Beware the Trans-Pacific Partnership: It’s Not About Free Trade

by Stephan Kinsella on June 1, 2015

My article, Beware the Trans-Pacific Partnership: It’s Not About Free Trade, was published yesterday at BAMSouth. Unfortunately, some free market thinkers seem to be in support of the TPP, e.g. Tyler Cowen, some people at Cato, etc. (see Cato vs. Public Citizen on IP and the TPP).

Reprinted at FEE.org.

Update: See Jeff Tucker, This Trade Treaty Got Better when the US Bailed

Beware the Trans-Pacific Partnership: It’s Not About Free Trade

May. 31st 2015
Stephan Kinsella
Columns, Main

The latest “free-trade” agreement, the Trans-Pacific Partnership (TPP), is lurking behind the headlines.

Congress is poised to renew trade promotion authority (TPA), also known as “fast track” negotiating authority, which will make the ratification of the TPP more likely, just as happened previously with NAFTA and other so-called free trade agreements.

This is not a good thing.

Those in favor of free enterprise, free trade, capitalism, and private property rights should oppose the TPP and the fast-track authority that makes its passage more likely. Let me explain why.

The details of the TPP are obscure, as it is being negotiated in secret, and its provisions are arcane. For this reason, the average citizen is uninterested in or knows little about this measure. Those in favor of free trade assume it’s a positive measure, but they don’t know much about it. Moreover, both left and right are wrong about the TPP. The left is opposing the TPP for the wrong reasons, and the right and corporate interests (allied with Obama) are using disingenuous arguments to push the TPP.

How to sort this out?

First, let’s not take the state at its word. It is undeniable that free trade is good. A smattering of basic economics is all one needs to grasp this simple point. When A and B trade, each is better off after the exchange. This is true whether they live in the same county, or in different states or countries. Leftists, liberals, and democrats who oppose genuine free trade policies are simply wrong. So: we should favor free trade.

But this is not what the TPP is about. The state says it is, but that does not mean much. The state is not usually efficient, but it is undeniably good at propaganda. In the old days, there was more truth in advertising. The US used to have a Department of War. Now it’s the Department of Defense. The modern patent system finds its origins in the explicitly-named “Statute of Monopolies” of 1624 in England. Here we have an admission that patents are monopoly grants of privilege. Now, patent and copyright are referred to as “intellectual property” rights. Advocates of patent and copyright now bristle if you refer to them as “monopolies.” (See my previous BAMSouth.com column“Intellectual Property Is “Evil”-And Businesspeople Should Oppose It,” Oct. 2013.)

Consider some other examples. Modern statutes are cleverly packaged to garner support—take the Orwellian name of the PATRIOT Act for example. Obama’s reform of the US patent law in 2011, which made only modest improvements and in some ways made patent law even worse, is called the “America Invents Act” (see my lecture Obama’s Patent Reform: Improvement or Continuing Calamity?: Mises Academy (2011) and my article The American Invents Act and Patent Reform: The Good, the Meh, and the Ugly). Invention and innovation are good, so this law must be too. A new scheme to permit Americans to save a paltry bit of their money free of some taxation is cleverly called Universal Savings Accounts (get it?: USA).

And there’s the ominously entitled “Protect America Act”—after all, who could be against “protecting” the homeland? A more honest title would be the “Police America Act.” And consider the perversely-named USA Freedom Act. There are any number of examples of statutes and treaties given innocuous or misleading names or acronyms to help sell them to the public or to get enacted without serious public scrutiny, such as PRO-IP; COICA;IPEC; ACTA; SOPA; PIPA; OPEN; PCIP; CISPA—just to name a few (see my post Death by Copyright-IP Fascist Police State Acronym).

