WASHINGTON — Proponents of the Trans-Pacific Partnership deal said projected modest increases in exports, real income and gross domestic product should help advance the 12-nation trade deal, while opponents said forecasts of manufacturing declines and a widened trade deficit should keep it from moving in Congress.
Some trade experts predicted that broader forces, such as the antitrade rhetoric in the presidential campaign and the leading candidates’ opposition to TPP could stop any momentum the pact might have gained from the positive projections in the ITC study.
Trade ministers signed TPP in early February. It includes the U.S., Australia, Japan, Mexico, Canada, Vietnam, Malaysia, Peru, Singapore, Chile, Brunei and New Zealand and aims to remove barriers to trade to encompass nearly 40 percent of the world’s GDP if enacted.
But the deal faces opposition from key Democrats in Congress, concerns from GOP leaders, all of the remaining presidential contenders, labor and environmental groups and growing numbers of the public. On the positive side, the deal has support from major business trade groups, including the U.S. Chamber of Commerce and National Association of Manufacturers.
Both sides in the debate over the controversial TPP trade deal found things to elevate their arguments for or against it.
In the overall economy, the ITC report found that U.S. annual real income would increase 0.23 percent, or $57.3 billion, by 2032 compared to a baseline projection that does not include TPP. Real GDP would be $42.7 billion, or 0.15 percent, higher than baseline projections and employment would be 0.07 percent, or about 128,000 full-time equivalents, higher than the baseline, the report said.
U.S. exports would increase 1 percent, or $27.2 billion, while imports would gain 1.1 percent, or $48.9 billion, relative to baseline projections. On the negative side, output in manufacturing, natural resources and energy would be 1 percent or $10.8 billion lower with the TPP agreement than it would be compared with baseline estimates without the agreement, the report found.
“I think it’s positive overall,” said David Spooner, a partner at Barnes & Thornburg LLP, who was the chief textile and apparel negotiator at the U.S. Trade Representative’s office from 2002 to 2006. “Even if it will add to the trade deficit, it will be only modestly and the report doesn’t include important things like [the benefits of] IP protection and increases in market access for the services sector, which is so important for the future of the U.S. economy.”
Spooner added that the ITC predicted it would help rebalance trade to other countries from China, adding, “those will both move the ball politically even if it was not groundbreaking.”
Stephen Lamar, executive vice president at the American Apparel & Footwear Association, said the report will help the Obama administration gain approval for TPP.
“You’ve got the main U.S. government agency that was tasked with studying the economic impact say it’s going to be a net positive,” Lamar said. “I think that can do nothing but help the efforts to get this approved. What we’ve been saying all along is we didn’t really think Congress would be able consider it until this report came out.…This is another report that adds to that knowledge base positively and…I think it’s going to help give momentum to Congressional consideration this year.”
Asked if the projected declines in textile output and employment, which the ITC pegged at 0.4 percent for both in 2032, would hurt the argument for TPP with textile state lawmakers, a spokesman for the National Council of Textile Organizations, said lawmakers look at a “whole host” of things on trade votes.
“They’ve got to weigh a lot of other things out there and you can’t really predict the volatility of the market,” the spokesman said. “You don’t know how fast Vietnam’s labor rates are going to rise or whether energy prices will spike.”
The report did find positives for the textile sector, including a projected increase in exports of 1.3 percent, or $257 million, by 2032 against the baseline. He said NCTO stands by its endorsement of TPP.
“It is very difficult to predict the future,” the spokesman said. “NCTO made the decision to endorse TPP because we believe the textile chapter [of TPP] is fair and balanced. This report is not going to change our position [and endorsement]. There was an awful lot of analysis that went into the decision we made to endorse this deal and from that standpoint, that is more important than any report being issued.”
Julia Hughes, president at the U.S. Fashion Industry Association, said the ITC study’s finding of a positive impact is an important message.
“It’s always good for any administration not to overpromise what is going to happen with a trade agreement,” Hughes said. “We are obviously seeing strong growth, particularly in U.S. exports [in the ITC report] and that is what the administration has been selling with TPP. Yesterday was a really important day [with the ITC report] on the road toward the approval of TPP. We have a report in front of us looking at details and talking about the impact on various sectors of the economy. Now we can move forward and focus on the substantive discussion about TPP.”
While proponents found the positives in the report that they said would help propel TPP this year, opponents said the negative findings would stop it from advancing.
“In spite of all the hype from the President, his senior officials and so-called industry leaders, the upside of the TPP is extremely limited,” said Kevin L. Kearns, president of the U.S. Business and Industry Council. “The minuscule gains the ITC is predicting for the TPP call into serious question why the United States Congress should even consider this massive undertaking, let alone follow the Obama administration’s lead and try to ram it through in a lame duck session.”
Celeste Drake, a trade policy specialist at the AFL-CIO, said the union is typically skeptical about ITC reports being “over-optimistic,” noting that that the agency’s projected declines in output in several industries and a widening trade deficit makes TPP all that more “dangerous for our economy and could be disastrous for families.”
She said the projections of manufacturing output declines were particularly concerning.
“I think Congress is going to be really disappointed,” Drake said. “The big selling point recently has been that everyone will win and there will be a few scattered people who lose their jobs. We never agreed with that, but now [lawmakers] look at this report and will have to think ‘this does not look to my voters like this will be a few scattered jobs.’”
She said she believes the ITC report make the prospects of TPP passage in Congress “even worse.”
“There has always been a question about whether there was going to be enough momentum and interest to bring it up during a lame duck and it has been a big issue on the campaign trail, and both parties have criticized TPP,” Drake said. “This is just more ammunition. This certainly puts another nail in the coffin.”
Academics and trade experts said the Obama administration will have to manage the concerns in the public about trade and navigate through opposition on the campaign trail in order for TPP to have a chance.
“In my mind, the economic case for TPP remains clear and the foreign policy imperative is even stronger. That’s on the substance,” said Phillip Swagel, a professor of international economic policy at the University of Maryland. “The prospects for the treaty depend, however, on President Obama or his successor allaying public concerns over trade and globalization that go well beyond the confines of this agreement.”
Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, said the ITC report “won’t move the needle on TPP and doesn’t change where TPP was before.”
“Here’s where it was before — [Donald] Trump looks certain to be nominated by the GOP and he has made a pitch of a [protectionist] trade policy with high tariffs on designated countries,” Hufbauer said. “Under that environment, it will be hard for [House Speaker] Paul Ryan, who is obviously a pro-trade person,” to move TPP, he said.
“If in the debate between Trump and [Hillary] Clinton, Trump outflanks Clinton to the left on trade…it will make it even harder for Ryan to keep Republican votes for the deal,” he added.