A Convincing Case For Passing the TPP

Trade and Investment Policy Watch Editor (PIIE)
May 15, 2015 5:15 PM

As the debate over the Trans-Pacific Partnership (TPP) intensifies in Congress, Adam S. Posen, president of the Peterson Institute for International Economics, argues that critics are underestimating the benefits of the most significant trade deal involving the United States in more than 20 years. In an interview for Vox by Ezra Klein on May 14, Posen spoke just as the Senate moved toward approval of Trade Promotion Authority (TPA), which is aimed at clearing the way for completion of the TPP itself.

The strongest case for the TPP is not its prospective impact on US jobs, which will be small, but the benefits to consumers in lowering prices and the benefits to US businesses in increasing productivity, Posen explains. Importantly, real gains from trade should not be viewed in a narrow lens of increased market access, but in the added pressure on businesses to be more productive, improve efficiency, and become more competitive. The broader global perspective  is also important: Trade agreements should not be viewed as zero-sum, with one country growing at the expense of another shrinking, Posen says. The benefits of the TPP move beyond the United States and can be transformative for developing country markets. Finally, Posen argues that the TPP has become important for US leadership and rulemaking in the global economy. He emphasizes that it is the business and political integration through trade and the TPP that has the potential to be among the most important mechanisms for orienting developing markets toward a more market-friendly, even pro-US and pro-democracy, path.

Posen pushes back in the interview against what he says is the disingenuous argument that the TPP is secretive, but he does agree that some reservations about TPP provisions have merit. For example, while the basic idea of investor-state dispute settlement (ISDS) is a good one for countries seeking to attract investment and for protection against expropriation, when it comes to issues of cultural property, health, and safety, some companies have taken ISDS too far. Such concerns should be addressed—as should the valid concerns that some provisions on intellectual property could hinder affordability and access to medicines.

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