Center for Strategic Communication

The world is turning upside down. Distinguished economist and free-trade supporter, Paul Krugman, released a new column on Thursday calling the economic effects of TPP overstated and saying that failed TPP negotiations would be “no big deal”.

Krugman pleads:

“Basically, old-fashioned trade deals are a victim of their own success: there just isn’t much more protectionism to eliminate. Average U.S. tariff rates have fallen by two-thirds since 1960. The most recent report on American import restraints by the International Trade Commission puts their total cost at less than 0.01 percent of G.D.P.”

Krugman soon went on to dismiss TPP’s benefits to the average American worker, instead labeling the agreement as merely a tool for big corporations to “assert control over intellectual property.”

“Is this [intellectual property rights] a good thing from a global point of view? Doubtful. The kind of property rights we’re talking about here can alternatively be described as legal monopolies. True, temporary monopolies are, in fact, how we reward new ideas; but arguing that we need even more monopolization is very dubious — and has nothing at all to do with classical arguments for free trade.”

Krugman’s points here are justified to an extent. In fact, my recent article on TPP made sure to highlight how most of the trade occurring between TPP members is already under preexisting FTAs.  But Krugman’s faults are not in what he said, but in what he didn’t say.

Trade—especially nowadays—is as much about building political relationships and national security strategy as it is about raw economics. Exporting cars is no more important than exporting US ideas on how to manage the world economy. The cross-border flow of goods can also be a cross-border flow of trust between countries. And trade agreements—if done right—can be an effective tool for aiding development in some of the world’s most poverty-stricken regions. All of these less-than-obvious benefits from trade cannot be neglected, since they often further US interests in a more efficient way than say, an army could.

Shawn Donnan’s response on Friday in the Financial Times is particularly relevant to the above points and is worth quoting at full length:

“Krugman seems to be missing one of the big motivations for US trade policy these days. Both the TPP, which groups 12 Pacific Rim countries including Japan, and the Trans-Atlantic Trade and Investment Partnership, the EU-US negotiations launched in July, are really big strategic, rather than economic, projects. They are about responding to the changing shape of the global economy and the rise of China and other emerging economies and trying to reinforce the US (and to a lesser extent, the EU’s) position at the centre of it. They are, particularly in the case of the TPP, about security policy as much as economic policy. If, as the FT’s Geoff Dyer puts it in his new book, the “contest of the century” is the one between the US and China, then trade deals (as they often have in history) have a whole other purpose.”

Of course, no one should overstate or abuse the points made in Donnan’s article.  At the misfortune of journalists in need of a catchy heading, a failed TPP or TTIP would not be America’s “doomsday equivalent” to the fall of the Roman Empire. But Donnan has rightly highlighted that the utility of trade extends beyond the bounds of just pure economics and numbers. National security, geopolitics, and reputation are all considerations intermingled within TPP, TTIP, and the like. This means determining the direction of trade policy is much more complex than as seen from the surface. On a brighter note though, it also means you don’t need to have a PhD in economics to see trade’s benefits.

Brendan Connell is a Research Assistant & Intern at the American Security Project covering American competitiveness and issues in trade.

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