TPP is the New Smoot Hawley

In the continuing effort of Neoliberals to undo the legacy of FDR and the New Deal (you know, things like repealing Glass Steagall) they are now seeking to reinstate Smoot Hawley style tariffs in the form of the outlandish Intellectual Property provisions of TPP and TTIP. As Dean Baker, an Economist of some repute, points out below, this has exactly the same economic effects as a tariff.

Think Trump’s 45 Percent Tariffs Are Bad? Try Obama’s 10,000 Percent Tariffs
By Dean Baker, Truthout
Monday, 28 March 2016 00:00

While Trump wants to put large tariffs on imports from some of our major trading partners, President Obama is actively pushing to have far larger tariffs imposed on a wide range of goods in his trade deals, most importantly the Trans-Pacific Partnership (TPP). Measures in the TPP pushed by US negotiators will raise the price of many items by several thousand percent above the free market price.

If you missed this discussion, it’s because these trade barriers are referred to as “intellectual property,” which takes the form of patent and copyright protection. But markets don’t care what term politicians use to describe a government imposed barrier. If a patent monopoly raises the price of a protected drug by 10,000 percent, it leads to the same sort of waste and corruption as if the government imposed a tariff of 10,000 percent, except that in the case of prescription drugs, high prices can also threaten lives.

If a price increase of 10,000 percent sounds high, you haven’t been paying attention to what the drug industry charges for its new drugs. For example, the list price for the Hepatitis C drug Sovaldi is $84,000 for a three-month course of treatment. A recent analysis found that Indian manufacturers can profitably produce the drug for just $200 per three-month course of treatment, suggesting a tariff equivalent of more than 40,000 percent.
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So we do face a very real threat of protectionism, but it is in the form of the Obama administration pushing for stronger and longer patent and related protections in the TPP and other trade deals. Unfortunately most media outlets are perfectly happy with protectionism when the main beneficiaries are drug companies. It is only when someone proposes protectionist measures with the idea that they could help ordinary workers that they get upset.