TPP Expected to Boost US Economy
Approved by Congress in October 2015, the Trans-Pacific Partnership (TPP) is expected to increase incomes, exports, and trade growth in the United States. The pact joins twelve Pacific Rim countries and promises to liberalize trade in the megaregion, which already accounts for 36 percent of international trade. Proponents claim it will significantly boost the U.S. economy, and while it may not add jobs, it also will not decrease employment.
International economists at the Washington-based Peterson Institute for International Economics contributed to an analysis of the TPP. The report was quickly endorsed by the Obama administration. It estimates that the pact would increase real incomes in the United States by $131 billion annually. That amounts to approximately 0.5 percent of the country’s gross domestic product (GDP), a measure of total economic output. Exports would increase $357 billion by 2030, a full 9.1 percent above previous projections.
The TPP plans to phase out tariffs among its partners and includes unprecedented rules for governing labor and the environment, goods, services, global investment, and digital commerce. Signatories include Canada, Chile, Australia, and Japan, as well as Mexico, Peru, New Zealand, Singapore, Malaysia, Vietnam, and Brunei.
Although noted as President Obama’s biggest economic priority for the 2016, the pact has met opposition from both Republicans and some Democrats. Four of the major contenders in the 2016 presidential election – Democrats Hilary Clinton and Bernie Sanders, and Republicans Ted Cruz and Donald Trump – have denounced the partnership. For some, the great economic boost is not worth the cost of certain manufacturing jobs. While some workers in industries vulnerable to global competition will be displaced, the Peterson Institute report expects a relatively small movement between workers and industries – likely less than a 0.1 percent increase. The authors note that “workers in specific locations, industries, or with skill shortages may experience serious transition costs,” but compensation for displaced individuals could be extracted from “a fraction of the total U.S. gains.”
Manufacturing jobs will see an overall increase globally, although jobs in the U.S. will shift instead toward the service sector. The report expects the lost manufacturing jobs will be offset by higher employment in service and “primary goods” industries that rely on exports, like agriculture and forestry. These jobs, they add, typically pay around 18 percent more than other jobs on average.
Without the TPP, however, the report estimates a deep economic opportunity cost. “Delaying the launch of the T.P.P. by even one year,” it states, “would represent a $77 billion permanent loss, or opportunity cost, to the U.S. economy as well as create other risks.”
For free trade zones (FTZs), like those in Georgia, effects of the TPP will be felt in some industries, but not all. As trade barriers decrease, exports should increase for the U.S.,a boon for FTZs. As the richest country of the signatories, America will see the greatest benefit in absolute terms.
Mr. Obama’s trade representative, Michael B. Froman, will represent the United States at the formal signing ceremony on February 4.