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The Fraught Politics of the TPP

TOKYO – This month, 12 countries on both sides of the Pacific finalized the historic Trans-Pacific Partnership trade agreement. The scope of the TPP is vast. If ratified and implemented, it will have a monumental impact on trade and capital flows along the Pacific Rim. Indeed, it will contribute to the ongoing transformation of the international order. Unfortunately, whether this will happen remains uncertain.

The economics of trade and finance that form the TPP’s foundations are rather simple, and have been known since the British political economist David Ricardo described them in the nineteenth century. By enabling countries to make the most of their comparative advantages, the liberalization of trade and investment provides net economic benefits, although it may hurt particular groups that previously benefitted from tariff protections.

But the politics of trade liberalization – that is, the way in which countries proceed to accept free trade – is much more complex, largely because of those particular groups it hurts. For them, the overall economic benefits of trade liberalization matter little, if their own narrow interests are being undercut. Even if these groups are relatively small, the discipline and unity with which they fight trade liberalization can amplify their political influence considerably – especially if a powerful political figure takes up their cause.

That is what is now happening in the United States. Former Secretary of State Hillary Clinton undoubtedly understands the economics of the TPP, which she once called the “gold standard” in trade agreements. But now that she is on the presidential campaign trail, she has changed her tune. The reason is apparent: she has judged that she cannot afford to lose the support of American trade unions such as the United Automobile Workers, whose members fear a reduction in tariffs on car and trucks.