Predictions

by Glyn Moody


Filed Under:
benefits, economics, itc, tpp



It's Official: US International Trade Commission Predicts Negligible Economic Benefits From TPP

from the and-that's-even-before-you-start-to-factor-in-the-costs dept

Techdirt has written hundreds of stories about TPP over the years. So many of those have revealed troubling aspects of the deal that it's hard to single out the worst. But there can be no doubt that one of the most extraordinary facts is that the US and the other TPP nations were negotiating for eight years the biggest so-called trade deal in history with only the sketchiest idea about its likely benefits. Instead, politicians and supporters simply assured the public that it would all be great, honest. And yet when the rigorous econometric studies began to appear, they consistently showed that TPP would produce almost no benefits whatsoever.

Upon hearing that a planned course of action designed to bring financial gains would do nothing of the kind, most rational people in ordinary life would try something else. But not the politicians and TPP negotiators, who carried on despite these clear signs that TPP was simply not worth the effort. They either ignored these studies completely, or at most said that the only reliable predictions worth considering were the official ones, which would come from the US International Trade Commission (USITC) once TPP's text had been finalised. Last week, the USITC released its massive 792-page report (pdf). Here's a key part of the summary:

The Commission used a dynamic computable general equilibrium model to determine the impact of TPP relative to a baseline projection that does not include TPP. The model estimated that TPP would have positive effects, albeit small as a percentage of the overall size of the U.S. economy. By year 15 (2032), U.S. annual real income would be $57.3 billion (0.23 percent) higher than the baseline projections, real GDP would be $42.7 billion (0.15 percent) higher, and employment would be 0.07 percent higher (128,000 full-time equivalents).
Like all the figures mentioned there, that 0.15% GDP boost would be achieved in 2032, which means that on average TPP is expected to produce an extra annual GDP boost of roughly 0.01%. Public Citizen's Global Trade Watch (pdf) pulled out a few other interesting figures from the report, which:
Estimates a worsening balance of trade for 16 out of 25 U.S. agriculture (p. 124), manufacturing (p.228), and services (p. 340) sectors that the ITC selected to feature. This includes vehicles, wheat, corn, autoparts, titanium products, chemicals, seafood, textiles and apparel, rice and even financial services. Autoparts would be hard hit with employment projected to decrease by 0.3 percent.

Estimates the TPP will increase the U.S. global trade deficit by $21.7 billion by 2032.

Projects even the U.S. services trade balance will worsen by 2032 as service imports of $7 billion swamp the estimated increase in exports of $4.8 billion (p. 35).
Global Trade Watch also notes that the USITC's track record for predictions is not good:
The actual outcomes of past trade pacts have been significantly more negative than ITC projections generated using the same methodology employed for the TPP study. This makes today’s unusually negative ITC findings on the TPP especially ominous.
The economist Dean Baker from the Center for Economic Policy Research (CEPR) agrees about the USITC's past failures:
The USITC also has not done well in projecting winning and losing sectors from trade agreements. A recent analysis by CEPR found no relationship between the industries that were projected to be export and import gainers and losers from the trade deal with Korea and the actual outcome.
He goes on to point out an even more worrying aspect of the latest modelling:
this analysis does not seem to incorporate any of the losses associated with the stronger and longer patent and copyright protection required under the TPP. Higher prices for drugs, software and other protected items are likely to impose substantial costs on the United States and other parties to the agreement. For example, the New Zealand government estimated that just one provision -- extension of copyright protection from 50 years to 70 years -- would cost the country 0.024 percent of GDP. This amount is 10 percent of the total gains projected in the USITC report. It is entirely possible that a full assessment of the cost of these provisions would show that the TPP would lead to a net reduction in income for the United States and other countries in the pact.
That's a hugely important point. On the rare occasions when TPP supporters have made specific claims about the economic benefits of TPP, they have consistently failed to take into account any downsides. It's like going into a business deal only looking at the benefits, and ignoring any possible costs. Against this chorus of disapproval, it's interesting to see how TPP supporters try to spin the USITC's miserable figures. Here's what the Business Roundtable, "an association of chief executive officers of leading U.S. companies", has to say:
"The release of the ITC report marks an important step in the process for considering the TPP. We look forward to reviewing the report's findings as we continue to highlight the benefits of the TPP to American businesses, farmers and workers," said Tom Linebarger, Chairman and Chief Executive Officer of Cummins Inc., and Chair of the Business Roundtable International Engagement Committee. "The TPP will remove many foreign barriers to U.S. goods and services and impose strong, enforceable rules for trade -- enabling U.S. manufacturing, services and technology companies to grow their sales to important international markets."

