By Simon Johnson
The Trans-Pacific Partnership (TPP) is a proposed free trade agreement (FTA) between the United States and 11 other countries. It is comprised of two main parts: reductions in tariffs (and related non-tariff barriers), of the kind typically seen in trade agreements; and new rules for foreign direct investment and intellectual property rights, which have not previously been prominent in FTAs.
The new rules part has become controversial. The case for introducing an investor-state dispute settlement seems less than compelling – this would favor foreign investors over domestic investors, not an idea that sits well with the standard idea of equality before the law (going back at least 800 years) and a direct contradiction to the usual principles of FTAs (emphasizing non-discrimination across types of investors). As currently formulated, it would also be open to considerable abuse. And the precise rules under consideration for patent protection appear likely to reduce access to affordable medicines in both our trading partners and potentially also in the United States.
As a result, advocates of TPP are now emphasizing the benefits of tariff reductions in terms of boosting US exports. But the administration’s claims in this regard are greatly exaggerated and the United States Trade Representative (USTR) is unfortunately refusing to fully discuss the broader trade impact, including the precise impact of higher imports into the United States. Continue reading