Paul Krugman is WRONG on TPP, here’s why.

Paul K did it, again. In a burst of arrogance, assumed elitism, and an old nobel laureate missing intellectual aura childish reaction, he managed to look ridiculously disconnected from reality.

On the trans pacific partnership, or the TPP, Krugman published a blunt blog post where he declares the following:

The big talk about TPP isn’t that silly. But my starting point for things like this is that most conventional barriers to trade — tariffs, import quotas, and so on — are already quite low, so that it’s hard to get big effects out of lowering them still further.

Now if you follow Krugman on the web, you would know that Mr « know it all » usually dismisses anyone contradicting him by the « silly » adjective, but that’s quite the norm in NYT « elitist type » op’s right? Let’s pass.

He adds on

OK, I don’t want to be too dismissive. But so far, I haven’t seen anything to justify the hype, positive or negative.

Hear me well, ANYTHING POSITIVE OR NEGATIVE? Not even a slight glitch in the thing?

I don’t disagree with Krugman. On a strictly macroeconomic level, the TPP and TTIP trade agreements don’t achieve much in an environment where official tariffs quotas and barriers are already low. It might furthermore consist of an insurance policy to corporations facing hazardous retaliations from trading partners in severe economic times where protectionist instincts are in the playbook again.

But this is not the main issue of discord in these trade agreements. And Krugman knows it and hides behind his academic cloak to dismiss the subject.

What are the TPP and TTIP agreements

For some of my readers, maybe you are not aware of TPP and TTIP. Mainly, they are both Free Trade Agreements covering different regions. I will post the following comparative table, reproduced from Exportvirginia.org blog.

TPPTTIP
What does the acronym stand for?Trans-Pacific PartnershipTransatlantic Trade and Investment Partnership
What is it?A free trade and investment agreement being negotiated among several countries bordering the Pacific Ocean: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.Thailand, Costa Rica and Colombia have also expressed interest in joining the TPP, but haven’t yet.Remember: the U.S. already has FTAs with Australia, Canada and Mexico via NAFTA, Chile, Peru, and Singapore.A free trade and investment agreement being negotiated between  the U.S. and the  European Union
What’s the purpose?The TPP agreement is expected to address the types of issues that the United States has included in its past FTAs, such as market access for goods and services, the protection of intellectual property, strong investment protections, and government procurement.  It is also expected to establish disciplines in such new areas as competition with state-owned enterprises (SOEs), the protection of cross-border data flows, emerging issues related to intellectual property rights, and regulatory cooperation.  The TPP countries have agreed to use the U.S. approach of negotiating services, financial services and investment commitments on a “negative list” basis (i.e., all commitments are binding on a TPP country unless it explicitly excludes itself from a commitment), which should lead to substantially increased market access opportunities for the United States.Source: Business RoundtableAccording to the USTR, the TTIP agreement willEliminate all tariffs on trade.Tackle costly “behind the border” non-tariff barriers that impede the flow of goods, including agricultural goods.Obtain improved market access on trade in services.Significantly reduce the cost of differences in regulations and standards by promoting greater compatibility, transparency, and cooperation.
What’s the timeline for this thing?We’ve been working on this one for a while. President Obama announced in November 2009 the U.S.’ intention to participate in the negotiations.Negotiators are pushing to complete the deal by the end of year. In fact, TPP Ministers and Leaders (read Presidents and Prime Ministers) will meet next week on the sidelines of APEC meetings in Bali, Indonesia to discuss pathways forward on remaining issues and plans for concluding the negotiation.In July 2013, the U.S. and European Union held the first round of negotiations to establish the Transatlantic Trade and Investment Partnership (TTIP).If the TPP negotiations are any indicator, this thing may not be hammered out for a while. However, we might expect negotiations to progress a bit faster here since the EU is a single trading group and should require just one trade agreement, whereas TPP negotiations required individual countries to reach bilateral agreements with one another.
What’s the potential impact for Virginia?Apart from Japan the TPP countries that are not current FTA partners— Brunei, Malaysia, New Zealand and Vietnam — were Virginia’s 21st largest export market in 2011, with a combined value of $213 million. Removing tariffs on exports to these countries could bring this aggregate market much higher in the ranking of Virginia exports’ destinations.Japan, alone, was VA’s 7th biggest export market in 2012, behind just the EU, Canada, China, Mexico, the ASEAN region, and Brazil. The value of Virginia goods and services sold into Japan was almost $500 million. If Japan removes tariffs on its imports from the U.S. as a result of the TPP, Virginia exports to the country will jump significantly.Source: Business RoundtableU.S. Chamber of CommerceThe EU purchased Virginia goods worth $4 billion (23 percent of goods exports) in 2012 and services worth $4.5 billion (33 percent of services exports) in 2011. Successful implementation of TTIP is estimated to increase Virginia exports to the EU by 25.2 percent and could boost net employment by 20,900 jobs.Source: Atlantic Council
What’s the latest news on this?The U.S. and Japan last week conducted a second round of bilateral talks on autos and trade barriers as part of TPP negotiations, in advance of the aforementioned talks this week in Bali.Prior to last week’s U.S.-Japan meetings. Japanese press reported that the country had made a bilateral proposal to scratch tariffs on nearly 90 percent of U.S. imports. The percentage of tariff-free items would thus top the 88.4 percent that Japan agreed to eliminate within 10 years for the Philippines — the highest so far among the 13 free trade agreements Japan has concluded. Japan exchanged a list of tariff-free item proposals with Brunei, New Zealand, Malaysia, Mexico, Peru and Singapore at the TPP’s 19th round of talks in August. The offers made at the time averaged around 80 percent.The second round of TTIP talks will take place in Brussels next week.
I don’t know much about the individual markets that will be included in these agreements.MalaysiaGDP growth of this Asian country is predicted to rise by an astonishing 21.8 percent by 2016. Additionally, Bloomberg recently ranked them the #12 country for their ease of doing business.Czech RepublicThis Eastern European country has a projected GDP growth rate of 21.1 percent by 2017. Click here for more information on export opportunities in the country, and here to register for our Czech/Poland trade mission in March.
*Unless otherwise specified, information sourced from U.S. Government and European Commission resources

