Economist Brad Delong blogged a few days ago that it drives him crazy when people analyze trade deals like the Trans-Pacific Partnership in terms of simple trade theory.
[A]nalyzing modern trade agreements as if they were primarily Ricardian deals is likely to lead one substantially astray. One has to think, and think deeply, creatively, and subtly, about all the potential general equilibrium effects. One has to work hard to bound their magnitude.
Thus arguments saying that a Ricardian analysis tells us that the Trans-Pacific Partnership (TPP) is a good thing tend to undermine my confidence in it. Those making such arguments seem to me either to have not done their homework, or to not particularly care whether the arguments they set forth for it are actually the true arguments for it.
This is a fair point to make for the TPP, though as Tyler Cowen notes there are some of those benefits as well, and many of the economic critiques of TPP also seem to be wildly overstated or (as DeLong notes) just flat-out wrong.
The security effects of free-trade agreements can be significant — indeed, one could argue that this was the most important thing about the North American Free Trade Agreement, the deal that has caused DeLong such existential angst. It’s worth remembering that prior to NAFTA, Mexico had a … let’s say “fraught” relationship with the United States. NAFTA made it clear to U.S. policymakers that Mexico was now a key partner and merited treatment as such. Which is why the United States helped Mexico in the mid-1990s and during the 2008 financial crisis. And the lock-in effects of NAFTA also helped Mexico transition from a one-party-dominated state to a true multiparty democracy.
But the Trans-Pacific Partnership is not NAFTA. President Obama and his army of op-ed allies have made the case for TPP as a means to advance U.S. interests while preventing China from writing the rules of the game in the Pacific Rim. And generally speaking, TPP is an intrinsic part of Obama’s rebalancing strategy. One obvious bonus is that it would send a reassurance signal for its East Asian signatories, including Malaysia, Vietnam and Japan.
But the presence of China also poses a potential problem for the security case for TPP. While free trade agreements tend to reduce security tensions between members, they can exacerbate tensions between signatories and non-signatories if they reduce exports from non-signatory countries. If TPP makes countries like Japan and Vietnam more secure but increases the likelihood of a Sino-American conflict, that does not seem to be a net winner of a deal.
Indeed, this was Chas Freeman’s argument in Politico a few days ago:
[Ashton Carter] and other administration spokespeople now justify the proposed agreement as a means to keep China from having a say in how business is done in Asia. But China has been and will remain an inseparable part of Asia’s economic success story.
In trying to divide Asia, TPP is not just sending an unfriendly message to China. It is getting the United States into a fight it is most unlikely to be able to win.
So maybe the security implications call for some skepticism about the benefits of TPP.
Which is why Keith Bradsher’s New York Times story about the evolution of Chinese thinking about TPP is a welcome read. Bradsher’s report suggests that Freeman’s assertion is off-base:
As the deal has come to the forefront again, the Chinese government has changed its view.
Some of China’s leading trade policy intellectuals now say that they have few concerns about the agreement. They also say that the pact could even help China, by making it easier for Beijing to pursue its own regional agreements without facing criticism that it should instead pursue ambitious global free trade pacts that would require significantly opening its markets to Western competition.
“We don’t think T.P.P. is a challenge to China — we will watch and study,” said He Weiwen, a former Commerce Ministry official who is now the co-director of the China-United States-European Union Study Center in Beijing.
“We are more or less neutral because we have our own agenda, pushing forward Asean plus six and the Silk Road,” he said, referring to two of China’s own regional initiatives. He added that China would make sure its regional pacts complied with global free trade rules on such deals.
This is a huge change from just a few years ago. Oh, and by the way, this is also a hidden security benefit of China’s own regional initiatives — they make Beijing less paranoid about U.S. initiatives like TPP. If Bradsher’s reportage is correct, then TPP would send a useful reassurance signal to U.S. allies in the region without triggering a worsening of Sino-American tensions.
So on the whole, the security narrative about the Trans-Pacific Partnership is akin to the economic narrative about TPP: The effects are more complicated than either International Trade 101 or International Security 101 would suggest. That said, the effects are still, on the whole, a net positive.