother me that much – though the deal on copyright is far better than I’d thought it could have been.

Eric is also on “the right of the economist punditsphere” (probably more so than I am).  In a sense, his point about “it would take just too much work to come to a strong view” echoes the argument for a proper independent expert evaluation.

And, of course, from the left was the sceptical paper on The Economics of TPPA which I linked to other day, which had substantial input from economics academics Geoff Bertram and Tim Hazeldine.

Perhaps I’ve missed someone, but I haven’t seen a ringing endorsement of the overall economic benefits to New Zealand of TPPA from any New Zealand economic commentators.      Perhaps the overall deal is slightly beneficial, or slightly detrimental, to New Zealand’s overall interests.  And different people might reasonably reach different views, by placing different emphases on the various strands of a complex deal.

In the Herald this morning, the Trade Minister argues that “today is exceptionally important day for New Zealand”.  Frankly, that seems unlikely either way.  He claims to believe that his own National Interest Assessment understates the likely economic gains to New Zealand.  It seems unlikely, but it would be interesting to see his argumentation and evidence.

Either way, I had a circular National Party e-mail from McClay yesterday, with a link to a site allegedly “setting the record straight on TPP”. He lost me here

FALSE: Supporting the TPP is a left-right issue

Actually, it’s an economic literacy issue.

I know it is politics, but I rather wondered who the Minister of Trade thought he was convincing.  The issues are important enough –  whether McClay is right or some of the sceptics and outright opponents are – for a rather more serious level of discussion and debate.

7 thoughts on “TPP: some economists

  1. “must”? Well, only if that is the only aspect of a complex deal one puts weight on. If it were only the goods trade dimensions we were considering, I’d say “yes, lower barriers are better than higher barriers”. But there is a whole lot more to the deal: extending copyright, giving foreign investors access to different courts than citizens or local businesses have, the extension of international treates into a whole variety of areas of domestic regulation, many many more international meetings and bureaucratic “consultation”, what transactions we must prioritise in a financial crisis, and so on.

    That combination is what makes the net benefit question a great deal less clear.

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    • Extending copyright laws – Can’t see too much impact. NZ already has subscribed to international law taking doubtful legal action on poor Mr Kim Dot Com on the behest of the US.

      Giving foreign investors access to different courts – I think NZ already has a different court via a English Court of Appeal so we ar pretty used to having to deal with a different court with different laws from our own.

      The extension into domestic regulation – if we are able to water down the Treaty of Waitangi, that would be a wonderful thing.

      Bureaucratic consultation – a treaty would likely move that consultation aspect from governmental level to a private level which lowers the cost on the taxpayer afterall it is private business that benefits from all this free trade.

      Transactions to prioritise in a financial crises – the G8 and the G20 meetings already keep members in line with international standards. The TPP is not going to change the fact that we live increasingly in a global environment where international standards are going to be the norm.

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      • Just briefly:

        1. Copyright. The official estimate is that it will cost NZ $55m pa. altho Treasury think that is an underestimate. The extension is wrong in principle, and materially impedes the availability of older material (there is clear evidence in the literature on that)

        2. I think you miss the point. ISDS provisions mean, that for some matters, a foreign firm owning a company in NZ has access to different remedies against the NZ govt than a NZ firm in NZ owning a company in the same sector has. Same goes in other countries. That is wrong in principle – equal access to justice has been a tenet of our system for a long time.

        3. Reasonable people will differ on that ( I happen to agree with you), but regulatory choices on purely domestic matters should be made in the domestic political process.

        4. Private business often also benefits from having barriers up against new entrants etc etc

        5. The point is that the new provisions go well beyond international standards (eg thru the IMF and WTO). Iceland had, and used, flexibility in its crisis, which we would now not be able to exercise.

        None of these points might worry you. People will differ in what they value and prioritise, but they aren’t self-evidently non-issues.

        And as Jim notes, even if there were only provisions around goods trade in the agreement, one still needs anaylsis of the trade creation vs trade diversion issue (which the Ausatralian Prod Commission has regulatory highlighted). General free trade is almost invariably beneficial; regional FTAs less self-evidently so.

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  2. Michael, I think it is a big stretch of the National Party to car support of trade agreements as an economic literacy issue.

    Even if it were a straight trade agreement there are the trade creation and trade diversion considerations. With all the other issues added in, its perfectly reasonable to be sceptical.

    Sadly, the critics on the Left of the agreement preferred conspiracy theories over admitting that is just a deal that may or may not be a good deal

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  3. Yes. It will be interesting to see how the politics play out. I suspect that a low-key technocratic approach (including commissioning a careful independent review – not for a “yea or nay” recommendation, but to fully tease out the implications of the numerous different aspects of the agreement – might have done rather better over the 12-18 months ahead than the rather belligerent OTT approach the Nats are taking, with overblown claims about the possible gains. The fragile global situation, and the uncertainty over the fate of TPP in the US, probably only reinforce that view. Then again, I’m no politician.

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