There’s a huge trade treaty being debated right now. Its advocates admit there are problems with the bill – because they strengthen problematic copyright laws – but these supporters say that the economic gains outweigh those costs. For example, Tyler Cowen writes that the estimated economic gains from the TPP are 1.9 trillion. He is wrong – and he appears to either be misreading the study he links, or deliberately obfuscating what the study finds.
The study he links to starts with this paragraph, with my emphasis added:
The Trans-Pacific Partnership (TPP) agreement … could yield annual global income gains of $295 billion (including $78 billion for the United States) and offers a pathway to free trade in the Asia-Pacific with potential gains of $1.9 trillion.”
So, according to the study he links, the actual benefits from this treaty are being estimated at $295 billion in annual income. The $1.9 trillion figure he touts is not from TPP, but from a predicted future where TPP leads to totally free trade. He can’t claim that as the benefits from TPP. To get the real benefit of TPP, use the estimate the study itself provides! That number is $295 billion – except Cowen admits that the past models have been inaccurate, so he cuts the “predicted benefit of TPP” (which is really a predicted benefit of totally free trade) in half, to 1 trillion, and says this is enough to outweigh concerns by digital rights organizations that the rules in the TPP undermine property rights. Applying the same halving as Cowen, to account for the flaky past of economic predictions in this area, we arrive at an annual benefit of $150 billion in annual income.
Now, sure, that’s a lot of money. It’s also on the order of the market cap of companies like Uber, Airbnb, Xiaomi, and – all of which did not exist a decade ago, and all of which are heavily driven by technology that this treaty locks down. The IP restrictions – which many supporters of the TPP admit are problematic, but claim are necessary to make this treaty happen – are far more destructive than they realize. Remember, these are people who admit that their predictive record hasn’t been that great, and they are talking about restricting free trade in the fastest growing sector of the world economy, in order to bring less annual benefit than that provided by a handful of companies in that fast growing sector – which depends upon openness to operate.
Tyler Cowen, you say
“If those costs and outrages associated with TPP are so bad, it ought to be possible to do a study which makes the trillion in benefits go away”
The very study you are linking to does that! The “trillions in benefits” are attributed to an imagined future in which we have free trade in Asia. We won’t get there with these draconian restrictions on copyright. They are an assault on the basic right to own property, and copyright will play an even large role in the future when computers are embedded everywhere.
You have admitted that the past predictions of these models are faulty, and I’m not challenging that actual free trade would bring trillions in benefits. Loosening restrictions on goods produced in the last century, while raising barriers to entry and providing handouts to the biggest players in information goods – reducing free trade in the fastest growing sector of the economy – that is not how we get there.
You want free trade in horse whips, at the small cost of a law limiting machines to be serviced only by the companies that make them. Please change your mind.