June 29, 2017

DONALD WHO?:

The Rebirth of the TPP (Koichi Hamada , 6/29/17, Project Syndicate)

The TPP's mega-regional approach can bring greater economic gains than a bilateral deal, as it spurs trade and investment flows - including by harmonizing regulations and standards - across a larger swath of the global economy. But, unlike the WTO, it is not so large, and does not encompass such diverse parties, that it is overwhelmingly difficult to reach agreement.

The mega-regional approach may have one more advantage, shared with the WTO: the involvement of more parties can dilute the authority of a major country and thus limit its ability to strong-arm its negotiating partners into an unbalanced agreement. Indeed, this may be precisely why Trump, with his penchant for "deal-making" and promises of an "America first" trade policy, rejected the TPP. In his view, bilateral negotiations put the US, as a political and economic hegemon, in a stronger bargaining position.

What Trump fails to recognize is that, while a small country may feel intimidated by the US at the negotiating table, it can still stand up and walk away. More important, even if the US can use its weight to secure more favorable provisions in a bilateral negotiating context, the benefits do not necessarily outweigh those of larger-scale agreements.

That is certainly the case with the TPP, which contained some provisions that were highly beneficial for the US economy. Specifically, the agreement would have given US businesses access to markets that had long been largely closed. The provisions on intellectual property rights, accounting, and conflict resolution were so favorable to Wall Street and US lawyers that they have been criticized for being unfair to the other parties. They were agreed, however, because of the expectation that China would eventually have to adhere to those standards.

In that sense, as Columbia University's Jagdish Bhagwati said to me, "the TPP was a bit like allowing people to play golf in a club, but only if they also attended a particular church over the weekend." The deal's signatories were in it for the golf - that is, the expanded trade and investment flows. But they couldn't avoid the obligation to accept rules that would benefit the US, in the hope that the liturgy might help to constrain China's behavior.

Posted by at June 29, 2017 5:36 PM

  

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