An expansive Asia-Pacific trade agreement will boost the paychecks of U.S. workers, increase exports and grow the economy, according to a new economic report.
Implementation of the Trans-Pacific Partnership (TPP) deal will raise U.S. annual incomes by $131 billion and annual exports by $357 billion — a 9.1 percent increase — in 2030, with similar gains to follow, according to the report, released Monday by Peter Petri and Michael Plummer with the Peterson Institute for International Economics.
Delaying enactment, which the report assumes happens in 2017 based on the established two-year timeline, would deliver a damaging blow to the U.S. economy, however. If the TPP is slowed by even a year, the United States will see an estimated one-time loss of $77 billion, or about a $600 loss on average for every household, the report said.
Froman said the analysis “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,” he said.
The United States would see compounding losses and be put at a disadvantage in global trade negotiations if the 12-nation deal gets pushed back, the report said. There also is concern that unforeseen political challenges or “competing trade projects may also erode decisions in partner countries, further increasing the costs from delaying TPP ratification.”
President Obama is urging Congress to pass the agreement this year but has struggled to sell the deal to his own party.
Many congressional Democrats argue that the deal hurts U.S. workers and lowers their wages.
But the Peterson report found that even though the TPP will cause jobs to shift into faster-growing businesses, the deal will have no effect on overall unemployment.
“While the TPP is not likely to affect overall employment in the United States, it will involve adjustment costs as U.S. workers and capital move from less to more productive firms and industries,” the report said.
Estimates are that 53,700 U.S. jobs will be affected each year during implementation of the TPP.
In 2014, 55.5 million American workers changed jobs in that manner “so the transition effects of the TPP would represent only less than 0.1 percent increase in labor market churn in a typical year,” according to the report.
But the report notes that “some workers may face difficult transitions” and that the costs to them could be high, so U.S. policymakers would need to step in to make sure programs are available to help them during the process.
Overall, the report concludes that the TPP appears to have met its two most important negotiating objectives: the deal will substantially benefit the 12 trading partners and it sets out an ambitious set of global trade rules that have “raced far ahead of the WTO rulebook, including services, investment, telecommunications, the digital economy and other critical industries.”
“If the TPP is ratified and implemented smoothly, these rules will renew progress, now stalled for more than two decades, in strengthening the world trading system,” the report said.
While the United States will be the TPP’s largest beneficiary “in absolute terms,” “the agreement will generate substantial gains for Japan, Malaysia and Vietnam as well, and solid benefits for other members.”
Read the full report here.
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