The TPP

The Trans-Pacific Partnership (the new trade deal being negotiated between the US and 12 nations in the Asia Pacific), has the support of our President and also strong support from Republicans.

The TPP has some resistance from Democrats, who are concerned mostly for jobs in the US–e.g., if we “open borders” to allow more unrestrained trade with those lower wage countries, will that result in jobs being lost in the US? Democrats want to see some protection or some compensation to US workers who might lose their jobs or face lower wages due to competition from lower wage lesser developed countries.

Little attention is being given to the negative ramifications of lowered barriers, “open borders,” for lesser developed foreign countries.  Foreign Policy magazine has a compelling analyst of the potential effects of the TPP on these countries.

History has vividly shown the risks of policies such as these. In the 80s and 90s, the Washington Consensus (a set of conservative principles originating in the Reagan administration), driving the policies of the World Bank and the International Monetary Fund, resulted in many lesser developed countries being forced to open borders in trade for desperately needed IMF loans. Economic recovery and growth were promised if the new policies were imposed, but instead, growth floundered and poverty remained. The beneficiaries were largely the corporations from the developed world. The essence of those policies are key elements of the TPP trade negotiations.

There were lots of reasons which were insufficiently considered by global policy makers in the 80s and 90s . Government was a major employer in many lesser developed countries, and one of the IMF demands was for government cost and size to be reduced. As a result, millions of government workers were displaced. The theory was that they would move to jobs in the private sector of those countries, because cheap labor would draw foreign investment and private market growth. However, many countries had poor institutions, poor rule of law, and poor infrastructure. It was impossible to transport goods produced where roads, ports, and airports were inadequate, which they often were. Instead, foreign investment moved mostly between developed countries, with a few exceptions such as India and China, where there was law, institutions, and infrastructure. Cheap labor was necessary, but not sufficient.

Ironically, all the modern industrialized countries put up big protective barriers when they were young, so that their infant industries would not be destroyed by the more advanced competition of more developed foreign competitors. Alexander Hamilton was a great proponent of this for the US, and we had strong barriers in the early years of our industrialization.  England had strong protections before us. Ha-Joon Chang details the protections of today’s developed nations when they were young in his 2002 book Kicking Away the Ladder. All the advanced economies did this in their early years. Yet, now that we are advanced, with well established industries, we advocate that lesser developed countries “open their borders,” which translates to being permitted to have no tariffs or restraints on foreign goods coming in. We seem to have forgotten how we got here.

The Foreign Policy article focuses on the lesser developed countries which are part of the 12 member group in the TPP, those being Brunei, Chile, Malaysia, Mexico, Peru and Vietnam. The Foreign Policy article details 9 ways the TPP is likely to hurt these countries. Forcing that government procurement be open to foreign companies is one.  The US doesn’t even do that fully today.  For example, much of our budget for foreign aid requires that the recipient country buy US made goods with the funds. Relaxing controls on foreign investment is another. Then there are controls on state owned companies and on intellectual property strengthening (which limits access to drugs which are key to good health among the poor).

The Foreign Policy article does not address the impact of a TPP on nations not invited to participate. Leaving aside strong countries like China, there are dozens of small and lesser developed countries not invited. If the US fills more of its needs from the 11 new partners, it is reasonable to expect other countries will be impacted a little or a lot, depending on what they have to sell.

What’s my point? My choice to take a little time on this issue is primarily to remind us that what we do from the US standpoint should not be designed entirely around how we can benefit the US, and particularly only US corporations. There are other important impacts and considerations. Our policies should also weigh the impact on US workers.

And, while happening to live in the most prosperous country, we are nevertheless also citizens of the world. We should also consider the impact on the citizens of lesser developed countries.

I welcome your comments

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