The Cable

Beauty Is In the Eye of the Beholder for Obama’s Asian Trade Pact

Opponents and proponents of TPP will find data they like in a U.S. report on the deal.

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The United States International Trade Commission, or ITC, has released its assessment of the economic benefits of the Trans Pacific Partnership, a massive trade deal between the United States and 11 Pacific nations covering nearly 40 percent of world GDP. It’s proving to be a Rorschach Test on international trade: what you see depends on your perspective.

For those backing the deal — most notably the White House and free-traders — the analysis shows that the trade deal would be beneficial to the U.S. economy. For those opposed to the deal — Republican and Democratic presidential front-runners Donald Trump and Hillary Clinton, environmental groups, and a large number of lawmakers from both parties — it’s more evidence that the deal isn’t necessary and should be scrapped.

Here’s what the ITC, an independent, federal agency, found: U.S. economic gains from TPP would be modest. For all the sturm und drang over the world-changing punch of the pact, the centerpiece of the administration’s pivot to Asia, its actual impact on the U.S. economy would be risibly small.

If ratified by Congress, it would increase U.S. GDP by $42.7 billion, or just 0.15 percent, by 2032, the year the pact would be fully implemented. It would add 128,000 jobs, and increase U.S. income by $57.3 billion, or 0.23 percent. To put that number in perspective, In April, the U.S. economy added 160,000 jobs.

ITC found that the deal would eliminate or lower tariffs between the U.S. and Japan, Canada, Mexico, Australia, Vietnam, Malaysia and five other countries around the Pacific. This does not include China, which is not a signatory on the pact.

The biggest winners would be U.S. food and agriculture, which would see lower barriers to U.S. exports to Japan and other nations. The U.S. service sector would also get a $42.3 billion boost by 2032.

ITC found that U.S. exports to TPP partners in 2032 would be $57.2 billion higher with the deal in place. Imports from these countries would increase by $47.5 billion.

The commission also determined the global U.S. trade deficit in 2032 would be $21.7 billion higher with TPP than without it. As of March, the U.S. annual trade deficit is  $40.4 billion. The U.S. trade balance with TPP signatories would improve over 15 years, but the overall U.S. trade deficit is unlikely to change much due to the agreement, the ITC found.

Some sectors would take a slight hit. Output in manufacturing, natural resources, and energy would fall by $10.8 billion, or 0.1 percent, with the deal, due to new, foreign competitors entering the American marketplace.  

There’s something for everyone in these numbers. Supporters of the deal can point to modest job growth and a very small increase — 0.15 percent — in GDP. They can celebrate lower tariffs, and gains in U.S. agriculture.

Those opposed to TPP can point to U.S. manufacturing losses, ever so slight, as evidence that the deal is a bad one. This is precisely what Trump and Democratic contender Sen. Bernie Sanders have been arguing. And the trade deficit would go up; Trump said he would eliminate the imbalance.

On Thursday, stakeholders began to make their respective cases for and against the deal, using ITC’s data as their justification.

“It is part of a growing body of evidence that shows that TPP will benefit our economy at home and allow the U.S. to help set the rules of the road for trade in the Asia Pacific,” U.S. Trade Representative Michael Froman said during a conference call Thursday afternoon.

Lee Branstetter, nonresident senior fellow at the Peterson Institute for International Economics, told Foreign Policy that even the slightest benefit is a plus to the U.S. economy. His organization, which backs the deal, puts income benefits from the pact at $131 billion, much higher than the ITC estimate of $57.3 billion. Scrapping a deal that’s already been negotiated would mean leaving money, even if it’s a small sum, on the table.

“There’s a saying in economics, ‘There is no such thing as a free lunch,” he said. TPP “is as close as you can get to a free lunch.”

Those opposed to the deal, including many lawmakers, seized on the report to make the case against it. Sen. Al Franken (D-Minn.), tweeted this after the data was made public:

House Ways and Means Committee ranking member Sander Levin, a Democrat from Michigan said that his “initial review of the ITC report only confirms my position that I cannot support TPP as negotiated.”

Ilana Solomon, director of the Sierra Club’s Responsible Trade Program, said in a statement Wednesday the report “offers further evidence that the Trans-Pacific Partnership would be a disaster for working families, communities and our climate.”

In the end, the fate of TPP during the Obama administration lies in the hands of the House and Senate leadership. So far, they’ve shown no willingness to move it forward.

“My sense is right now it’s going to be very, very difficult to get [TPP] passed unless it’s done in the lame duck session” after next year’s presidential election, Frank Friedman, chief operating officer and chief financial officer of Deloitte LLP, told Foreign Policy.

Photo credit: MARTIN BERNETTI/Getty Images

David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis

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