[A2k] FT: Trade deal would barely nudge US growth, says report

Thiru Balasubramaniam thiru at keionline.org
Wed May 18 23:51:19 PDT 2016


http://www.ft.com/intl/cms/s/0/46e8448c-1d46-11e6-b286-cddde55ca122.html

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May 19, 2016 12:14 am

Trade deal would barely nudge US growth, says report

Shawn Donnan in Washington

An ambitious Pacific Rim trade deal being touted by US President Barack
Obama would add just 0.15 per cent annually to US economic output after 15
years and contribute to a loss of politically sensitive manufacturing jobs,
according to an official study of its economic impact that is likely to
fuel criticism of the pact.

Mr Obama has put the Trans-Pacific Partnership with Japan and 10 other
countries at the centre of his second-term economic agenda and argued that
it is needed for the US to get ahead of China in writing the rules of the
road for global commerce.

But his administration is facing an uphill battle to secure approval from
Congress for the deal before he leaves office in January. With all
remaining combatants in the battle to succeed Mr Obama expressing
scepticism about the TPP, the broad view is that the next president is
unlikely to rush to make it a reality if it does not pass through Congress
by then.

Mike Froman, Mr Obama’s trade tsar, defended what he called the
“conservative” gains projected in an exhaustive 792-page review of the TPP
by economists from the US International Trade Commission, mandated by
Congress.

“Every major reputable study has said that the TPP will benefit the
American economy,” he told reporters after the report was released on
Wednesday.

The benefits, he said, were even greater when areas not considered by the
new report were added in, including the impact of intellectual property
rules and of guaranteeing free data flows in the TPP countries, which
together make up about 40 per cent of the global economy. “All of those
benefits go above the gains outlined in today’s study,” he said.

Mr Froman’s view was backed by the US Chamber of Commerce, the country’s
biggest business group, which said in a statement that the report “at first
glance provides substantive support for the Chamber’s view that the TPP is
in our national economic interest”.

But the new study is likely to add fuel to one of the main criticisms of
the TPP by opponents on both the left and right of politics. They say it
would only slowly offer modest economic benefits while opening up the US
economy to further competition from low-wage economies like Vietnam.
Sectors such as manufacturing that are struggling to compete with rivals in
places like China could be hurt.

Opponents also argue that the International Trade Commission has in the
past overestimated the economic benefits of trade deals.

Ilana Solomon, a trade analyst for the Sierra Club, an environmental group
opposed to the TPP, said the report “offers further evidence that the [TPP]
would be a disaster for working families”. “ITC reports have a record of
projecting economic benefits of trade agreements that have failed to
materialise, so it is noteworthy that even the overly positive ITC
acknowledges that the TPP would have real costs and estimates economic
benefits that are slim.”

The new ITC study estimated the TPP would add $42.7bn, or 0.15 per cent,
annually to US real GDP over and above baseline estimates for US GDP by
2032, the 15th year after it comes into effect. It would also add the
equivalent of 128,000 full-time jobs while real income would be $57.3bn, or
0.23 per cent, higher.

Projected rise in exports for the US manufacturing, natural resource and
energy industries

The biggest beneficiaries of the deal would be the US agriculture industry
with farm exports likely to increase by $7.2bn, or 2.6 per cent, by 2032.

The TPP would lead to a $15.2bn, or 0.9 per cent, increase in exports by
the manufacturing, natural resource and energy industries. But it would
also lead to a small number of job losses, ranging from 0.3 to 1.3 per
cent, in sectors like chemicals, textiles and auto parts, the ITC
economists found, as imports were forecast to grow more than exports in
those sectors.

The projected benefits of the TPP amount to less than half those predicted
earlier this year in a report by economists at the Peterson Institute for
International Economics. They found that the TPP would add $131bn to real
incomes, or 0.5 per cent of GDP, by 2030.

The TPP includes 12 countries: Australia, Brunei, Canada, Chile, Japan,
Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US.



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