It's Official: US International Trade Commission Predicts Negligible Economic Benefits From TPP

from the and-that's-even-before-you-start-to-factor-in-the-costs dept

Techdirt has written hundreds of stories about TPP over the years. So many of those have revealed troubling aspects of the deal that it's hard to single out the worst. But there can be no doubt that one of the most extraordinary facts is that the US and the other TPP nations were negotiating for eight years the biggest so-called trade deal in history with only the sketchiest idea about its likely benefits. Instead, politicians and supporters simply assured the public that it would all be great, honest. And yet when the rigorous econometric studies began to appear, they consistently showed that TPP would produce almost no benefits whatsoever.

Upon hearing that a planned course of action designed to bring financial gains would do nothing of the kind, most rational people in ordinary life would try something else. But not the politicians and TPP negotiators, who carried on despite these clear signs that TPP was simply not worth the effort. They either ignored these studies completely, or at most said that the only reliable predictions worth considering were the official ones, which would come from the US International Trade Commission (USITC) once TPP's text had been finalised. Last week, the USITC released its massive 792-page report (pdf). Here's a key part of the summary: The Commission used a dynamic computable general equilibrium model to determine the impact of TPP relative to a baseline projection that does not include TPP. The model estimated that TPP would have positive effects, albeit small as a percentage of the overall size of the U.S. economy. By year 15 (2032), U.S. annual real income would be $57.3 billion (0.23 percent) higher than the baseline projections, real GDP would be $42.7 billion (0.15 percent) higher, and employment would be 0.07 percent higher (128,000 full-time equivalents). Like all the figures mentioned there, that 0.15% GDP boost would be achieved in 2032, which means that on average TPP is expected to produce an extra annual GDP boost of roughly 0.01%. Public Citizen's Global Trade Watch (pdf) pulled out a few other interesting figures from the report, which: Estimates a worsening balance of trade for 16 out of 25 U.S. agriculture (p. 124), manufacturing (p.228), and services (p. 340) sectors that the ITC selected to feature. This includes vehicles, wheat, corn, autoparts, titanium products, chemicals, seafood, textiles and apparel, rice and even financial services. Autoparts would be hard hit with employment projected to decrease by 0.3 percent.



Estimates the TPP will increase the U.S. global trade deficit by $21.7 billion by 2032.



Projects even the U.S. services trade balance will worsen by 2032 as service imports of $7 billion swamp the estimated increase in exports of $4.8 billion (p. 35). Global Trade Watch also notes that the USITC's track record for predictions is not good: The actual outcomes of past trade pacts have been significantly more negative than ITC projections generated using the same methodology employed for the TPP study. This makes today’s unusually negative ITC findings on the TPP especially ominous. The economist Dean Baker from the Center for Economic Policy Research (CEPR) agrees about the USITC's past failures: The USITC also has not done well in projecting winning and losing sectors from trade agreements. A recent analysis by CEPR found no relationship between the industries that were projected to be export and import gainers and losers from the trade deal with Korea and the actual outcome. He goes on to point out an even more worrying aspect of the latest modelling: this analysis does not seem to incorporate any of the losses associated with the stronger and longer patent and copyright protection required under the TPP. Higher prices for drugs, software and other protected items are likely to impose substantial costs on the United States and other parties to the agreement. For example, the New Zealand government estimated that just one provision -- extension of copyright protection from 50 years to 70 years -- would cost the country 0.024 percent of GDP. This amount is 10 percent of the total gains projected in the USITC report. It is entirely possible that a full assessment of the cost of these provisions would show that the TPP would lead to a net reduction in income for the United States and other countries in the pact. That's a hugely important point. On the rare occasions when TPP supporters have made specific claims about the economic benefits of TPP, they have consistently failed to take into account any downsides. It's like going into a business deal only looking at the benefits, and ignoring any possible costs. Against this chorus of disapproval, it's interesting to see how TPP supporters try to spin the USITC's miserable figures. Here's what the Business Roundtable, "an association of chief executive officers of leading U.S. companies", has to say: "The release of the ITC report marks an important step in the process for considering the TPP. We look forward to reviewing the report's findings as we continue to highlight the benefits of the TPP to American businesses, farmers and workers," said Tom Linebarger, Chairman and Chief Executive Officer of Cummins Inc., and Chair of the Business Roundtable International Engagement Committee. "The TPP will remove many foreign barriers to U.S. goods and services and impose strong, enforceable rules for trade -- enabling U.S. manufacturing, services and technology companies to grow their sales to important international markets."



"The TPP sets high standards and reflects American priorities, and if the United States doesn't take the lead in shaping international trade rules, our economic competitors will," continued Linebarger. That's it: the Business Roundtable could not find a single number to quote that made TPP look like a good deal. What about the ultimate TPP cheerleader, US Trade Representative Michael Froman? What did he have to say about the report? This: "The ITC report illustrates for the American people and members of Congress the benefits TPP will deliver in their own backyards. If you are a poultry farmer in Delaware this report shows that chicken exports will increase by $174 million annually under TPP. If you are a rancher in Nebraska this report shows that beef exports will increase by $876 million annually under TPP. And if you build cars in the Midwest, this report shows that auto exports will rise $1.95 billion annually. With today's study as another important data point, our work with Congressional leaders on TPP implementation and enforcement will continue and accelerate in the days and weeks ahead." Froman decided to pretend it was all about little numbers, and to gloss over the fact that when you add up all those little numbers to find out TPP's total benefit...you still get a little number. Froman also fell back on that old favorite -- fear-mongering about China: "What cannot be quantified in this study or any other is the cost to American leadership if we fail to pass TPP and allow China to carve up the Asia-Pacific through their own trade agreement. If we allow China to beat us in defining the rules for trade it will undercut our workers and businesses and prevent us from taking badly needed steps to improve worker rights, bolster intellectual property protections, and protect the environment through TPP." In other words, yes, it's true TPP offers absolutely negligible benefits for the US but oh, look, a squirrel...

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community. Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis. While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: benefits, economics, itc, tpp