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Economist Jeffrey Sachs Says NO to TPP and TAFTA Trade Deals

09/15/2014 01:46 pm ET | Updated Nov 15, 2014

The subject was the two major trade agreements that elites in both U.S. political parties are negotiating with the corporate elites in other countries: the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA) (also known as TTIP).

The event was a September 10 Capitol Hill forum organized by Representatives Rosa DeLauro and George Miller, leaders of the growing number of lawmakers concerned that badly-conceived corporate trade deals can undermine economic opportunity here and around the globe. They heard from of a number of experts and economists, including former economic adviser to Vice President Joe Biden, Jared Bernstein, and AFL-CIO trade economist (and deputy chief of staff) Thea Lee.

But the big draw was economist Jeffrey Sachs, the Columbia University economist and Professor of Sustainable Development who also directs the Earth Institute. Sachs is a world-renowned professor of economics, leader in sustainable development, senior United Nations adviser, bestselling author, and syndicated columnist whose monthly newspaper columns appear in more than 100 countries.

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Below you will find both a video and transcript of the Sachs and Bernstein presentations at this important public event. (Thanks to Public Citizen's Global Trade Watch.) But the key points of the Sachs presentation merit summary:

Without touching on the unpopular Fast-Track mechanism necessary to pass these two treaties, Sachs laid out five reasons why, on the substance, they should not be passed or ratified:

1. They are not trade treaties, but agreements aimed at protecting investors.

2. They ignore great challenges of sustainable development: the environment and growing inequality.

3. Their investor-state dispute settlement clauses give absolutely unjustified and dangerous powers to investors vis-à-vis the state.

4. The entire process is not transparent, and this secrecy alone in reason enough to reject the two treaties.

5. Finally, he warned that the Obama administration has not presented one analysis of the cost and benefits with regard to jobs, different industries, income distribution, economic growth and trade.

Both political parties are pushing the TPP and the TAFTA trade deals as magic bullets that, they claim, will revive economic growth and job creation. When I asked him at the end of his presentation whether either treaty would have any positive impact on U.S. growth, Sachs replied with an important and very personal statement:

On general principles, I would say, that these treaties will continue to underpin and amplify the kind of globalization process that is underway right now. I'm not against all aspects of the globalization, I have to say, I do believe, by the way, in foreign direct investment, international production systems, cross-border investment and so forth. But I am completely against the kind of arrangement we have now. In fact it's my great disappointment because I helped to bring globalization, through my own efforts and advisory work over the years, and I always envisioned that when we moved to a global system, we would move to a humane, decent global system that would recognize losers as well as winners, that would maintain standards of redistribution, that would focus on the poor, that would address market failures like environmental crises and financial crises. But our general mode of globalization has been to ignore all of the downsides and to plow ahead on emphasizing investor rights. And this is not surprising, because we're a lobby-led government structure, and so you see what you get when you put the pharmaceutical industry or the financial sector or the other sectors as heads of the negotiations. You get narrow interests and you don't face the broader challenge. So while I can't give a number on the trade deficit, I would say that the kind of globalization that we have right now, which in some ways expands the pie, but does so at high costs to the poor, to many poor, to rising inequality, to more frequent financial crises, and to a growing environmental catastrophe. Nothing that I know of these two treaties would do anything but continue us along that course, perhaps accelerated. These are not 21st century treaties that start out with our goals; these are 20th century treaties continuing to build the flawed globalization that we have underway.

International Trade Forum on Free Trade Agreements

Hosted by Congresswoman Rosa DeLauro & Congressman George Miller
September 10, 2014

Remarks from Keynote Speaker Professor Jeffrey Sachs

Congresswoman, thank you so much, and thank you for holding this forum. It is extremely timely and indeed very important. The United States is engaged, of course, in two major negotiations on trade and investment -- both the TPP and the TTIP, the Transatlantic Trade and Investment Partnership. These are extraordinarily important.

