Menu Close

(What’s Left of) Our Economy: TPP Fakeonomics from Asia

This is a syndicated repost published with the permission of alantonelson.wordpress.com. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

The best laid plans of economics bloggers, I’m re-learning this morning, gang aft agley due to dysfunctional government websites. So my analysis of today’s final report on May factory orders will have to wait till the Census Bureau gets its on-line act together. (According to business reporters – who usually get this material earlier than we in the riff-raff – the key business investment figure rose 0.7 percent from April – the same as the advance May number released recently.) I’ll discuss the full report once I can access it – I promise!

For now, though, let’s turn to the often-delusional world of international economics, especially in the trade field, and spotlight an unusually pathetic example of an Asia trade specialist who doesn’t seem to know the first thing about Asia trade. Although that sounds harsh, it’s hard to conclude anything else from Jayant Menon’s new post for the influential voxeu.com site on why reaching a Trans-Pacific Partnership (TPP) has taken so much longer than the trade deal’s supporters claimed to expect.

As Menon says he sees it, one big obstacle is Washington’s refusal to compromise on proposed measures that he describes as completely and unfairly skewed in favor of U.S. interests at the expense of the other countries involved, especially low-ish-income economies like Vietnam and Malaysia. Most of these measures, in turn, involve not traditional trade barriers like tariffs and quotas, but national regulations, policies, and economic structures themselves that often have the effect of interfering with trade, whether they intend to or not.

There’s a legitimate debate here: Should most of these so-called invisible, or non-tariff, trade barriers stay in place (because sovereign countries should have every right to govern their own affairs)? Or should they be scrapped dismantled because most of them are unmistakably intended to keep imports out?

I believe nearly all the evidence favors the latter view – especially for the protectionist economies of Asia – but that’s not the main problem with Menon’s analysis. Instead, it’s his apparent belief that the TPP will contain provisions that make possible enforcing agreements on these non-tariff barriers. Everything known about U.S. trade deals reveals this assumption to be laughable.

The main problem with these informal barriers – especially from the standpoint of a country like the United States which has relatively few – is that they’re informal. That is, they’re rarely written down in the form of laws and regulations. Nor are they often created via public executive acts or legislation. Instead, they result from the actions of powerful bureaucracies that have long operated secretly. And the main reason for secrecy, especially vis-à-vis foreigners, is that knowledge is power. In other words, transparency is not only completely absent – it’s actively rejected.

This is why American businessmen so often complain that they can’t even find out what the rules in various foreign markets are. And because the bureaucrats are rarely responsible to legislators or domestic constituencies of any kind, they can change these rules at the drop of a hat. Consequently, non-tariff barriers tend to be excruciatingly difficult even to identify, much less fight through litigation in the U.S. trade law system, the World Trade Organization, or the WTO-like dispute-resolution processes typically established by trade deals like the TPP.

Need evidence? Check out this article I published in 2011. It pointed out that a total inability to assess the impact of China’s non-tariff barriers led the U.S. International Trade Commission to produce a widely off-base estimate of how admitting China into the World Trade Organization would affect the U.S. economy.

At that time, the ITC had just issued a similar study projecting the effects of the Korea-U.S. free trade agreement, and guess what? That projection turned out to be worthless, too – for largely the same reason.

In fact, we’ve just gotten another admission of large-scale ignorance by U.S. officials regarding non-tariff barriers and their flip side – subsidies – in Asia. It comes from no less than the U.S. Trade Representative’s office. Just yesterday, a top official complained publicly that the World Trade Organization had run into “systemic difficulties in securing information” about China’s trade and investment policies.

Indeed, said USTR, “it has been our experience that many aspects of China’s trade and investment policies and practices seem to remain hidden away in unpublished measures, internal instructions, oral directives and confidential documents – or for some other reason are simply unavailable. Similarly, the operations of China’s state-owned enterprises – which represent a major part of China’s economy – are largely shielded from view.”

These gaps in official knowledge matter. Vitally. They explain much of the reason why practically every trade agreement the United States signs with an Asian country boosts the U.S. trade deficit – depressing America’s economic growth and job-creation and fueling the national debt in the process. These deals lead Washington to reduce or eliminate its (by now modest) tariffs and quotas, and to weaken its handful of non-tariff barriers (like Buy American requirements for government procurement) in ways that can be monitored and enforced. And for all intents and purposes they leave Asian non-tariff barrier and subsidies untouched.

As a result, these repeated U.S. trade policy mistakes deserve much blame for fueling the record global economic imbalances that helped set the stage for the last financial crisis.