"The TPP sets high standards and reflects American priorities, and if the United States doesn't take the lead in shaping international trade rules, our economic competitors will," continued Linebarger.
That's it: the Business Roundtable could not find a single number to quote that made TPP look like a good deal. What about the ultimate TPP cheerleader, US Trade Representative Michael Froman? What did he have to say about the report? This:
"The ITC report illustrates for the American people and members of Congress the benefits TPP will deliver in their own backyards. If you are a poultry farmer in Delaware this report shows that chicken exports will increase by $174 million annually under TPP. If you are a rancher in Nebraska this report shows that beef exports will increase by $876 million annually under TPP. And if you build cars in the Midwest, this report shows that auto exports will rise $1.95 billion annually. With today's study as another important data point, our work with Congressional leaders on TPP implementation and enforcement will continue and accelerate in the days and weeks ahead."
Froman decided to pretend it was all about little numbers, and to gloss over the fact that when you add up all those little numbers to find out TPP's total benefit...you still get a little number. Froman also fell back on that old favorite -- fear-mongering about China:
"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. 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."
In other words, yes, it's true TPP offers absolutely negligible benefits for the US but oh, look, a squirrel...

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  • icon
    That One Guy (profile), 2 Jun 2016 @ 1:43am

    "Oh we only look at the good parts of course, the bad stuff doesn't count."

    We look forward to reviewing the report's findings as we continue to highlight the benefits of the TPP to American businesses, farmers and workers,"

    So in other words they didn't actually wait to see what the findings were before they started trying to convince people how absolutely great the thing is. You'd almost think that they don't actually care what the findings are, and they'd push the thing even if it was shown that it would have a negative impact on the very people they're trying to convince.

    Estimates a worsening balance of trade for 16 out of 25 U.S. agriculture (p. 124), manufacturing (p.228), and services (p. 340) sectors that the ITC selected to feature. This includes vehicles, wheat, corn, autoparts, titanium products, chemicals, seafood, textiles and apparel, rice and even financial services. Autoparts would be hard hit with employment projected to decrease by 0.3 percent.

    Yup, no lies here at all in trying to convince the very people that would be screwed under the TPP about how great it is by ignoring their own studies when the data happens to be inconvenient...

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Jun 2016 @ 3:50am

    Yeah, but you can bet a few specific, well-connected company's are gonna make out like bandits...

    reply to this | link to this | view in chronology ]

  • identicon
    Annonymouse, 2 Jun 2016 @ 4:00am

    ... are going to continue to make out as bandits.

    They always were but will be more so after this passes.

    reply to this | link to this | view in chronology ]

  • icon
    PaulT (profile), 2 Jun 2016 @ 5:16am

    "if the United States doesn't take the lead in shaping international trade rules, our economic competitors will"

    What if the thing those competitors are doing is waiting for you to implement this pile of crap so you can cripple yourselves and give them the advantage? "We must do something" is only valid if the "something" is actually advantageous and workable.

    "For example, the New Zealand government estimated that just one provision -- extension of copyright protection from 50 years to 70 years -- would cost the country 0.024 percent of GDP. This amount is 10 percent of the total gains projected in the USITC report."

    But I was assured that stronger copyright was needed to protect profit and strengthen the economy. Oh wait, that's for the corporations who avoid taxes, not for the economies of ordinary countries.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Jun 2016 @ 5:48am

      Re:

      if the United States doesn't take the lead in shaping international trade rules,

      It has taken the lead by exporting most of its manufacturing to the Likes of China. It now has to try and monetize ideas, via copyright and patents, to keep an income flowing into the country.

      reply to this | link to this | view in chronology ]

  • icon
    Paul Renault (profile), 2 Jun 2016 @ 5:42am

    From Glyn's article: "TPP is expected to produce an extra annual GDP boost of roughly 0.01%"

    Well, from everything I've read about it, the TPP is designed by the 0.01% to transfer money from everyone else to the 0.01%; damn the consequences for the rest.

    reply to this | link to this | view in chronology ]

  • icon
    DannyB (profile), 2 Jun 2016 @ 5:54am

    What do you mean Negligable Economic Benefits?

    You're wrong! The TPP will have HUGE, let me say that again HUGE economic benefits.