I wish we knew more about them. They're all so secret. There are leaks, there are snippets, there are people here who are engaged in some of the negotiations, but the public is not engaged. So a lot of what we say is a bit speculative.

The fact that the public is not engaged means that we should worry because we do know that when things are managed in secret, as these negotiations have been, it's the organized and powerful interests that by far dominate the proceedings. These are largely industry- and lobby-driven activities. They are not yet in any way proved to be in the interest of American people, and this is a matter of significant concern.

This is called an international trade forum, but we should be clear that it's an international trade and investment forum. Because perhaps at least as much as trade, it is the opening of the world in the last thirty years to financial flows and foreign direct investment that have reshaped the world economy.

And these two treaties are primarily investment treaties even more than trade treaties. Although trade is an issue, the regulations and procedures and standards governing international investment are also very much at stake and in many ways extremely worrisome.

Let me start with a very general economic proposition, and that is that international trade and investment can be a force for mutual good of all parties in fact. But a second proposition that's sometimes forgotten in the rah-rah of free trade rhetoric is that simply open trade or open investment by itself has no guarantee of meeting the criterion of raising wellbeing broadly, much less across the board.

The first thing that one learns in the first week of trade class is that trade has effects both on the size of economies, but also on the income distribution. There can be winners as well as losers.

And in general, in trade class you learn by the second week that in order to have a widespread improvement from trade, there has to be some kind of redistribution that goes along with the trade policy to compensate losers in the process of also enjoying the benefits. We live in a society however, that not only does not have such redistribution, but redistribution goes in the opposite direction in the last thirty years. The redistribution is mostly from the poor or middle class to the rich, rather than the other way around. And there's nothing in these trade agreements, trade and investment agreements, that are being negotiated, that even address the issues of redistribution.

The second thing that one learns in trade theory is that, in a world of many so-called market failures, externalities, spill-overs across the borders, and these come in many shapes and forms - they come in financial crises; they come in the form of environmental crises; they can come in the form of health crises - trade by itself does not necessarily improve the situation if these spill-overs or external effects are also not being addressed.

And therefore when President Obama talks about TPP and TTIP being 21st century trade agreements, the starting point should be that the phenomena of globalization more generally, the extent of financial crises, the growing environmental catastrophe worldwide of climate change and loss of biodiversity, the crises of international disease (such as we now have with Ebola in West Africa) need to be not only considered as footnotes. And they're not even that in any way. They need to be in the forefront of our international economic relations.

In other words, trade and investment treaties need to work for solutions in those areas and certainly not to exacerbate these crises. I would say from all that we know, and unfortunately I can't tell you that I know the latest script of either of these treaties. I do not, I have not read a copy of the 29 chapters of TPP. I do not know what's on the negotiating table. But from what I do know, we have a lot of reason to worry. All the considerations that make international trade and investment potentially beneficial are not being joined by the kinds of policy measures that are needed to ensure that they are in fact beneficial.

So I don't want to come here in the guise of anti-trade or anti-investment, I want to speak in a position of what I think is responsibility to core goals: to core standards of fairness, to environmental sustainability, to narrowing income inequalities that have reached historic highs in our country, and that will be exacerbated by many of the things that are proposed by at least some of the actors right now.

And in that sense I can't support either of these negotiations with what I see now. I think that they would distract us from the more important global issues. I don't think they rise close to the standard of being 21st century trade and investment agreements, not even close. They are very much 20th century agreements which were already out of date by the time they were negotiated. This is a NAFTA treaty writ large, or this is the same negotiation that we've had in many other cases. Our country has not taken up the leadership on income distribution, inequality, environmental degradation at a global scale, the global health crises adequately and so on. So let me make a few observations and then recommendations.

First, let's keep in mind in our own rhetoric, that these proposed agreements are mostly investor protection agreements, rather than trade agreements. There are trade elements in them, but this is mostly about investor protection: investor protection of property rights of investors, of prerogatives of investors, of IP of investors, of the regulatory environment of investors, and so forth.

