Impact Assessment

Trans-Pacific Trade Pact Would Lift U.S. Incomes, but Not Jobs Overall, Study Says

WASHINGTON — A far-reaching trade pact binding a dozen Pacific Rim nations would increase incomes, exports and growth in the United States but is unlikely to add to overall employment, according to an independent analysis released Monday.

The Trans-Pacific PartnershipPresident Obama’s biggest economic priority of his final year in office, would not cost overall employment either, the report said, but inevitably some work, especially in manufacturing, would be lost even as export-industry jobs are created — a downside that political opponents in Congress and in both parties’ presidential races have been emphasizing for months.

The pact would liberalize trade from Canada to Chile and Australia to Japan. Other parties to the accord are Mexico, Peru, New Zealand, Singapore, Malaysia, Vietnam and Brunei.

The Obama administration quickly endorsed the analysis from the Washington-based Peterson Institute for International Economics to buttress its uphill fight for Congress’s approval of the Trans-Pacific Partnership, completed last October after years of negotiations. An earlier analysis for the World Bank likewise underscored the regional as well as global benefits of the accord, if ratified. Yet both organizations, as champions of international trade, are unlikely to sway the skeptics at a time of widespread economic uncertainty for many American workers.

“The T.P.P. is a landmark accord,” international economists Peter A. Petri of the Brandeis International Business School and Michael G. Plummer of Johns Hopkins University wrote for the institute. They noted that the so-called megaregional pact, binding Pacific-area nations that account for 36 percent of global trade and nearly a quarter of all exports, went further to phase out tariffs among the trading partners than expected, and included unprecedented trade rules governing labor and the environment, goods, services, global investment and digital commerce.

In the United States, the analysis said, the pact would increase real incomes by $131 billion annually, or 0.5 percent of gross domestic product, which is the measure of the country’s total economic output. Exports would increase $357 billion, or 9.1 percent above previous projections by 2030, when the deal is supposed to be fully in force.

The report suggested that the displacement of workers in industries most vulnerable to competition would be relatively small: The resulting movement of workers between jobs and industries, or “churn” in economists’ terms, would increase less than 0.1 percent.

But the authors recommended intensified efforts to help the workers inevitably displaced by free trade, calling that “a compelling ethical and political objective.”

“Most workers who lose jobs do find alternative employment, but workers in specific locations, industries, or with skill shortages may experience serious transition costs including lasting wage cuts and unemployment,” they wrote. “Since the costs to the individuals displaced can be quite high, compensating them for these costs, using a fraction of the total U.S. gains, is a compelling ethical and political objective, and policies to achieve equitable adjustment are likely to be affordable.”

While manufacturing jobs would continue to grow, the trade deal would reduce the sector’s growth rate by about one-fifth, the analysts said. That would be offset, they added, by higher employment in service and “primary goods” industries such as agriculture and forestry that rely on exports, they added, noting — much like Mr. Obama does — that export-intensive jobs pay about 18 percent more than other jobs on average.

The United States, as the largest and richest nation of the Pacific group, would benefit most in absolute terms, but “the agreement will generate substantial gains for Japan, Malaysia, and Vietnam as well, and solid benefits for other members,” it said.

The report also warned about — and quantified — the economic costs if the accord is not approved. Given the potential benefits, it said, “delaying the launch of the T.P.P. by even one year would represent a $77 billion permanent loss, or opportunity cost, to the U.S. economy as well as create other risks.”

House Speaker Paul D. Ryan of Wisconsin is a trade proponent but he has deferred to his party colleagues. More threatening to congressional action this year, Senator Mitch McConnell of Kentucky, the majority leader, has suggested delaying debate until after the November elections. Among presidential candidates, Democrats Hillary Clinton and Bernie Sanders have opposed the agreement, as have Republicans Donald J. Trump and Ted Cruz.

Mr. Obama’s trade representative, Michael B. Froman, who will join other trade ministers in New Zealand on Feb. 4 for a formal signing ceremony, said in a statement that the analysis is evidence that the trade deal “will raise wages for American workers, grow our economy, and help farmers and businesses export more ‘Made in America’ products.”

He added, “It also shows that sitting on the sideline and delaying T.P.P., even for a short time, will cost us dearly.”

 

Source: NY Times

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