Tufts Policy Brief: U.S. Exports, GDP Won't Reach Full Potential Under TPP
U.S. exports and GDP will underperform, and developing economies will grow only marginally when the Trans-Pacific Partnership enters into force, claims a policy brief publicly distributed on Feb. 25 by Tufts University’s Global Development and Environment Institute (here). The brief highlights the contrast between a joint study published last month by Tufts economics faculty and Malaysian economist Jomo Sundaram, and another January analysis performed by the Peterson Institute, which projected overall global economic growth from TPP. The Tufts/Sundaram model employs the United Nations “Global Policy Model,” designed to investigate regional and global policies and trends related to issues, including trade, through application of historical data and, in this case, economic trajectories. The Peterson study wrongly incorporates unexplained surges in foreign direct investment, a fixed trade balance, and growth and income gains due to non-trade measures, Sundaram wrote in the brief.
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In contrast with the Peterson study, Sundaram concludes that, compared with a non-TPP baseline, the U.S. will post a 0.5-percent lower GDP and Japan’s GDP will grow 0.1 percent less than it would. Furthermore, after a decade, Chile’s and Peru’s GDPs will generate a combined gain of only 2.8 percent over the non-TPP scenario, Sundaram wrote. “Our modeling suggests that TPP skeptics, concerned about the agreement’s impacts on growth, labor incomes, employment and inequality, have good reason to doubt optimistic projections,” he wrote. “Our results show negative impacts in all these areas, particularly in the United States. Legislatures in TPP countries should carefully consider these findings and their implications before approving the agreement." Moreover, Sundaram asserted that Peterson’s prediction of a 9.1-percent increase in U.S. exports and imports by 2030 purely reflects the study's premature assumption of fixed trade balances under TPP, although U.S. trade deficits usually rise after implementation of free trade agreements, Sundaram said.