July 1, 2016 10:24AM

Cato Trade Scholars Endorse the Trans‐​Pacific Partnership

On June 30, U.S. Trade Representative Michael Froman, former U.S. Trade Representative Clayton Yeutter, and other trade policy experts joined Cato's trade scholars in the Hayek Auditorium for an event titled: "Should Free Traders Support the Trans-Pacific Partnership?" The main purpose of the event was to reveal the findings of a forthcoming paper by my trade center colleagues and me, in which we provide a chapter-by-chapter assessment of the 30-chapter, 5,500-page trade deal and reach the conclusion that, yes, free traders should support the TPP.

In our assessment, we make the distinction between free trade and free trade agreements:

For free traders, the ideal is free trade: No border barriers; no domestic regulations or policies that have protectionist intent or effects or that otherwise bestow relative privileges on domestic companies or their products; no superfluous rules that are merely tangentially related to trade, but violations of which can be invoked to erect new impediments to trade. Measured against those standards, the TPP – with its 5,500 pages of explicit rules and exemptions – would not pass the free trade test. The TPP is not free trade. Like all other U.S. trade agreements, the TPP is a managed trade agreement, with provisions that both liberalize and restrict trade and investment. Some free traders would reject the TPP out of hand for its failure to eliminate all restrictions.

While such comprehensive trade liberalization would be ideal, expecting the TPP to deliver real free trade is unrealistic. That outcome is simply politically unattainable. Holding out for the ideal would make the perfect the enemy of the good, when the good is very likely better than the status quo. If the TPP will deliver more trade liberalization than restriction, and realistic alternatives to more comprehensive liberalization are unavailable, why not support the TPP?

Here is an abstract of the forthcoming paper, which includes our chapter-by-chapter scores, various averages of those scores, an explanation of methodology, and summaries of our scoring rationale for each graded chapter.  But here are some bullets:

  • We graded 22 of 30 chapters (8 did not lend themselves to this kind of evaluation) on a scale of 0 (protectionist) to 10 (free trade) -- with 5 meaning the chapter would have a neutral impact.  
  • Chapters earning scores above 5 are considered "net liberalizing," and those graded below 5 are considered "net restrictive."
  • 15 of 22 chapters received scores above 5.
  • 5 of 22 chapters received scores below 5.
  • 2 of 22 chapters received neutral scores of 5.
  • The highest score assigned was 8 and it was assigned to 5 chapters.
  • The lowest score assigned was 3 and it was assigned to 3 chapters.
  • The median and mode scores were both 6.
  • The straight average score was 5.82 (but this measure assigns every chapter the same weight, which doesn't make sense to do).
  • The average for "market access" oriented chapters was 6.18.
  • The average for "rules and governance" oriented chapter was 5.45.
  • The average for "First Tier" chapters (those that have to most bearing on the quality of the agreement) was 6.63.
  • The average for "Second Tier" chapters was 5.36.
  • The weighted average (where twice as much weight is assigned to First Tier chapters) was 6.03

Obviously, not everything in a free trade agreement is going to be to the liking of free traders. Some issues simply don't belong in trade agreements.  But in our view every little bit of liberalization helps, and as long at it doesn't come at a cost that exceeds the benefits, it is worthy of support. The bottom line is that, in our assessment, the TPP would be net liberalizing -- it would, on par, increase our economic freedoms.  I hope it will be ratified and implemented as soon as possible.