Recognizing that, we have some reasons to support some of these issues, but a lot of reasons for worry, because it's not true that everything that is in the investor's interest is in the worker's interest. Its' not true that everything that's in the investor's interest is in the broad interest of the American people or the people in host countries where the American investment may be going, or in the same way, investment that could be coming into this country. So we're talking about mainly investment rules. And trade, which is already quite liberalized in the straightforward trade manner, doesn't change all that much from what we know of these treaties. These are basically not trade agreements. They are investment agreements.

Second point is that I see no evidence that these proposed arrangements focus on the great challenges of sustainable development, which I believe to be the core challenges of our time. By sustainable development I mean the triple challenge of economic improvement, social inclusion, and environmental sustainability. These treaties do not focus on the challenges of poverty. They do not focus on the challenges of inequality of income and its sharp rise in the last generation and its continuing rise even in recent years.

Nor do they focus on the issues of the environment, except perhaps in a negative way, I would say. There is reportedly to be an environmental standard here, but I worry more that investor prerogatives will be given preference over environmental needs, and there's very little to really give us confidence that environmental issues are at the forefront. If they were, I'm sure that most of the supporters of these agreements on the Republican side would be against them for all the wrong reasons. But the fact that they're so enthusiastic is because there's very little protection indeed for the environmental issues.

A third point, which has become notorious in these agreements, which I think is notorious correctly, is the whole issue of investor-state dispute settlement. And, to my mind, it is quite alarming that the administration seems until this day to be pushing something which more and more observers, participants, legal scholars view as out of control

So, as I'm sure that most or all of you know, there is an investor-state dispute settlement mechanism proposed in both TPP and TTIP. And the problem with this is that it creates an extra-legal venue for arbitration that has proven in many investment treaties in recent years to be highly deleterious for basic government regulatory processes and especially around issues of health, safety, environment, and other issues. The idea is essentially that this new mechanism -- rather, the mechanism proposed here which is already part of many bilateral treaties and some multilateral investment treaties -- is giving more and more power to investors to challenge general government regulatory actions. Not breach of specific investment contracts, but general regulatory and legislative actions on the claim that those general regulatory or legislative actions are against the interests of the investors and somehow therefore violate the implicit standards or guarantees that these investors have vis-à-vis the host countries.

In other words, standards of general applicability against smoking or for environmental protection, or for taxation of natural resources and so forth are now coming under challenge in these investor-state dispute arbitration panels and forcing governments -- the host governments -- to back down or rescind or, in the face of a lost arbitration, to cancel laws of general applicability, and therefore to lose the sovereign right to pursue national interest at the face of investor interest. Well you can imagine why America's most powerful multi-national companies would like such an arrangement. And this is the sense in which these treaties really are investor treaties first, and trade treaties a distant second.

This investor-state dispute clause has been widely attacked. The German government has spoken out strongly, with strong reservations about it. Legal scholars across the United States more and more are expressing alarm at how these clauses have gotten out of hand, given absolutely unjustified and dangerous powers to investors vis-à-vis the state.

Yet as far as I know, and since I'm not an insider to this, I don't know for sure, but as far as I know the United States government continues to press this clause today.

I regard that alone as reason to oppose both of these treaties.

If this remains in place, it is absolutely in the wrong direction. And, these clauses have proven to be increasingly dangerous and I've seen publicly no response to this at all.

Fourth, as the Congresswoman rightly stressed, this entire process is not transparent, and this is why TPA should absolutely never be accepted in this context. But I think in the end it's why both treaties or both partnership agreements are likely to go down as well. Because, the idea that the administration's just going to present a completed document to the public and then basically say even if there isn't TPA formally, well take it or leave it, we can't really negotiate with this, is in the end, I believe, going to be politically toxic for all the understandable reasons.

I don't understand how something of such vast significance for billions of people could even presume to be treated in this manner. One could imagine that negotiations over very specific tariff rates or very specific numerical clauses in some of these chapters could be held privately.

