Will the US Go Backwards?

United States and TPPA

We at this blog are Free Traders.  Our position on this issue is grounded in private property rights, which in turn are grounded in the divine command not to steal.  If a government prevents a Mom and Pop business from selling to customers in Timbucktoo should they wish to do so it is indirectly stealing from the couple.  (Of course there are legitimate exceptions--but those turn around matters which are the legitimate concern of the State, namely national defence from armed attack.  But in Mom and Pop's case, this is would not be at issue.)

There is also a fundamental economic rationality to Free Trade.  New Zealand once had a state subsidised automotive industry.  It had to be subsidised, because there was no way in the galaxy New Zealand could make cars as efficiently and cheaply as the United States, then subsequently, Japan.  So eventually we retreated to a subsidised vehicle assembly industry.  Eventually, the whole thing was scrapped, despite apoplectic unions.

Once vehicles in New Zealand were uber-expensive and few and far between.  Our roads were populated by ancient, ailing, vastly overpriced Morris Minors and Hillmans.  As soon as all the protection and anti-free trade barriers on vehicles were removed, the wealth of New Zealanders took a huge step upwards.

Thus, in principle we believe the Trans-Pacific Partnership Agreement is a jolly good thing.  We hope it gets passed.  Of critical moment is whether the United States Senate will approve and sign the deal between now and the inauguration of the soon-to-be-elected next President.  Both candidates have said (on the campaign trail) that they oppose the signing of the deal.  (We take this with a huge grain of salt, since neither candidate has a stellar reputation when it comes to "my word is my bond".)

Nevertheless, TPPA may fail to pass in the US Senate.  Is it the end?  Not at all.  TPPA will go ahead without the United States (which joined late in the process in any event).  Those nations still involved will  end up not with a Rolls Royce, but a BMW.  Worth having in any event.

Ironically, the nation which will suffer the most from its failure to sign will be the United States.  Inefficiencies and higher costs will harden the arteries of that nation.  Business and trade will end up flowing elsewhere.  As an editorial in the NZ Herald put it:

The TPP has not come from nothing. It grew out of the World Trade Organisation’s stalled Doha round, which itself resulted from collapse of communism and almost universal realisation that competitive markets are the source of prosperity. If the US turns inward and protectionist under its next President, trading countries will look elsewhere for global progress.

They certainly will.  It's a flat and flattening world when it comes to the global economy these days.  Those who act like King Canute will be bypassed.  There are plenty of opportunities elsewhere in the globe.  New Zealand, being one of the most open economies in the world, will benefit either way.