Monday, October 31, 2016

Tyler Cowen on TPP

See TPP Is Exciting. Let's Make the Case for It. Excerpt:
"Another good argument for TPP is that it will bring 18,000 tax cuts to job-creating exporters. But that’s not how Ronald Reagan would have sold a tax cut. It’s easier to talk about one big tax cut – especially if everyone has a chance of seeing it appear on their tax form -- than about removing 18,000 obstacles to business.

­­­A Peterson Institute estimate suggests global yearly gains from TPP of $295 billion, with $78 billion of that going to the U.S. That is an abstract number to most voters; it doesn’t feel like money in their pockets and it’s hard to be sure it’s accurate anyway.

Alternatively, TPP could be viewed at the margin. The U.S. already has trade agreements with many of the 12 Pacific Rim nations in the proposed pact, so the major additional impact for the U.S. is a new free trade agreement with Japan, the world’s third-largest economy and a significant ally. That seems constructive, but it won’t get people excited about the larger vision.

Other parts of TPP are simply hard to understand. There’s a mechanism to resolve disputes that has been criticized for giving companies the upper hand in conflicts with governments; it’s a common part of trade deals that shouldn’t be a major problem, but has become one. Hardly anyone even mentions that TPP will make it harder for Asian economies to compete unfairly against U.S. companies through state-owned enterprises. The Obama administration touts the labor and environmental standards in the deal to progressives, but those provisions, appropriately or not, leave many of the traditional supporters of free trade under-enthused.

So what then is the exciting, big-picture case for TPP? I say it’s to keep North America, and especially the U.S., the world's leading economic cluster for the foreseeable future.

Think of the global economy as one where some regions do very well -- for example, Silicon Valley or Shanghai -- and other regions languish. The talent, the capital and the most ambitious immigrants want to go to the flourishing places to do business, innovate and create jobs. Overall, the U.S. is the largest and most successful agglomeration of commerce.

If the United States is to extend its economic influence, it must draw upon Asian connections, talent and markets as much as possible. After all, the Asian economies in TPP -- Japan, Malaysia, Vietnam, Singapore and Brunei, along with Australia and New Zealand -- are significant in both population and gross domestic product. South Korea, Indonesia, Thailand and the Philippines have signaled a possible intent to join, and perhaps eventually India and Bangladesh as well.

There are thus two visions of America’s economic future. In one, the U.S. is able to mobilize Asian resources to help maintain its role as world economic leader, to the mutual benefit of most other Pacific nations. In the other, the talents and resources of the TPP nations get pulled in other directions, including toward China, and U.S. economic and geopolitical leadership declines."

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