Opinions For and Against TPP


1. Professor Stiglitz at Columbia University (Nobel Laureate)

During a lecture he gave in Tokyo in May 2013, Professor Stiglitz argued that the TPP is designed to benefit specific groups. He thinks the purpose of the TPP is to remove various regulations that affect businesses, even if these regulations are beneficial. These regulations have often been put in place by governments for a reason, such as regulations that protect citizens from environmental pollution.

The TPP is a reflection of the fact that these days the purpose of trade agreements is different than in previous decades. Tariffs around the world are already low, so the focus has shifted to so-called “non-tariff barriers.” The most important of these — at least for the corporate interests pushing agreements — are domestic regulations. Huge multinational corporations often complain that inconsistent regulations make international business costly. But most of the regulations, even if they are imperfect, are there for a reason: to protect workers, consumers, the economy and the environment.

What’s more, those regulations were often put in place by governments responding to the democratic demands of their citizens. The supporters of trade agreements claim that they are simply after regulatory “harmonization,” which is meant to connote an innocent plan to promote efficiency. One could, of course, get regulatory harmonization by strengthening regulations to the highest standards everywhere. But, when corporations call for harmonization, what they really seek is is a race to the bottom.

2. Dean Baker

Baker does not support the TPP. He portrays the agreement as an effort to protect wealthy corporate interests, which he says is the opposite of “free” trade. In particular, he points out that the TPP will strengthen intellectual property rights (such as patent protections), which benefits profitable companies but is harmful for poorer consumers. For example, the TPP will make it harder for countries to produce generic versions of drugs, which will give patent holders monopoly power over drug production and lead to higher prices for consumers.


3. Paul Krugman

Krugman is a professor at Princeton University and another winner of the Nobel Prize in Economics. Krugman is neither for nor against the TPP because he doesn’t think it would matter all that much. He says that: “The answer is that I’ve been having a hard time figuring out why this deal is especially important.” In his opinion, the most important barriers to trade are tariffs. These are already low so lowering them further will not have a large effect on GDP.

Also, Krugman points out that the true purpose of trade deals doesn’t seem to be tariff reduction. He looks more carefully at the non-tariff barriers, and notes that there might be bad effects from the TPP. Yet, he thinks the opponents often overstate their case.


4. Takeshi Nakano Nakano is a bureaucrat in the Ministry of Economy, Industry and Trade (METI), a former professor at Kyoto University and an author of the The Ruin of the Country by TPP published in 2011 which became a bestseller in Japan after it sold 200,000 copies.  He holds a PhD in Sociology from the University of Edinburgh. He was awarded the Nations and Nationalism Prize by the Association for the Study of Ethnicity and Nationalism in 2003.  Nakano argues that the TPP is practically a free trade agreement between the US and Japan since those countries make up most of the GDP of the participant nations. He argues that the TPP is based on a US “National Export Strategy” that is aiming to double the amount of exports within five years. US President Barack Obama said as much in his 2010 State of Union address. He also argues that the agreement serves two purposes the US: one is to increasing US exports and improve the global trade imbalance, and the other is to increase employment in the US, thus lowering the unemployment rate.

Like Stiglitz, Nakano argues that the TPP is designed to benefit only specific groups of people and that Japan as a whole will not benefit from the TPP.

Nakano notes that deflation is a severe problem that Japan suffered with for a very long time, and that the TPP actually ends up worsening Japanese deflation. If the TPP were to be concluded, cheaper goods will be imported to Japan from foreign countries. If cheaper goods are sold in Japan, domestic goods will be relatively more expensive and will be at a competitive disadvantage. This could lead to layoffs and higher unemployment since cheaper imported goods and materials will force firms to compete by lowering prices and thus lowering wage costs. In order to lower wage costs, firms are compelled to layoff employees, and if there were more unemployed people, there would increase labor supply and lead to lower real wages. Because the wages that firms would be willing to pay are lower than they used to be, consumers would become more reluctant to spend money. This would decrease consumer demand, which has traditionally been the main cause of Japanese deflation. One may wonder why Nakano  can criticise the TPP while he working for the METI which is a big supporter of the TPP. He explains that the METI is an open minded organization which accepts differences in opinion far more than people outside of the METI may imagine. So, the publication of the book did not affect him negatively inside the METI although he has heard his colleagues joke that there are some officials who were offended by his book.

Source: Takeshi Nakano, TPP Ruin of The Country. Tokyo: Shueishashinsho, 2011.

5. Pro TPP,  Heizo Takenaka

Heizo Takenaka is currently a professor in the Department of Policy Management at Keio University and a member of the Industrial Competitiveness Committee (ICC). The ICC was created by the Committee for Japan Economic Revitalisation in the Abe administration.  The objective of the ICC is to be a forum for experts to discuss how structural reform, the third of the three pillars of so-called Abenomics, can be achieved. Takenaka was Minister of Internal Affairs and Communication and Minister for Privatization of Japanese Postal Service during the Koizumi Administration. He is a proponent of TPP. He was awarded Suntory Prize for Social Sciences and Humanities in 1984. He holds PhD in Economics from Osaka University.

He served as a visiting scholar at Institute of International Economics within Harvard University.

Takenaka argues that it is important to have an international perspective when people considering the effects of the TPP. He says that Japan should not focus solely on protecting domestic agriculture. The US is increasingly aware of China’s market power and wants to create an economic framework with many countries in Pacific Rim with the aim of eventually incorporating China into this. Takenaka argues that it is natural for Japan to cooperate with the US since they are allied nations. At its core, the TPP promotes free trade and it is obvious that free trade is beneficial in the long run.

Takaaki Mitsuhashi, another economist, has argued that free trade should not be implemented during a period of deflation in Japan. But, Takenaka argues that free trade should be implemented regardless of the inflationary climate. Deflation is a problem of monetary policy, not trade policy.

6. Pro TPP (The Economist)

The Economist argues that the issues raised in the TPP are more complicated than Paul Krugman acknowledges. In fact, a lot of things that the TPP is trying to accomplish are actually pretty important.  For example, even though there aren’t as many high tariffs as there used to be, there are some remaining tariffs (such as on equipment for producing solar and wind energy) which should be eliminated to achieve other important policy goals (such as encouraging more wind and solar power). Also, non-tariff barriers are very significant. In agriculture alone, if you consider both tariffs and nontariff barriers, it is effectively as though Japan has a tariff rate of 38.8% and the US has a tariff rate of 17.0%.



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