But the idea that the main text around issues as broad as investor protection, dispute settlement, taxation, financial flows, intellectual property, would be done secretly, is shocking actually to me. If it were purely an issue of quantification of a specific tariff for a six-digit SITC code sector, it's understandable perhaps that it would take... that one would not have the numbers published day-by-day.

But we're talking about the basic rules of the international economy for the three major regions of the world. There is no reason in the world I can see for this text not to be public, not to be publicly vetted, and not to be updated over time. And the fact that it isn't is a huge tactical mistake in my opinion of the administration anyway, but makes it untenable for us to get support for this process.

Finally, there is as far as I can see, not one single analysis by the administration. And of course, none in detail by anybody else. Because we don't know about the costs and benefits and implications of these proposed agreements. What would they mean? What would the implications be for jobs, sectors, income distribution, growth, trade. Not that economics is up to the task of giving precise answers to that. But still, before launching into such a potentially large and disruptive set of arrangements, one does an analysis of what it means, and I don't see any evidence, I don't even see the case that the administration's making, except on general principles, which I don't find compelling for the reasons I've explained about what the consequences would be.

So, how could we actually perceive without some sense of quantification and analysis of the basic implications? I think the answer is we could not proceed in that way.

So, my recommendation is that there should be, proposed by the members of Congress, a statement of principles that are a baseline for going ahead on this and I would include the following:

First, that the interim draft should be posted. And further drafts should be available for public comment. This is a basic standard of functional good governance.

Second, that the administration is committed to providing a detailed, quantified analysis of the implications of these two treaties, and one that will be made available sufficiently ahead of time for commentary and for additional analyses by other interested parties.

Third, that trade and investment agreements of the 21st century identify the primacy of the goals. The goals are not processes. The goals are not to strengthen investor rights. The goals should be goals of job creation in the signatory countries, good living standards for workers, environmental protection, including facing the major challenges of climate change, loss of biodiversity - and assistance and distributive policies to help those who would be losers in what otherwise is potentially a winning hand for all of the countries involved. Those are basic standards, it seems to me, that need to be acknowledged, recognized and put forward. And then the actual agreement can be tested against those standards. Does this agreement actually fulfill those needs?

Fourth, I would say, should be a clear statement about the primacy of every country's sovereign right and responsibility to pursue sustainable development over specific clauses of trade and investment that might be agreed. Just so there's no misunderstanding: these agreements must not stand in the way of effectively addressing climate change, for example, which is the largest environmental issue that humanity has ever faced. And yet it's quite conceivable that there would be barriers to effective regulation on climate change as a result of the TTIP and the TPP. And unless there's a clear statement about the need for sovereign governments to have responsibility and for trade and investment rules not to impede on taking basic measures for public health, for the environment, and for the general public welfare then I would say that it takes huge risks.

Fifth, and in that same regard, either the investor-state dispute settlement provision is dropped altogether. Or it is dramatically limited in scope and application, in line with many recommendations that have been made by the legal community: by exhaustion clauses on state law, as some German government officials propose, and so on. That proposed new provision should be scrutinized carefully by the legal community, by the practitioner community. But in general, I believe that the investor-state dispute settlement clause should be dropped from these agreements.

And sixth, I would also urge that these treaties be analyzed from the point of view of international taxation. We have an utter crisis of corporate irresponsibility and loopholes that we are seeing play out day-by-day. Tax inversions with all of the incredible manipulations of our leading companies, Apple and Google and Starbucks and others are marquee names who have figured out how to use the international legal structure to avoid paying taxes that are rightly due.

I believe that these two new treaties, the partnership proposals, could further undermine international taxation and I would put a special look on that because this is a crisis and it's gutting our capacity as a country to function and to address the needs that I have been emphasizing.

So those are my suggestions, and I thank you very much.

Questions:

Sam Cho, Legislative Fellow with Congressman Ami Bera: As you mentioned several times in your speech, these agreements are really investment agreements. This means essentially freer mobility of capital will result. If you were a legislator, what safeguards would you look for in the actual agreement that would essentially hedge us from potential financial crises stemming from the capital account deficit?

