Economists split over Pacific trade pact's impact

The Tufts report concludes that the Trans-Pacific Partnership would cause job losses and worsen income inequality especially in the US, while the Peterson Institute report says there will be no net change in overall US employment. Left: Labourers at
The Tufts report concludes that the Trans-Pacific Partnership would cause job losses and worsen income inequality especially in the US, while the Peterson Institute report says there will be no net change in overall US employment. Left: Labourers at work in Times Square.PHOTO: AGENCE FRANCE-PRESSE

WASHINGTON • Lawmakers and presidential candidates have been having their say about the 12-nation Pacific Rim trade accord, which is United States President Barack Obama's top economic priority in his final year in office.

But lately, the liveliest debate over the deal is among blue-ribbon economists.

On Monday, it was the critics' turn: Economists from Tufts University unveiled their study concluding that the Trans-Pacific Partnership (TPP) would cause some job losses and exacerbate income inequality in each of the dozen participating nations, but especially in the largest - the US.

The conclusions of the Tufts economists contradict recent positive findings from the Peterson Institute for International Economics and the World Bank about the trade pact, which would be the largest regional accord in history and would bind nations including Canada, Chile, Australia, Japan and Singapore.

Mr Michael Froman, Mr Obama's trade representative, plans to join other trade ministers in Auckland, New Zealand, tomorrow for the formal signing of the trade deal, which they finished last October after years of negotiations.

But the future of the deal depends on the approval of a sharply divided US Congress.

The Tufts report projected that incomes in the US would decline by half a percentage point, compared with the change expected without the TPP. The Peterson Institute's report projected that incomes would rise by half a percentage point.

The Tufts paper also projected that the overall economies of the US and Japan would contract slightly. Employment in the US would decline by 448,000 jobs, while total job losses in the dozen nations would be 771,000 - a small share of the nations' total workforces, yet hardly a selling point for leaders seeking to ratify the trade pact.

The Obama administration has acknowledged that some jobs would be lost, especially in manufacturing and in industries that employ workers with lower skills, but it has said those losses would be offset by new jobs created in export-reliant industries that pay more on average.

The Peterson Institute report offered evidence for that argument, while concluding that there would be no net change in overall employment in the US.

The other parties to the pact are Mexico, New Zealand, Peru, Malaysia, Vietnam and Brunei.

"Economic gains would be negligible for other participating countries - less than 1 per cent over 10 years for developed countries, and less than 3 per cent for developing countries," the Tufts report said.

It also had bad news for countries, including China, that are not parties to the TPP, whose participants account for nearly 40 per cent of the world economy.

"We project negative effects on growth and employment in non- TPP countries," the report said. "This increases the risk of global instability and a race to the bottom, in which labour incomes will be under increasing pressure."

NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on February 03, 2016, with the headline 'Economists split over Pacific trade pact's impact'. Print Edition | Subscribe