TPP: Boon or Bust?

The Trans-Pacific Partnership (TPP), signed by member states on February 4th, is a free trade pact among 12 nations that border the Pacific Ocean. The agreement contains a number of measures that proponents believe will strengthen the global economic system, including tariff and trade barrier reductions, increased international protection of intellectual property (IP), and provisions aimed at enhancing worldwide labor protections.

In the United States, election year politics have brought the TPP to the forefront of primary discourse in both the Republican and Democratic parties, and various think tanks have weighed in on its effects on the U.S. economy. Various surveys show that despite the arguments of those in favor of the deal, Americans seem to have a mixed view of the agreement.

But what about non-Americans?

A poll released last year,before the deal’s final text was revealed, by the Pew Research Organization indicates that the citizens of most of the other member states of the TPP have a more positive view of the agreement. Most notably, citizens of developing nations are far more supportive of the deal.

In Vietnam, for instance, support stood at 89% as compared to 49% in the U.S. However, in Australia, support reached only 52% despite a promotional effort by the Australian government. Ultimately, in every country surveyed, support for the TPP outweighed opposition. From an economic standpoint, is this optimism warranted?

The answers varies heavily depending on perspectives. Researchers at Tufts University released a paper earlier this year which concluded that the TPP would have an overall negative impact on the world economy, even for those countries not involved in the agreement. The models used in the paper, which the authors describe as “more realistic”, predict that every member nation would experience job losses and that GDP growth would be negligible or negative.

The deal would also be detrimental for those left out of the TPP. Job losses could number in the millions and GDP growth would average about -.5% for developed and developing countries.

These researchers are not alone in their assessment. Paul Krugman, a liberal economist, argues that the TPP as a whole will increase corporate control over intellectual property and do little to remove trade barriers, since most world tariffs have already been eliminated.

Thus, there would be little to gain and possibly a lot to lose from the agreement. Even reports with positive views of the TPP conclude that in developed countries, the deal would not create major growth; Australia, for instance, would only see a .7% annual boost by the year 2030.

These conclusions, however, have been called into question. One pair of researchers from the Peterson Institute for International Economics concluded that annual world income would actually increase by $492 billion. Granted, this increase will probably be distributed unevenly across various countries, with developed countries seeing the bulk of the added income.

In addition,  TPP member states are all expected to see economic growth and increased exports. Peter Lawrence of the Peterson Institute has defended the Institute’s researchers’ conclusions. He noted that the Tufts study was heavily limited in its ability to make predictions about a number of economic factors. He also accused it of being heavily biased due to its authors’ assumptions, who excluded positive effects, such as increased exports and economic specialization.

Krugman’s conclusions were also directly contested by columnists from the Center for Economic and Policy Research. They argue that Krugman fails to consider large tariffs that still exist, such as a 39% Japanese tariff on imported beef. More importantly, they note that he fails to consider “non-tariff barriers”, regulatory hurdles that impede free trade. These barriers are equivalent to huge taxes on imported goods, with the highest (in Mexico) reaching the equivalent of a 134% tariff. The TPP includes measures to reduce these barriers, which the columnists argue would lead to greater economic growth.

Finally, a World Bank report has also analyzed the possible effects of the TPP on the economies of member and non-member states. The report concluded that while benefits to developed nations may be small, developing nations could see large gains. Malaysia, for example, is projected to experience a 10% growth in GDP by 2030.

So in the end, do the citizens of member countries have good reasons to be optimistic? It is impossible to be certain unless the agreement is approved by each member nation. However, the predictions of economists and researchers provide evidence in favor of these positive expectations. Although developed nations may not see the major gains advertised by their governments, they will still benefit economically from the TPP. Developing nations, meanwhile, could stand to gain massive boosts in economic growth and access to world markets. Thus, despite the claims of its denigrators, the TPP may, in fact, be good for the world as a whole.