Equally nonsensical is Menon’s claim that the kinds of strong labor and environmental standards the TPP would allegedly impose would remove crucial and perfectly natural sources of competitive advantage for low-cost developing countries. How many American officials, for example, would need to be running around how many factories in Vietnam or Malaysia – or China, for that matter, which is bound to join a completed TPP sooner or later – to determine which ones are unsafe, or flagrant polluters?

If Menon was, say, a well-intentioned but fundamentally ignorant self-styled progressive western trade activist, these critiques of TPP would be understandable. Ditto if he was equally well-meaning but ignorant (at least about Asia) Nobel Prize-winning economist like Joseph Stiglitz, who has championed essentially the same views.

But Menon is “the Lead Economist at the Office for Regional Integration” at the Asian Development Bank. That’s a World Bank-like international organization focused on Asia. So he’s supposed to know what he’s talking about. His post on TPP strongly indicates that fakeonomics is hardly confined to American academics, or to the offshoring lobby in Washington and its hired hands in the U.S. government.

Join the conversation and have a little fun at Capitalstool.com. If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

1 Comment

  1. DEHSmith

    SECRET TPPartnership,
    C-CITreaty & CETA TRIBUNALS are INSIDER TRADING; corp. Canada
    fears China may Blow “Arrangements” between Can. Lobbyists’
    Clients & Parties’ Executives (W.A.D. Accord*)? NON Shareholders
    HAVE TO PAY the arranged PENALTIES. LineUp to PREFERRED IPOs
    SHOrtens.

    There are several reasons
    for the secrecy (“omerta”) of the dispute resolution
    tribunals. They are:

    1) To Protect the parties
    to the treaty, &/or, agreement, ie. corporate sponsors, from
    having to reveal to the non shareholding tax payers the existing
    arrangements that it has with its own government. For instance, the
    Canadian W.A.D. Accord suggests that corporate Canada’s lobbyists pay
    considerations to the executives of the political parties for two
    main reasons:
    A) to promote corporate
    Canada’s agenda with governing party(ies) by:
    i) reducing its taxes &
    thus, the “net increase” in taxes for non shareholders
    &
    ii) increase its funding
    for “economic development” which covers the cost of, among
    other things, the present & future advocacy, ie. lobbying &
    the cost of the considerations that corporate Canada pays out, etc.
    It may be regrettable that given the source of the accessed “economic
    development” funds, ie. those 95% – 99% of Canadians who are non
    shareholding tax payers there is a great deal of room for
    discretionary spending & its abuse
    and
    B) to protect corporate
    Canada’s agenda by paying the other (non governing) political parties
    considerations in order to limit the scope of the “opposition”
    to manageable issues that can be compromised in order that “opposing”
    parties can claim victories (at least a limited victory) for their
    constituents. Under this arrangement both, the politicians & the
    lobbyists’ clients are protected from scrutiny by the role of the
    parties’ executives.
    2) To Protect the parties
    to the treaty, &/or, agreement, ie. corporate sponsor from having
    to reveal to the each others’ corporate sponsors their existing
    arrangements that it has with its own government & thus, each
    counties’ corporate sponsors are not obliged to share the benefits &
    considerations (& future considerations) that they receive from
    their respective governments ie. their non shareholding taxpayers.
    Often the benefits are shared as an inducement to conduct business
    together in the more convenient jurisdictions.
    3) To Protect the parties
    to one treaty, &/or, agreement (referred to as the “original”
    treaty/agreement) from having to reveal to third parties the nature,
    &/or, details of their “original” arrangements to other
    third parties who may want to enter into a treaty, &/or,
    agreement with either of the parties to the “original”
    agreement/treaty.That is to say, that acquiring & having
    privileged information of an outsiders treaties, &/or, agreements
    will cause contention as the third party will undoubtedly insist upon
    more favorable terms & conditions to a new treaty/agreement than
    the original treaty/agreement. For example; “You did this with
    them, so I insist upon more, or, I’ll deal with them, or, others”.
    The European Union is particularly interested in preventing the
    Canada – European Union CETA from becoming divisive whereby
    individual EU member countries may be enticed, &/or, coerced into
    making preferential, but, “very secretive” side deals with
    corporate Canada, et al.
    By preventing the non
    shareholding taxpayers from learning about the aforementioned reasons
    for the tribunals’ secrecy whereby the non shareholding taxpayers pay
    for the increase in the value of the shareholders’ stocks &
    dividends is insider trading & stock manipulation.

    …For
    the FULL ARTICLE, see;
    Facebook;
    “David Smith, Sidney, BC”,
    &/or,
    Google
    “David E.H. Smith”, for the accessing RECENT ARTICLES &
    CORRESPONDENCES

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

RSS
Follow by Email
LinkedIn
Share

Discover more from The Wall Street Examiner

Subscribe now to keep reading and get access to the full archive.

Continue reading