A post about TPP to make everyone think again

This blog post is one of the most interesting analyses of the flaws in arguments offered by economists on both the pro- and anti-TPP sides of the debate.

Too often the pro faction can see no evil, and the anti faction can see no good. Harvard professor Dani Rodrik is an economist who accepts reasonable people can fall on either side of the agreement, and weighs the evidence on either side. One deeply concerning observation in his post:

In regions with industries hit hard by competition from Chinese imports, wages have remained depressed and unemployment levels elevated for more than a decade. Falling employment in such industries was expected; the surprise was the absence of offsetting employment gains in other industries.

Advocates of trade agreements have long maintained that deindustrialization and the loss of low-skill jobs in advanced economies have little to do with international trade; they are the product of new technologies. In the current TPP debate, many prominent proponents still cling to this line. In light of the new empirical findings, such nonchalance toward trade has become untenable.

This is an argument against not just TPP, but liberalisation generally. I was growing up in the UK in the 1980s when Thatcher’s liberalisation was closing the mines. The Coal not Dole campaign failed. We were right to fight for those communities but picked the wrong battle. We were trying to protect the job, not the worker. The Tory Government had no interest in rolling out incentives for new industries to open up in the old coal mining villages.

But two crucial differences apply for New Zealand.

Wage depression and job losses occur in protected industries when liberalisation first occurs. For New Zealand this phase was in the 1980s and virtually completed by the late 1990s. There is ample evidence of regions in New Zealand that lost wages and jobs for a decade as predicted when protection was removed.

Today, those losses have already been incurred. That’s why we didn’t see a repeat devastating round of fresh job losses and wage cuts after the China FTA was signed. The TPP won’t — and can’t — have the same effect as the earlier impact because protections in New Zealand have already been eliminated.

Second, the outcome analysed is modelled on a counter-factual where no TPP exists. But that is misleading. The real alternative is a trade bloc across the Pacific, that includes Japan, the US, Australia, Canada — but excludes New Zealand.

Here’s an alternative discussion of the competing TPP studies:

I discovered these interesting commentaries via @StephenJacobi on Twitter.