by IAN GUSTAFSON
The Trans-Pacific Partnership, agreed to on October 5, 2015 by the twelve participating countries, is likely to prove disastrous for the Latin American states—Chile, Mexico, and Perú—that have joined the pact up to now. Multinational economic interests based in the United States have exerted extraordinary influence over the accord, inserting language that will arguably serve to damage Latin American interests.
Though the TPP has often been presented as a disinterested effort to stimulate basic economic growth and development in the Pacific Rim, the economic principles that underlay the TPP may instead serve to advance the interests of the world’s leading corporations. U.S. President Barack Obama promised in a statement that the TPP would slash over 18,000 foreign taxes that the U.S. faces for its exports.[1] Despite being heralded as a path to prosperity for developing countries, eliminating protectionist measures in countries like Chile, Perú, and Mexico could prove to be very harmful.
The great nineteenth century German economist Friedrich List argued that developed countries calling for expanded free trade in less developed countries is hypocritical as well as misleading. As List put it, “it is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him.”[2]
Britain and the United States, which historically have been unflagging proponents of free trade for developing countries, both adopted free trade policies only after they were technologically advanced enough not to need protectionist policies.[3] Britain adopted free trade in the mid-nineteenth century, while the United States eliminated its highly protectionist policies only in the early twentieth century.
The unprecedented productivity gap that exists today between developed and developing countries makes high tariffs and other support for infant industries even more necessary to provide protection and foster the conditions under which today’s advanced countries developed, according to Cambridge economist Ha-Joon Chang.[4]
The United States’ promotion of free trade in the Trans-Pacific Partnership ignores its own history and could set a troubling course for the Latin American states involved, which will now have an even more difficult time competing in global markets. The TPP, whose twelve members represent some 40 percent of the global economy, pits two of the world’s three biggest economies (the U.S. and Japan) against much smaller states in a productivity battle.[5] It will not be a fair fight, but neither is it guaranteed that any adjustation of the free trade zone will necessarily bring economic justice to some of the poorest countries in the world.
Even the most ardent defenders of free trade ideology acknowledge that there are certain conditions under which protectionism is the better policy, conditions that are present in the Latin American countries taking part in the TPP. Economists of international trade agree that improving a country’s terms of trade—the ratio of the price of goods it exports to the price of goods it imports—is unequivocally beneficial.[6] Tariffs improve a country’s terms of trade, because a tariff will lower demand for the imported good and increase demand for the now relatively less-expensive domestically produced product. Latin American states generally export lower-priced goods and thus have quite a bit to gain from improving terms of trade; the TPP hampers the potential for these gains by eliminating tariffs on goods from more developed states.
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