Why killing Obama’s trade deal could be good for free trade

Something that often gets obscured in debates over the Trans-Pacific Partnership is that experts who disagree about Barack Obama’s trade deal often don’t have a lot of disagreements about the specific policies the deal contains.

Among economists, there’s fairly broad support for trade-related provisions like lowering tariffs on sugar and light trucks. And there’s a lot of skepticism about provisions to boost generic drug costs, lengthen copyright terms, and create a new process for corporations to challenge government actions outside of the traditional court system.

Where experts disagree, however, is how the defeat of the Trans-Pacific Partnership would shape future trade negotiations. Supporters like Tyler Cowen think the economic gains from the TPP’s trade liberalization exceed the harms from provisions that mostly benefit special interests. So he thinks we should take the deal. And he believes killing the TPP now will lead to worse, not better, trade deals in the future.

This last question is key. Even assuming Cowen is right that the TPP is a good deal on net, it might still be worth killing if doing so will lead to a better set of economic policies in the long run.

The US has been using trade deals to push counterproductive copyright and patent policies on the rest of the world since the 1990s. Each time a deal comes up for a vote, supporters play up the trade provisions and downplay the corporate giveaways. If the TPP is approved, we can expect the same kind of terms in the next trade bill the US negotiates.

On the other hand, if the TPP is defeated, and the defeat is widely blamed on excessive special interest giveaways, it will change the dynamics of the next round of trade negotiations. When special interest groups started lobbying for another round of goodies, US trade negotiators would be able to say, “We’d love to help but we can’t risk having the deal rejected.” Killing the TPP could lead to future deals that are not as larded up with corporatist provisions.

Of course, this only works if people believe that it was these kinds of concerns — rather than old-fashioned protectionist sentiments — that led to the deal’s downfall. The reality is that if Congress rejects the deal, different members of Congress will vote for different reasons. Yet there are some signs that opposition to the TPP isn’t primarily driven by protectionist concerns.

In the 1990s, opponents of trade deals were often straightforwardly protectionist. (Remember Ross Perot’s famous statement about NAFTA creating a “giant sucking sound” pulling jobs to Mexico?) But this kind of argument is rare today.

Today, opposition to the TPP mostly comes from the left. Sen. Elizabeth Warren (D-MA) has emerged as a standard-bearer for left-leaning TPP critics. And, notably, she’s not warning about a giant sucking sound. Her critique of the TPP focuses on an otherwise obscure TPP provision called investor-state dispute settlement that allows corporations to challenge countries’ policies outside of the regular legal system.

Liberal pundits like Paul Krugman have been sounding similar themes. “The real arguments are not about trade but about intellectual property and dispute settlement,” he wrote earlier this week.

The labor movement has always been a key left-leaning constituency against trade deals. Yet if you read the arguments of AFL-CIO head Richard Trumka, he has carefully avoided making protectionist arguments. He says he’s upset about a lack of currency provisions, is opposed to ISDS, and wants stronger labor and environmental standards.

Finally, public support for foreign trade is higher than it’s been in 15 years, and surprisingly it’s more popular among Democrats than among Republicans:

So if the TPP dies in Congress at the hands of congressional Democrats, it will be totally plausible that the deal died because liberals became fed up with special interest groups hijacking trade deals to win goodies for themselves. And if that becomes the conventional wisdom, it could be a powerful political constraint on the next president when he or she is negotiating future trade deals. And that could lead to future deals that give us beneficial trade liberalization plus a lot less corporate rent-seeking.