    ... for the people* who wrote the text of the TPP

    * corporations are people too

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Jun 2016 @ 5:57am

    no different to any other friggin' Trade Deal' then and every reason why it, like the others, will be brought in! the main reason being Hollywood and the entertainment industries use them try to take USA copyright laws to the rest of the world and in doing so, ensure the industries remain in charge of media and get more harsh punishments in place for everyone who disobeys their wants!
    until there are punishments for those who are 'encouraged' to help the industries, while doing nothing for the public or to aid innovation and advancement of new technology and for the industries themselves for frequently doing what the sue others for doing, nothing will change! it takes someone with a decent set of plums to take this task on, but sooner or later, it has to be!

    reply to this | link to this | view in chronology ]

  • icon
    Ed (profile), 2 Jun 2016 @ 6:36am

    Braindead Senators

    I wrote my two senators (Johnny Isakson and David Perdue, both Republican of course) about TPP and how it is a terrible deal for America and only benefits the few huge multinational corporations. They both responded with the exact same form letter telling me how wonderful TPP is and how it will help America get ahead of China. The exact same letter, from both. I wonder which lobbyist wrote it?

    reply to this | link to this | view in chronology ]

  • identicon
    Tin-Foil-Hat, 2 Jun 2016 @ 7:00am

    Reject TPP

    This deal should be rejected outright by the people of every country involved. I don't care if it has the potential of raining money. The secrecy surrounding it makes it not even worth considering.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Jun 2016 @ 7:22am

    Other question is - what economic harm would be projected for China if the TPP passed?

    Keep in mind the economy is a competitive environment and the one at the top typically calls the shots. So I'm curious how much the TPP is expected to harm China's projected GDP.

    reply to this | link to this | view in chronology ]

  • icon
    Anonymous Anonymous Coward (profile), 2 Jun 2016 @ 8:45am

    To ratify or not to ratify, that is the question...

    ...except it is already too late. Haven't we discussed the language in this piece of expletive that causes it to be in force even if every country fails to ratify it?

    Those jokers (being kind here) that construed this thing to help those it will help without a care about those it won't help already have what they wanted from the negotiation process, and those jobs and stock options are awaiting them, ratified or not.

    reply to this | link to this | view in chronology ]

  • icon
    ECA (profile), 2 Jun 2016 @ 10:32am

    " They either ignored these studies completely, or at most said that the only reliable predictions worth considering were the official ones"

    And a Police officer is a professional observer..
    The only whistle blowers are ones that WORK for the company..
    Only a Plumber can tell you, that you have a LEAKY FACET..
    Only a Doctor can tell you, you have JOCK ITCH..

    Its funny. That the USA gov and CORPS dont/wont believe anyone/any nation, until WE do the discovery..
    Like Cancer.org has a FDA document about HOW THC/CBD can help affect Cancers..And all the Gov keeps saying, is we need to KEEP TESTING.. But, there is very little testing of Restricted drugs..
    For all the Money Spent on studies in the USA, how many have been given FREELY to the people WHO PAID for them??\
    Even the FDA, has documents SHOWING there are problems with Some of our foods, but unless someone is willing to DIG into all of it..THEY wont tell us anything..

    reply to this | link to this | view in chronology ]

  • icon
    Adrian Cochrane (profile), 2 Jun 2016 @ 11:40am

    Yup, dollars speak louder than percentages

    We've seen the Micheal Froman approach of highlighting dollar ammounts instead of percentages work well before. This is how John Key sells TPPA to New Zealand - then he steamrolls ahead. It seems that the numbers appear bigger that way.

    And at least here in New Zealand it's not a new approach. Key's been spinning the numbers for pretty much his entire reign and kiwis just lap it up.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Jun 2016 @ 7:47pm

    '"The TPP sets high standards and reflects American priorities, and if the United States doesn't take the lead in shaping international trade rules, our economic competitors will," continued Linebarger.'

    At least they're honest in admitting they only care about America's power and control.

    reply to this | link to this | view in chronology ]

  • icon
    BernardoVerda (profile), 3 Jun 2016 @ 8:20pm

    Ever since the US-Canada FTA, I've seen this play out over and over.

    The proponents insist these "Trade Agrements" will benefit everyone, the critics point out obvious flaws that make this unlikely, the deals are struck anyways...

    ... and the critics prove to have been right, but that gets little attention, the media expounds the success, because the fan club has gotten richer -- on-paper benefits for society, real profits for the few, real costs for the many.

    reply to this | link to this | view in chronology ]


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