Why I support the Trans Pacific Partnership (and free trade and globalization in general)

The brief talking points in the attached link serves as a pretty close approximation to how I feel about the benefits of this particular deal. While the text is not entirely known to the public and while the agreement may not be a perfect quid-pro-quo between signatories on lowering trade barriers, I will adopt an adage from a previous boss that I think applies of, “don’t let perfect be the enemy of good.”

http://centerforglobalbusinessandgovernment.cmail2.com/t/ViewEmail/y/81E895973C4286FB/CE7158040C363B87A10BC276F201ED4B#fv

The authors note three reasons for supporting the TPP, of which I quote below:

“Reason #1: The economic gains to the 12 countries today. Although no one has read and processed the entire text of this freshly inked agreement, over the years sufficient information about its broad structure has emerged to permit analysis that shows TPP would generate non-trivial economic gains. A prominent study recently estimated that by 2025 the TPP would increase annual worldwide real income by about $223 billion and annual worldwide exports by about $300 billion. These estimates are conservative insofar as they do not model any acceleration in countries’ underlying economic growth rates from TPP.

Reason #2: The economic gains to even more countries tomorrow. By design, the TPP process has allowed new countries to enter into the negotiating framework. The hope of many is that in the future, additional countries will accede to the TPP—which would generate even larger economic gains for all involved. The two most notably absent countries from the TPP table have been India and China. Each of these countries has, to date, undertaken very little liberalization with the TPP dozen. Thus could the future economic gains be quite substantial.

Reason #3: The economic and other opportunity costs of failing. Not ratifying TTP would incur substantial opportunity costs—both now and in the future—well beyond the foregone $223 billion per year. The Trans-Atlantic Trade and Investment Partnership, a similarly ambitious agreement between the Untied States and the European Union, would likely fail as the EU loses interest in an unreliable partner. The World Trade Organization, which hopes that a ratified TPP would boost its energy, would almost surely see the death of its 14-year-old, already-on-life-support Doha Development Round. And beyond matters of just economics, world leaders might resign themselves to thinking that global challenges with less-certain, longer-term, more-contentious benefits than TPP—say, climate change—are simply insurmountable.”

As a general guiding principle, I am in support of open trade given that the alternative of protectionism places government in the role of arbitrarily choosing winners and losers, which necessarily promotes a governmental power that I believe should be trimmed. Many small and large business owners would support the fact that true commerce and the ability for their business to flourish is enhanced when there is respect no national boundaries for their scope of commerce. Hence, erecting trade barriers to protect the few will necessarily involve the government enacting and enforcing powers that are detrimental to the majority for the benefit of a minority special interest group (think of a U.S. sugar producer that benefits from trade barriers erected against Brazilian sugar producers. He may benefit from the intrusiveness of the government, but the rest of us as consumers pay higher sugar prices as a result.)

Aside from the philosophical debate on the role and scope of government, I support free trade at large due to its actual benefits to the economy. To break it down simply, it benefits us largely as producers and businesses and almost entirely as consumers. I say “largely” to resist the urge to be a simplistic Panglossian supporter and to echo a point made by the authors of my linked article that not every single producer or employee will benefit from free trade. Much like the authors, I would indicate that a more appropriate palliative to this is to focus on employment assistance and training rather than shooting off the foot to save the toe that is protectionism.

The benefits of free trade are largely beneficial due to the economic concept of comparative advantage, which if you put in the perspective of a nation-state means that our respective nations’ possess different inherent advantages in producing goods. For example, it is intuitive that the U.S. holds a comparative advantage in the production of high-tech technology goods, corn, and higher education services compared to most other countries. Thus, the comparative advantage construct is a relative rather than an absolute one. Just because America may produce the best sugar in the world (an absolute advantage) it does not follow that America holds a comparative advantage in the production of sugar and it may mean that America should not produce sugar at all. This may result from the fact that another country can produce it far more cheaply due to labor advantages, or that America fails to attract enough investment in sugar due to all other opportunities. To use a simple analogy, just because Lebron James might be the best house painter in the world, it does not follow that Lebron should in fact waste his time painting his home when he could easily pay someone else to do so and spend his time where it is more valuable – on the basketball court. Thus, comparative advantages are closely related to opportunity costs – the cost of foregone opportunities due to diverting resources to some other use.

I recognize that this can get a bit esoteric, so perhaps a thought experiment will help elucidate the point I am attempting to make here. Using my hometown and current residence of Lubbock, Texas – imagine that Lubbock had to rely exclusively within a walled off city to buy all of our needs. This means only buying our means of transportation, technology, food, and furthermore only being able to produce and sell to our fellows in our community. The end result of all of this is that we would be awash in cotton but unable to produce or purchase a modern car, sushi, an iPad, or a whole host of other items that we have grown accustomed to enjoying as if they were second nature. These same concepts and benefits extend on a much broader scale when we talk about interstate and international trade.

For those interested in exploring this topic further, I highly recommend reading The Choice by economist Russ Roberts. He presents the choices between free trade and protectionism in a remarkably lucid and easy to understand way in the form of a page-turning novel. http://www.amazon.com/The-Choice-Fable-Protection-Edition/dp/0131433547

I echo a lot of Robert’s points from The Choice in an essay named “Free Men, Free Trade” that I contributed to a book called Reinventing the Right that further expands on my points from above. http://www.amazon.com/Reinventing-Right-Conservative-Voices-Millennium/dp/1439267359

 

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One thought on “Why I support the Trans Pacific Partnership (and free trade and globalization in general)

  1. Pingback: The Kansas City Royals as an example for businesses to follow | The Gymnasium

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