Is the TPP Good for America?

WASHINGTON, DC – The Trans-Pacific Partnership, the far-reaching trade and investment agreement that the United States has negotiated with 11 other countries, including Canada, Mexico, Japan, Malaysia, Australia, and Vietnam, is now up for debate. In order to enter into effect, the US Congress must approve the TPP, which is not likely until enough members make up their minds about the merits of the case. So, what does the TPP mean for US voters now and in the future?

For starters, while the TPP would most likely generate some overall gain for the US economy, measured in terms of GDP and people’s incomes, that gain is very small and comes mostly from providing greater opportunities for US exports – by reducing tariff and non-tariff barriers in other countries. Some imports would become cheaper as well, benefiting American consumers.

In analytical work favored by President Barack Obama’s administration, the projections suggest that approval of the TPP could cause the total size of the US economy to be 0.5% higher in 2030 than it would be otherwise. Note that this estimate is of the TPP’s effect on the level of aggregate income after 15 years, not of its impact on the annual growth rate.

Given that this assessment is advanced by TPP supporters, it seems reasonable to suppose that it represents the higher end of what they regard as plausible. (I am a senior fellow at the Peterson Institute for International Economics, under whose auspices the study was published, but I had no part in its preparation.) Unfortunately, the models used in this field do not generate error bands or confidence intervals. In fact, given the complexity of the trade agreement – including the emphasis on hard-to-quantify non-tariff barriers – these estimates are likely to be highly imprecise.