Sachs: There are two main kinds of financial flows. One is foreign direct investment which is generally long term, more stable and aimed at operations overseas. The other is portfolio investment, which is much more volatile, and really the source of a lot of the financial crises in the last 25 years. Most of our serious financial crises, like 2008 or Asia 1997, are sudden dramatic liquidity crises, which come from panics. Lehman Brothers induced the 2008 panic; the baht devaluation in 1997 induced the Asian panic and as soon as those panics break out, then the interbank lines of credit dry up, short term liquidity dries up and economies are pushed into an extremely deep crisis. International capital flows are especially vulnerable; they dry up very. very quickly. That's why from September 14, 2008 until around September 18, 2008, in one week the entire world economy was brought into the Wall Street Crisis. It was the most dramatic global scale financial crisis we have ever seen and well, certainly, the fastest because even the Great Depression rolled out over the course of two years with the bank failures, whereas this dried up international liquidity in one week. I'm quite sure this is not being addressed in this treaty making because there's just very weak governance about these issues in general and the economics profession is not so good on these issues because mainstream macroeconomics isn't about this and there's a lot to say, but the idea that we just push forward liberalization of cross-border finance without due regard for the safeguards needed for liquidity crises would be adding fuel to this fire. And so there are many questions about how long-term foreign direct investment should be handled. That goes to questions of income distribution, labor standards, environment standards, and so forth, the things I talked about. The short-term portfolio flow, to the extent that that is pushed in these treaties, for example, general clauses that capital markets should liberalize, I don't know what's in these clauses, but if that were the nature of these clauses, it would add danger and fragility to the world markets rather than stability. To get stability, one would need a rather thorough -- which we are not going to get through this administration or in this context -- a rather thorough structure bulwark to be able to both prevent and face these liquidity crises. But after 2008 we did not make any deep forms on international financial liquidity management, I would say, only very ad hoc measures, and they won't be part of this treaty. It's too complicated. So this treaty may be neutral on this subject, possibly negative, just opening up more without the safety net underneath it, but it will not be positive and constructive on this.

Brandon Mendoza, office of Congresswoman Susan Davis: Given the stance that you want the most amount of nimbleness in regards to responding to financial crises, liquidity crises, would you advise against including currency measures in the trade agreement?

Sachs: I am not a great fan of the currency manipulation measures myself, just because I know from 35 years of work in international finance, that one country's currency manipulation is another country's monetary policy and vice-versa. And the standards of what this means are, in my view, not so easily defined. Some of my best friends in Congress view otherwise, so I don't want to push the point too hard, except to say that I do not believe that these are the places for currency issues to be resolved. I think that a preformed international monetary system and using the institutions of the Bretton Woods, especially the IMF framework, is the place where those issues should be taken up. There was good reason in 1944 to vest the exchange rate issues there, things have gotten a lot more complicated since 1944. Then it was just trying to think about how to re-open an international monetary system; now are a managing, and not managing well, a global financial market with trillions of dollars in transactions per day. And so in this sense, we're not up to it yet. That's why we have these very deep, periodic crises -- and do not believe they are under control. I have been working in those fields for more than three decades and we have not made institutional progress on this in a deep way. I personally wouldn't put it in here. It's just not the place to handle this, in my opinion, and we need a multilateral framework to handle exchange rate issues. When it's purely done in a bilateral way, it's easy for the two to say, "You're unfair, you're too weak, you're too weak, you're manipulating, you're manipulating" and I think in the end, it's actually not so fruitful. In general, it's disappointing that after the 2008 crisis we didn't have a major clear sense of overall of these issues. They're not easy, but they were beyond the reach.

Roger Hickey, Campaign for America's Future: Can you tell us what you think these two treaties' impact would be on the ballooning U.S. trade deficit?

