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Home Publications Blogs Beat the Press Post Touts Trade Deals that Would Enrich Its Advertisers

Post Touts Trade Deals that Would Enrich Its Advertisers

Sunday, 12 January 2014 08:58

The lead editorial in the Washington Post today called on Congress to approve "fast-track" authority which would require that new trade deals be put to a vote on an accelerated timetable without any possibility of amendment. It made this argument based on the proposition that such deals could boost growth and create jobs.

This assertion is extremely misleading at best. It is questionable whether such deals will have any positive impact on growth at all and the potential gains would be trivial in any case. One of the deals that would likely come up under fast-track authority is an EU-U.S. trade agreement. A study (Table 16) by the Centre for Economic Policy Research in the U.K. (which is supportive of the deal) concluded that in its mid-point scenario GDP would be 0.27 percentage points higher in 2027 as a result of the deal. This implies a boost to annual growth of 0.015 percentage point, an amount that is far too small to be picked up in our measurements of GDP.

This figure should be viewed as optimistic since it doesn't take account of any losses that might result from higher prices for pharmaceuticals and other products as a result of stronger protections for patents and other intellectual property claims. When these measures are taken into account it is very likely that this deal will be a net drag on growth. The same is true of the Trans-Pacific Partnership, the other major deal likely to be come up under this fast-track authorization.

Both deals are not really about "free-trade" even though the Post uses this term repeatedly. In most cases the formal trade barriers between the United States and the countries in the agreements are already very low. These deals are in fact primarily about putting in place a structure of regulation that will over-ride national and sub-national governmental bodies. In some cases, such as with intellectual property protections, these regulations are 180 degrees at odds with free trade. They will raise prices and reduce the flow of goods and services.

In other cases, the regulations will likely restrict the ability to impose legitimate health, safety, and environmental regulations. For example, they may make it more difficult to regulate fracking to ensure that oil and gas companies don't pollute groundwater. They may also make it more difficult to impose restrictions that would have prevented the sort of chemical spills that have denied much of West Virginia drinking water in the last week. These deals may also limit the ability of regulators to rein in the financial sector to prevent the types of abuses that fed the housing bubble and led to the financial crisis.

These are the sorts of issues that are at stake with the agreements that will likely come up under fast-track authority. The Post is seriously misleading its readers by calling them "free-trade" deals and claiming that they would have any noticeable impact on jobs and growth. In this respect, it is probably worth noting that many of the Post's major advertisers, such as drug companies and defense contractors, stand to be big gainers from these deals.

Comments (3)Add Comment
Very important
written by Robert Sadin, January 12, 2014 12:23
Dean, It is great that you are pursuing this issue. Don't you think that
the silence of Krugman on this is beyond curious. It is now disturbing.
It is more than a month since his half-baked dismissal of TPP as nothing
to be excited about. (dealing only with the trade elements and ignoring all the
points you mention today).

His reach is (unfortunately) far beyond that of Beat the Press.

Hold his feet to the fire!
written by ggordon , January 12, 2014 2:10
The silly arguments just keep coming from the MSM. In November 2013 we had the NYT editorial. Now comes WaPo.
What's especially puzzling is that its Board would use the dismal unemployment numbers as a basis to push for those 'free-trade' deals. Clearly, no one on the Editorial Board bothered to do a little research; or not so disposed, read any of your posts on the subject to understand the issues.
Of course, Beat the Press will be soon swatting down the same argument from some other cynical or intellectually lazy media reporter/editor. Never a dull moment.
And, yes, Prof Krugman's blog odyssey has taken him from Kentucky to North Carolina, and he's yet to reach close to the TPP - though he had promised to do some research and 'get back'.
Back door legislation
written by Michael Epton, January 12, 2014 2:12
Good comments Dean. Thanks for pointing out this huge and worsening problem.

The central problem is that under the constitution, treaty agreements trump legislation. This is why trade deals are so popular with the inside fixers. They can have their way, and they don't even have to lobby very hard. One difficulty is that "free trade" has become a brand, with plenty of propaganda building up brand loyalty. And with that sort of thing, you get unthinking loyalty to the cause.

The famous logician Kurt Godel famously obsessed over the flaws in the Constitution that he judged would make it possible to establish a Hitleresque dictatorship in America. I wonder what he would have thought of treaty supremacy.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.