As you can see, the TPP and TTIP are both rather conventional trade agreements. The issue however is not the access to international markets. If it were, I would be completely lobbying all over the web for the acceptance of these agreements.

Indeed, and unlike Paul K, I believe that the world does not know a better policy than free trade in its search for peace and prosperity. I am a « market fundamentalist » as Krugman likes to call other economists that give the market a slight intellectual and moral advantage over central government.

The issue with these two deals is: PRIVACY.

Paul Krugman

Paul Krugman

The issue

The reason I am fuming against Krugman’s intellectual contempt is that he places all  his analysis out of context, and links it to his close minded academic models and « textbook economics ». To resume, he likes to think « in the box ».

In the models Krugman uses to dismiss the TPP deal as minimal and not that relevant, there is NO Edward Snowden. There is NO NSA scandal. There are NO popular revolts all over europe against crony capitalism. Are you kidding? François Hollande is a success story under Paul K’s achievement standards, forget the fact that his own populace cannot stand him, the fact that small businesses are deserting the country because of an unbearable tax load. No, textbook economics say Hollande is right, and Krugman believes it.

The real issue with the TPP and TTIP is privacy, and the power given to corporations. It is not that I am in no position to comment, but I would rather post a couple of links that clearly underline those issues.

If these FTA’s will open a huge boulevard for spying agencies all around the United States to have an open bar in Europe, then the European citizens say no. And if the European elite do not listen, the 2014 elections will be worse than a Strauss-Khan scandal mingled with a bank run. To resume, citizens will be putting them out of a job soon. Remember, Paul K doesn’t live in Europe. And his privacy is no concern, for friends in Washington will take a good care of what info is released on him.

Here’s why it’s a bad deal

The recent revelations of extensive intelligence gathering by United States (« U.S. ») agencies on the European Union (« EU »), its citizens and governments has harmed EU-U.S. relations, and has dampened Europeans’ enthusiasm for the Transatlantic Trade and Investment Partnership (« TTIP »). This is one of the major findings from a survey on data security that canvassed the opinions of 1,536 respondents in the EU and 1,000 respondents in the U.S., conducted by FTI Consulting, Inc. (NYSE: FCN ), the global business advisory firm dedicated to helping organisations protect and enhance their enterprise value.

More:

However, as documents from negotiations have been leaked, a growing number of politicians and policy groups across political ideologies have found disconcerting features of the TPP that point not at all toward free trade, but bigger government, stricter laws, and less accountability.

And more negative points Krugman (and all the New York Staff btw) « fails » to see

As she explained to Reason, “what is decided as being good for the economy and job creation is strictly dictated by corporations that have ready access to the text and have spent immeasurable amounts of money lobbying for provisions that enact regulations that benefit their private interests. We only know what’s in this agreement based on official statements and leaked documents.” She asks, “That really isn’t any way to make international regulatory norms, is it?”

A bad deal

The FTA’s talked about earlier are a bad deal. They are a bad deal because of the context. The internet generation does not trust government with its privacy, let alone huge transnational companies. They are a bad deal because nation states are failing, and before a new system of democratic governance is produced, giving transnational companies a free ride on our governance and the governance of our privacy is not an acceptable choice.

Hear the people, Professor Krugman.

Links:

Extensive Covert Surveillance Programme Harms EU Perceptions of U.S. And Could Put TTIP Negotiations at Risk

The Trans-Pacific Partnership Agreement: Obama’s Dangerous International Deal

It’s Trade Agreement Time Again! Let’s Compare: TPP vs. TTIP

Trans Pacific Partnership is Not Especially Important

The conscience of a Liberal: TPP

Benefits of Trade & U.S Trade Agreements: Drivers of American Growth and Jobs

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Paul Krugman is WRONG on TPP, here’s why. was last modified: avril 23rd, 2014 by Tony

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