Sachs: No, because I haven't seen the treaties and I really feel that it's very hard to give a quantitation on that. On general principles, I would say, that these treaties will continue to underpin the kind of globalization process that is underway right now. So they will not change direction, but amplify the current direction. I'm not against all aspects of the globalization, I have to say, I do believe, by the way, in foreign direct investment, international production systems, cross-border investment and so forth. And I see it also as a way to for poorer countries to develop. But I am completely against the kind of arrangement we have now. In fact it's my great disappointment because I helped to bring globalization, through my own efforts and advisory work over the years, and I always envisioned that when we moved to a global system, we would move to a humane, decent global system that would recognize losers as well as winners, that would maintain standards of redistribution, that would focus on the poor, that would address market failures like environmental crises and financial crises. But our general mode of globalization has been to ignore all of the downsides and to plow ahead on emphasizing investor rights. And this is not surprising, because we're a lobby-led government structure, and so you see what you get when you put the pharmaceutical industry or the financial sector or the other sectors as heads of the negotiations. You get narrow interests and you don't face the broader challenge. So while I can't give a number on the trade deficit, I would say that the kind of globalization that we have right now, which in some ways expands the pie, but does so at high costs to the poor, to many poor, to rising inequality, to more frequent financial crises, and to a growing environmental catastrophe. Nothing that I know of these two treaties would do anything but continue us along that course, perhaps accelerated. These are not 21st century treaties that start out with our goals; these are 20th century treaties continuing to build the flawed globalization that we have underway.

Remarks from Jared Bernstein
Senior Fellow, Center on Budget and Policy Priorities

I'm going to be brief. But I'm going to stand here so I can see people who I can't see if I am sitting there. Thank you very much Congresswoman for inviting me and for holding the forum.

In five to seven minutes, I want to amplify some of the points that Jeff made so trenchantly and effectively - although I have a strong disagreement with one point on the currency chapter, which I will emphasize. So I want to talk the role of trade agreements and trade deficits, something Roger Hickey [from Campaign for American Future] asked about a second ago; the relationship between these issues and income inequality; and then say a word about fiscal concerns because I think there is a linkage there that's really important. And, we are in a building where fiscal concern looms large.

I strongly view TPP without a currency chapter one that clearly disallows currency management or manipulation as an export subsidy as a non-tariff barrier. Such a trade agreement should always be opposed and particularly strongly in this case. I really try to avoid arguing with people who aren't here to argue back. And Jeff is a very capable arguer. But I think he has left. So I'll make sure to follow up with him on this myself because I want to give him the opportunity to argue with me about this. But in fact, what I kind of heard him saying is that it wouldn't work. And frankly what we are doing now isn't working. I believe it would help, but if it didn't, we'd be no worse off.

So the idea of if there is going to be a TPP an idea of not taking that opportunity to have a chapter that prohibits, creates mechanisms by which currency management is disallowed would be, not only a missed opportunity, but would be a completely unacceptable path in my view.

Why? What's so darn important about that? Well, I'm going to get to that. But I want to talk to the issue of income inequality which is something that Congresswoman DeLauro asked me to speak to. Given time, I won't show you -- this is a rare presentation for me because I'm not using slides -- I won't show you the slide that I throw up here which basically shows the income distribution, how low, high and middle incomes have done over the past 60-70 years. And if you look between the mid-40s and, say, the mid-70s you actually have incomes growing together -- low, middle, high -- they just about doubled in every case. Family incomes doubled at the bottom. Believe it or not, yes, that used to happen. It doubled in the middle. And doubled at the top. So growing together, as it were, in those years. Since then, of course, they've really separated a great deal.

Now what does this have to do with trade? Well two things: first of all, the balance of trade in the period when incomes were growing together was about zero on average. That is, the trade that was in the shared GDP was about zero, maybe slightly positive over that initial period. Over that latter period, say, the last 30-40 years, the trade deficit has been, on average, about -3% of GDP. And most recently trade deficits were in the 4-5 hundred billion range last year, so we are talking about 3-4% of GDP. I am by no means saying that that is the only variable. It is a common economic mistake, to say here's something that happened and here's another variable that happened at the same time; however, they are intimately linked. And the way that they are linked is very clearly through the absence of tight job markets or full employment.

