More Zombie TPP

As have I, Dean Baker has taken note of the recent spate of stories lamenting the abandonment of the Trans Pacific Partnership. Mostly the argument is- Trump Bad, Trump Kill TPP, TPP Good!

That is the shallowest, most cynical non-reasoned pleading I’ve heard in a long time. Look, I don’t like Trump but appealing to my personal antipathy to promote a trade policy that advocates Corporate Courts with superior jurisdiction to the Federal and State Judiciary (Investor State Dispute System) and guarantees protection for notional and potential profit over demonstrated damages as well as turning a blind eye to actual, factual chattel slavery (Malaysia) using it as a bludgeon to depress the wages of United States workers for minuscule benefits which mostly go to the wealthiest .01% is a dog that just won’t hunt.

I may have been born but it wasn’t yesterday.

My optimistic self tells me this is the last gasp of a dying Neo Liberal system that even under this regime could simply not sustain itself for long. My pessimistic side says that rather than accept the inevitable they will continue to stick stakes up the butts of long dead corpses in the hopes we will get tired or discouraged.

Media Continue to Mourn the Loss of the Trans-Pacific Partnership
by Dean Baker, Center for Economic and Policy Research
07 August 2017

Wow, we could have had another $10 billion in agricultural output after 15 years, if only Donald Trump had not pulled the plug. Hmm, $10 billion in additional agricultural output in 2032, is that a big deal?

Well, if we turn to the International Trade Commission (ITC) report cited in the piece, we see that it amounts to 0.5 percent of projected agricultural output in 2032. That’s about equal to six months of normal growth of the agricultural economy. This means that, according to the ITC report, with the TPP in effect, the agricultural economy would be producing roughly as much on January 1, 2032 as it would otherwise be producing on July 1, 2032 without the TPP.

Is this a “lifeline” for the agricultural economy?

There is also reason to be wary of the ITC report, since these models have been incredibly bad at predicting the outcome of past trade deals.

It’s also worth commenting on the apparent horror with which Politico views the possibility, “rival exporters such as Australia, New Zealand and the European Union to negotiate even lower tariffs with importing nations.” In the good old days, economists used to believe that the United States was helped by stronger trading partners. This was one reason the U.S. generally supported the process of economic integration that led to the European Union.

If other countries remove barriers between them, this could make some of their goods better positioned relative to U.S. exports, but it can also lead to more rapid growth in these countries, which will increase demand for U.S. exports. While both effects are likely to be small relative to the size of U.S. production, it is entirely possible that the growth effect will exceed the substitution effect. Long and short, there is no need for reasonable people to be terrified by the prospect of other countries crafting trade deals.

Is the NYT Required to Lie to Push Trade Agreements?
by Dean Baker, Center for Economic and Policy Research
08 August 2017

I understand people can have reasonable differences of opinion on trade deals like the Trans-Pacific Partnership (TPP), but why is it that the proponents have to insist, with zero evidence, that not doing the deal was an economic disaster? Yes, I know the political argument, which seemed to arise late in the game, that U.S. standing in the world has collapsed because we didn’t folllow through on the TPP. But, let’s just stick with the economics.

Yesterday, Politico ran a lengthy piece saying that the U.S. pullout from the TPP undermined the hopes for a revival of rural America. It cited as evidence a report from the United States International Trade Commission that projected the deal would increase agricultural output by 0.5 percent when fully phased in 15 years from now. Seriously folks, a 0.5 percent increase in output is going to save rural America? That’s 3 months of normal growth, who are you trying to fool?

The NYT joins the act this morning with a news article that starts out by pointing to the costs from the Trump adminstration’s ambiguities on trade policy. While the piece makes many reasonable points, it then turns to the losses from pulling out from the TPP.
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While the piece tells us how important the Japanese beef market is, it would have been useful to get some sense of proportion. According to the piece, Japan’s entire market is $1.5 billion annually. U.S. beef production is currently $60 billion. This means that if U.S. producers were able to secure half of Japan’s market, a very impressive accomplishment for a country halfway across the world, it would raise the demand for U.S. beef by 1.3 percent.

The piece also misleads readers on the nature of global markets. If Australia gets preferred access to Japan’s beef market, then some of the beef that Australia used to export to other countries will be diverted to Japan. This will open up new export markets for U.S. beef. It is worth noting that, while the piece includes the exuberant praise of the TPP from Mr. Bacus, it does not quote or cite any critics of the deal.

The piece then turns to the tariffs imposed on Canadian softwood lumber, ostensibly because Canada subsidizes its lumber exports.
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It’s not clear where Bloomberg gets its data, but the Bureau of Labor Statistics reports that softwood lumber prices have increased by 9.7 percent over the last year, just over half of the 18 percent figure cited in the piece. We are currently building more (.PDF) than 600,000 new homes a year, with an average sales price of almost $380,000.

This puts the total value of new homes in the range of $220 billion. If we paid 24 percent more on $5.7 billion in softwood imported from Canada, as a result of the tariff, this would increase the cost by roughly $1.4 billion. That would imply an increase in costs of a bit more than 0.6 percent of the sales price. That is not altogether trivial, but it seems unlikely to wreck the housing industry.