I’ve been getting a fair bit of correspondence wondering why I haven’t written about the negotiations for a Trans Pacific Partnership, which many of my correspondents and commenters regard as something both immense and sinister.

The answer is that I’ve been having a hard time figuring out why this deal is especially important.

The usual rhetoric — from supporters and opponents alike — stresses the size of the economies involved: hundreds of millions of people! 40 percent of global output! But that tells you nothing much. After all, the Iceland-China free trade agreement created a free trade zone with 1.36 billion people!!! But only 300,000 of those people live in Iceland, and nobody considers the agreement a big deal.

The big talk about TPP isn’t that silly. But my starting point for things like this is that most conventional barriers to trade — tariffs, import quotas, and so on — are already quite low, so that it’s hard to get big effects out of lowering them still further.

The deal currently being negotiated involves only 12 countries, several of which already have free trade agreements with each other. It’s roughly, though not exactly, the TPP11 scenario analyzed by Petri et al (pdf). They’re pro-TPP, and in general pro-liberalization, yet even so they can’t get big estimates of gains from that scenario — only around 0.1 percent of GDP. And that’s with a model that includes a lot of non-standard effects.

An aside: one little-known aspect of the literature on trade liberalization is that to get any kind of large effect it’s necessary to drop the assumption that markets are highly competitive and efficient, and assume instead that there are large inefficiences that will be reduced as a result of international competition. This was the case for people claiming large gains from 1992 in Europe, and it’s the case for TPP now. I’m not saying that this is wrong — the Melitz model in which inefficient firms don’t get driven out unless there’s increased external pressure is a beautiful thing. But it’s sort of dissonant with the overall pro-market feel of this stuff.

Oh, and 1992 was kind of a disappointment, wasn’t it?

As I read it, to make TPP something really important you have to (a) bring China inside, which isn’t on the table right now and (b) have major effects on foreign direct investment.To be fair, NAFTA seems to have had effect (b) — but NAFTA changed the political environment in Mexico in a way TPP probably won’t.

OK, I don’t want to be too dismissive. But so far, I haven’t seen anything to justify the hype, positive or negative.