Former IMF chief economist on the problems with TPP

Tim Harford writes, "Simon Johnson is a fascinating character, former chief economist of the IMF and now scourge of bankers and lobbyists everywhere."

The Trans Pacific Partnership is a notorious, secretly negotiated trade deal; from leaks we know that it continues "Investor State Resolution" clauses that allow foreign companies to sue to overturn national labor and environmental laws. Johnson's analysis stresses that trade agreements can be good for countries, but they aren't necessarily good -- and when they're negotiated in secret, they rarely go well.

The TPP is not only – perhaps not even mostly – about freer trade, and thus who gains and who loses is very much dependent on what exactly are the details of the agreement. The exact nature of the provisions matters and at this point, because the TPP text is not available to the public, we cannot be sure whom this trade agreement will help or hurt within the United States or elsewhere.

Outside of agriculture, international trade is already substantially liberalized, and thus the gains from further reductions in tariffs are most likely limited by the fact that tariffs are already quite low.

And the scope of modern-day trade agreements has expanded – primarily into areas in which the economic theory case for mutual benefits is far from clear.

Perhaps the most prominent example is intellectual property rights (IPRs), including patents. Contrary to the mutual benefits of international trade in general, there is no clear-cut theoretical case that stronger enforcement of IPRs will benefit all parties.

In the world in which the developing countries can imitate technologies of developed countries, improving intellectual property rights protection in developing countries is actually likely to make them worse off. This is intuitive: ignoring the developed countries’ IPRs allows developing countries to adopt better technologies faster, increasing welfare there. In the case of medicines, for example, forcing lower income countries to fully respect all patents will mean more expensive treatments and less access to life-saving drugs.

The Trans-Pacific Partnership (TPP): This Is Not About Ricardo [Simon Johnson and Andrei Levchenko/Baseline Scenario]