WASHINGTON — A report released Monday by the Peterson Institute for International Economics surmised the U.S. would be the biggest beneficiary of the 12-nation Trans-Pacific Partnership trade deal in “absolute terms,” lifting income and exports significantly by 2030.
A World Bank report released earlier this month concluded that Vietnam would be the biggest winner in percentage gains in gross domestic product, while the U.S. would benefit the least based on percentage gains.
Trade ministers reached a deal in October on TPP — which includes the U.S., Australia, Japan, Mexico, Canada, Vietnam, Malaysia, Peru, Singapore, Chile, Brunei and New Zealand. The governments must all sign the deal, which has reportedly been set for Feb. 4, and then send it to their legislatures for approval.
According to the new report, authored by Peter Petri and Michael Plummer of Peterson, the TPP will increase U.S. annual income by $131 billion, or 0.5 percent of GDP, and exports by $357 billion, or 9.1 percent of exports, by 2030, over baseline projections in 2015. (The target date for near full implementation of the trade deal is 2030.)
The Obama administration has gone on a full court press to garner support in Congress for TPP, arguing it will lower some 18,000 tariffs on U.S. exports and boost the economy and job growth in the U.S.
“This independent analysis shows that TPP will raise wages for American workers, grow our economy, and help farmers and businesses export more ‘Made in America’ products,” said U.S. Trade Representative Michael Froman. “It offers clear evidence that TPP is an answer to challenges on how middle-class workers will compete at home and how our nation’s economy will compete abroad. Importantly, it also shows that sitting on the sideline and delaying TPP, even for a short time, will cost us dearly.”
The Peterson researchers warned in the report that delaying the implementation of TPP even by a year would represent a $77 billion permanent loss, or what they called an “opportunity cost” to the U.S. economy, and also create other risks.
“Postponing implementation will give up gains that compound over time and defer or foreclose new opportunities for the United States in international negotiations,” the report said. “Unexpected political challenges or competing trade projects may also erode decisions in partner countries, further increasing the costs from delaying TPP ratification,” the report said.
While the U.S. is expected to gain the most in real income growth from TPP, other partners in the pact are expected to see significant gains, the report found.
Japan’s real income would increase by an estimated $125 billion by 2030, while Malaysia’s would increase by $52 billion and Vietnam would increase by $41 billion, according to the report.
“Japan benefits from improved market access throughout the TPP region, including early liberalization of auto imports in markets other than the United States, and from domestic reforms that reduce distortions in its protected service and investment sectors,” the report said. “Percentage gains are especially large for Vietnam and Malaysia, where the agreement should also stimulate domestic reforms and provide access to protected foreign markets. Other significant percentage gains are projected for the smaller economies of Brunei, Peru, Singapore and New Zealand.”
Some non-member TPP countries could see an adverse impact in lost share of overall trade, the report noted.
“Losses are tangible for China, India, and Thailand, which compete with TPP members for TPP markets, and for [South] Korea, because the TPP will erode that country’s advantage in U.S. markets under KORUS [the U.S.-Korea free trade agreement],” the report said. “But except for Thailand, these losses are small compared with GDPs. Some nonmembers, including the European Union and Hong Kong, experience net gains, in part because of the assumption that TPP provisions liberalize some trade with nonmembers.”
In the area of U.S. employment, the report found that TPP is “not likely” to affect overall employment but will lead to “adjustments” in employment as workers and capital move from less productive firms to more productive firms and industries, the report said.
An estimated 53,700 jobs will be affected as shifts occur, with jobs eliminated in “less productive import-competing firms and added in exporting and other expanding firms” in each year during implementation of TPP, the report said.
“This kind of movement between jobs and industries is what economists refer to as ‘churn,’ and most kinds of productivity growth cannot occur without it taking place,” the report said. “For perspective, 55.5 million American workers changed jobs in this way in 2014 — so the transition effects of the TPP would represent only less than 0.1 percent increase in labor market churn in a typical year.”
The researchers noted that displaced workers often find alternative jobs, although workers in specific locations and industries or with skill shortages may experience “serious transition costs,” including wage cuts and unemployment.