The TPP purports to improve free trade between the US and several other Pacific-rim countries. This follows on the heels of hundreds of bilateral and multilateral free-trade agreements negotiated mostly since WWII. Prior to WWI, the world had a more or less free trade system. After WWI, tariffs and other trade controls (e.g the US Smoot-Hawley Tariff) helped lead to WWII. After WWII, the surviving powers tried to avoid the anti-market controls that led to world war, but they wanted to manage it. Thus emerged the post-war era of managed trade. Instead of unilateral free trade, states negotiated managed trade arrangements as specified in thousands of bilateral and multilateral agreements, such as GATT, WTO, bilateral investment treaties (BITs), and so on. These agreements were managed trade, not free trade. The implicit assumption was that imports are bad, but they can be tolerated so long as the trading partners accepted exports.

A real free trade policy would amount to a couple of sentences, not thousands of pages: one nation announcing that all imports and exports to and from that nation are to be exempt from duties, controls, tariffs. That is free trade. Instead, we have the managed trade of the last 60-70 years.

True, these regimes and agreements have gradually lowered trade barriers, albeit not as low as they should be. But what of the TPP? Consider that the agreement is only among about a dozen Pacific Rim countries. Why in the world would a trade agreement not be universal? Why would the US be simultaneously negotiating a similar but separate treaty, the TTIP (Transatlantic Trade and Investment Partnership), between the US and Europe? (See my post SOPA II? Obama’s Transatlantic Trade and Investment Partnership.) The TPP should be open to all trading partners—to all 196 countries in the world. Or, better yet, the US should just unilaterally abolish all its import duties, restrictions, and tariffs, and lead by example.

We don’t know for sure exactly what the TPP will do, because its provisions are mostly secret so far. We can expect that already-low trade barriers between the negotiating states will be slightly lowered, but with many environmental, union, and other provisions limiting even these gains. A slight gain, perhaps, and better than nothing, but less than could easily be achieved by unilaterally lowering trade barriers.

But what we do know about the TPP is the leak a couple years ago of the IP chapter. For decades the US has been using its global dominance to strong-arm other countries into adopting ever-stronger US-style intellectual property rights, at the behest of US special interests, especially in Hollywood (the MPAA), the music industry (RIAA), and the pharmaceutical and high tech industries. This has been done in hundreds of bilateral investment treaties (BITs), and in multilateral and regional trade agreements and other treaties—and is just IP imperialism (see Intellectual Property Rights: A Critical History and US IP Imperialism). Canada has already succumbed to this pressure: it recently extended its copyright term for sound recordings by 20 additional years at US urging, due to TPP negotiations.

The TPP would only marginally improve free trade, but would export to other countries stronger copyright and patent standards, which would increase the costs these monopoly privilege systems impose on economies, reduce internet and artistic freedom, increase the prices of pharmaceuticals, and reduce innovation, as I noted in my previous column. (See also Longer copyright terms, stiffer copyright penalties coming, thanks to TPP and ACTA….)

Another perverse aspect of the IP treaties the US has pushed onto other countries is that it makes it difficult to reform US IP law. For example, any significant improvement to US copyright law, which is widely seen as being out of control and in need of reform, would arguably be in violation of US obligations under the Berne Convention. So Congress ties its own hands by means of international agreements and then uses this as an excuse later for why IP reform is not possible.

The TPP will not significantly reduce trade barriers, which are already pretty low between the negotiating parties. Second, there are better ways to foster trade, namely: unilaterally reduce tariffs and trade barriers. Third, the TPP aims to twist the arms of our trading partners to get them to adopt stronger, US-style intellectual-property (IP) rights for the benefit of the US music, movie, and pharmaceutical industries, as has been happening for decades now.

Moreover, intellectual property has nothing to do with free trade, and has no place in a trade agreement. Free trade is about trade barriers between nations, not about the property rights system internal to each country.

Leftists who oppose the TPP because they oppose free trade are wrong to oppose free trade, but they are also wrong in assuming that the TPP is really about free trade: it is about managed trade, and IP. The TPP is just the latest instance of the US federal government employing its post-WWII dominance to advance the interests of the music, movie, and pharmaceutical industries in the US, at the expense of US consumers and foreigners.

It must be defeated.