ITC's TPP Report Projects Modest Economic Gain, Increased Trade Deficit
The Trans-Pacific Partnership would decrease the costs of moving goods within the agreement’s covered region, and bring modest gains to the U.S. economy over its first 15 years, but the deal would also exacerbate the U.S.’ existing trade deficit, according to the summary (here) of a Congressionally mandated 792-page report on TPP released May 18 by the International Trade Commission (here).
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Assuming TPP enters into force by the end of 2017, the report predicts that real U.S. GDP would rise by $42.7 billion (0.15 percent) over baseline projections, while overall exports would increase by $27.2 billion (1 percent) and $48.9 billion (1.1 percent), respectively, by 2032, according to the summary. Furthermore, TPP over 15 years would boost agricultural output by $10 billion (0.5 percent), but would precipitate a $10.8 billion (0.1 percent) loss in U.S. manufacturing, natural resource, and energy output, the summary says.
In addition to lowering trading costs, TPP would “generally establish” rules that strengthen and harmonize regulations, and increase certainty, the summary says. The ITC engaged with several stakeholders who consider e-commerce provisions protecting cross-border data flows and ban data localization requirements as crucial to streamlining global operations of large and small U.S. companies “in all sectors,” the summary says. Industry has emphasized intellectual property rights, customs and trade facilitation, investment, technical barriers to trade, sanitary and phytosanitary standards, and state-owned enterprises as especially important parts of the agreement, the summary says.
Release of the report drew mixed reviews from Congress, industry, and union members. Trade-focused GOP Congressional leaders expressed enthusiasm to review the report, and while they largely highlighted the report’s positive findings, they said the agreement still isn’t perfect. House Ways and Means Chairman Kevin Brady, R-Texas, indicated in a statement that the Obama Administration must continue working with Congress to address members’ concerns before TPP is brought up for an implementation vote.
“[I]t’s the substance of TPP that will drive the timing and process in Congress, not the other way around,” Brady said in a statement (here). “We cannot move forward until the Administration has addressed Member concerns on key aspects of the agreement, including by developing implementation plans on key obligations in the agreement to ensure that our trading partners will comply and TPP will deliver significant benefits across our country.” Senate Finance Chairman Orrin Hatch, R-Utah, said the agreement should be studied closely to determine how TPP will impact the U.S. economy. “[T]his is a once-in-a-lifetime opportunity, and we have to make sure that we get it right,” he said in a statement (here). Ways and Means Trade Subcommittee Chairman Dave Reichert, R-Wash., said in a statement (here) the report underscores the economic growth and high-income jobs that the deal can produce for the U.S.
Trade unions and and several Congressional Democrats drew negative conclusions from the report, while TPP-supporting industry groups said ITC’s release marks an important step toward U.S. ratification. U.S. Trade Representative Michael Froman in a statement (here) used anecdotes of middle-class farmers and factory workers to frame the report’s determinations as “part of a growing body of evidence” that TPP will help the economy and to solidify the U.S.’ role as a global rule-setter. “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,” Froman said. “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.”
Ways and Means Ranking Member Sandy Levin, D-Mich., in a statement (here) said his cursory review of the report has reinforced his opposition to the deal, noting that TPP’s “weak automotive rules of origin” will deplete auto parts jobs in the U.S., and that the report short-shrifts TPP’s non-tariff provisions, which compose “almost all” Congressional concerns. “The figures are also based on an optimistic assumption that our trading partners will open their markets to our exports, rather than simply replacing their existing tariff barriers with new non-tariff barriers, even though we have repeatedly seen that happen in the past.” Further, he called the report’s predicted 0.15-percent economic gain and 0.07-percent 15-year employment increase “insignificant,” and said the ITC did not delve deeply enough into other issues such as implementation of labor obligations and whether currency manipulation would offset the benefits of tariff cuts.
Rep. Rosa DeLauro, D-Conn., an outspoken opponent of TPP, emphasized the report found that TPP would worsen trade balances for 16 of 17 U.S. manufacturing sectors covered by the report. “We need the truth about what these trade agreements can really do to our economy, not glowing talking points that do not paint the full picture,” she said in a statement (here).
International Brotherhood of Teamsters General President James Hoffa downplayed the report’s positive findings, and advised readers to take them “with a grain of salt.” He said in a statement (here): "For years now, the USITC has reported on pending trade agreements and made them look like blockbuster deals for this nation. But everyday Americans know the true story. Millions of jobs have been lost in the past two decades and wages have been cut for many formerly middle-class workers across the country.”
The U.S. Chamber of Commerce (here), U.S. Council for International Business (here), Emergency Committee for American Trade (here), and Business Roundtable (here), welcomed the report’s release as an important part of the overall TPP vetting process. The Chamber was especially optimistic about the report’s findings, saying they substantively support its view that TPP is in the overall U.S. national interest. “By eliminating thousands of tariffs and other barriers to the export of U.S.-made goods and services, the TPP will create new opportunities for American workers, farmers, ranchers, innovators, and companies,” U.S. Chamber Executive Vice President Myron Brilliant said in a statement. “While the ITC understandably adopts a conservative approach to these reports, the historical record has shown that export growth under past trade agreements has exceeded projections by a considerable margin.”