Remember, this is basic Econ 101. GDP is consumption plus investment plus government spending plus net exports. Now if net exports are negative, that's a drag on GDP growth. That means less economic activity. And when we run these trade deficits, essentially, we are exporting jobs abroad. Now that doesn't mean that you can't have a trade deficit of some magnitude year in and year out. It happens.

But the idea that we've run substantial deficits since 1976 is a suggestion that something is deeply imbalanced in global accounts.

So the relationship, just to be clear, between trade and inequality runs through slower growth, weaker labor markets, the absence of full employment.

And the relationship between that and trade agreements or TPP has to do with some of our trading partners who manage the dollar. This is not a secret. In fact I like to call it, management versus manipulation, because manipulation sounds so secretive and like some sort of evil plot.

If you plot the Chinese currency against the U.S. dollar, it goes straight for a while and then it wiggles about, which you can do on the FRED database [Federal Reserve Economic Database] in about 30 seconds. Let's call that management, because it's not really a secret.

The idea of dealing with that in a trade deal like the TPP is one that I think many opponents of the agreement support. Most recently I read a paper, written just a few months ago by Fred Bergsten at PIIE [Peterson Institute for International Economics] and certainly no rabid opponent of tradeand I thought it was an excellent piece of work, which was precisely about the need for a currency chapter and even articulating how that chapter would work.

So, I can say more about these relationships during the Q&A, including some ideas as to what you might put in such a chapter to reduce this export subsidy and import tariff. But let me just say briefly, the idea that I liked the best, and I say this sometimes surprising people, is simply legislating reciprocity.

That is, if a country can buy our Treasuries, we have to be able to buy theirs. Now, you might think that, "don't we already have that? If China, if Korea goes out, if Singapore goes out and buys a bunch of Treasury bills in order to boost the value of the dollar relative to their currency to make sure that their exports to us are cheap and ours to them are more expensive. Can't we go out and do the same thing?" The answer is no. So simply having that kind of reciprocity would make a big difference.

Finally, I wanted to say a word about fiscal concerns. It's funny, when I think about this question of fiscal policy, especially in recent years when we have had a weak economy. I really think it's like that movie "Honey, I Shrunk the Kids". You know, like "Honey, I Shrunk the Wrong Deficit".

Our focus on shrinking the budget deficit, in a time of a weak, private sector economy -- that's called austerity -- has been a very serious problem and a major contributor to what has been a pretty weak recovery, relative to targeting the trade deficit. And one of the reasons that come to mind is that, in fact, I've tried to make these connections between the trade deficit and weaker growth, the absence of full employment.

When we've actually had a better fiscal outlook, in the latter 1990s, for example, one of the things that helped us get there was full employment. Now you might be saying: "but we had trade deficits then?" And the fact is we did. And we offset them with the bubble just like we offset them with the bubble in the 2000s. If you are running a trade deficit of that magnitude, you either have to offset it with a bubble, with a big budget deficit or you have to live with higher unemployment.

On the fiscal front, where the TPP really comes in -- and this is from the paper by Paul Van De Water when he wrote for the Center on Budget Priorities, where I work -- the concern there is that the TPP would restrict Medicare's ability to limit the prices it pays for, say, Part B beneficiaries by allowing drug companies to challenge some of the payment policies that now hold down the costs of drug purchases. TPP could raise health costs by expanding patent protection for both drugs and medical devices. This is all in the Van De Water paper. And the TPP could give companies an avenue to challenge policies that the U.S. is trying to pursue to actually control these costs.

Our fiscal health in the future goes directly through the kinds of cost controls that we are trying to build into the Affordable Care Act and hopefully into the stronger negotiating for lower medical prices that comes from the government as a single payer in the case as, say, Medicare or Medicaid. The TPP threatens to block that and I think we should have great fiscal concerns about those outcomes. Thank you.