Comments due by Feb. 19, 2016
Lawmakers and presidential candidates are having their say about the 12-nation Pacific Rim trade accord that is President 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 pact, called the Trans-Pacific Partnership, would cause some job losses and exacerbate income inequality in each of the dozen participating nations, but especially in the largest — the United States.
Supporting the authors at the National Press Club was Jared Bernstein, who was the top economic adviser to Vice President Joseph R. Biden Jr. during Mr. Obama’s first term.
Each side in the economists’ debate has criticized the economic model that the other used to reach its results, while opponents and supporters of the trade accord have quickly seized upon whichever analysis buttressed their own views.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 and Japan.
Michael B. Froman, Mr. Obama’s trade representative, plans to join other trade ministers in Auckland, New Zealand, on Thursday for the formal signing of the trade deal, which they finished in October after years of negotiations.
The future of the deal, however, depends on the approval of a sharply divided Congress. The administration is believed to lack enough support for passage, though votes are not expected until after the November election. Some other nations are delaying their own ratification processes pending American action.
Election-year pressures are not helping the president’s cause, as leading candidates in both parties are opposing the trade agreement.
Donald J. Trump, the leading Republican candidate, told the conservative website Breitbart News over the weekend that as president he would stop what he called “Hillary’s Obamatrade.”
Hillary Clinton, the leading Democratic contender, has criticized the final agreement after praising it while it was being negotiated. She continues to be assailed by her main rival for the nomination, Senator Bernie Sanders of Vermont, for her early support.
Against this backdrop, the economists from prestigious universities and research institutions have been providing their takes and debating their differences just as intensely, though with more scholarly reserve.
The analysis from the Global Development and Environment Institute at Tufts was titled “Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement,” and was written by the economists Jeronim Capaldo and Alex Izurieta, with Jomo Kwame Sundaram, a former United Nations economic development official.
The authors wrote that they used “a more realistic model” for their analysis, and that previous reports that projected economic benefits from the trade accord were “based on unrealistic assumptions such as full employment” and unchanging income distribution.
The Tufts report projected that incomes in the United States would decline by a half-percentage point compared with the change expected without the Trans-Pacific Partnership. The Peterson Institute’s report, by economists from Brandeis and Johns Hopkins universities, projected that incomes would rise by half a percentage point.
The Tufts paper also projected that the overall economies of the United States and Japan would contract slightly. Employment in the United States would decline by 448,000 jobs; total job losses in the dozen nations would be 771,000 — a small share of the nations’ total work forces, yet hardly a selling point for leaders seeking to ratify the trade agreement.
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 that 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 United States.
The other parties to the pact are Mexico, New Zealand, Peru, Malaysia, Vietnam, Singapore and Brunei.
“Economic gains would be negligible for other participating countries — less than one percent over 10 years for developed countries, and less than three percent for developing countries,” the Tufts report said.
It also had bad news for countries, including China, that are not parties to the Trans-Pacific Partnership, whose participants account for nearly 40 percent of the world economy.
“We project negative effects on growth and employment in non-T.P.P. countries,” the report said. “This increases the risk of global instability and a race to the bottom, in which labor incomes will be under increasing pressure.”
The authors’ explicit criticism of models and data used by other economists provoked swift counter-criticism. Robert Z. Lawrence, a professor of international trade and investment at the Kennedy School of Government at Harvard, and a senior fellow of the Peterson Institute, wrote a blog pieceon Monday expounding on why the institute’s analysis was “superior on all counts” and better suited to specifically gauging the impact of megatrade agreements.
Great post on the trade agreement put forth by the president and it brought questions to mind about its effectiveness in the long-run. With any new agreement or piece of legislature there will be criticisms that do not hold much merit other than they go against the traditional ideology of what someone believes. That being said what shaped their beliefs can't be overlooked and it may help guide to a better agreement if their voice is heard. When there is criticism from both sides of the aisle about the actual benefits of such an agreement it raises another question of what is the true purpose of such an agreement? I think moving forward with an agreement that brings little growth to our economy in regards to wages and decreases the employment is obviously not a good move. Then why the push to have this agreement passed? What is it that makes the agreement so beneficial to the US that the president has conducted closed door meetings and only allowed public hearings after an agreement was signed? I don't have a theory or opinion but it might make for a good debate. There is no doubt of the growth that is experienced between countries that trade as seen in the classical theory of Smith and Ricardo and in history between countries in Europe. There were certain economic conditions in which it was imperative that trade be conducted to get European countries on a stable growth path but that was under post-war economic conditions. As we saw with the Euro debt and Greek crisis as more countries begin to interlock economies troubles appear when it comes to management of fiscal policy and their interrelatedness had developed significant complexities. A trade agreement would need to provide substantial benefits to both parties for it to truly be a positive impact. Conducting trade between established countries like Japan, Australia and Canada will see little growth because we already exchange goods on a regular basis and we already have trade agreements with countries like Canada and Mexico. Smaller countries that would have great benefit to trade because it would grant them access to lower cost goods and a substantial amount of these goods. If there is an actual effort to enhance growth, emerging markets need to be the target of future agreements.
ReplyDeleteThe dialogue surrounding the TPP lends a great deal to the magnanimous impact it will have on the global ecosystem. Conflicting reports (either for or against) are helpful regardless of the position they take because it produces evidence that can be used to corroborate arguments in terms of the efficacy of the TPP.
ReplyDeleteThe models that some of these authors criticize is due to the certain economic assumptions that some make such as "full employment" and "unchanging income distribution" similar to the ones that are being studies in Ch. 4 and 5. The "my model is better than yours" mentality is readily evident here, as we see how different accounts produce varying results that are then used to delineate one another's studies and results.
Take for example the issue of income change. The Tufts report concluded that incomes in the US would decline while Brandeis and Johns Hopkins projected that they would rise. Much of the findings focus on the effects on the US economy, but Tuft's inclusion of the TPP's global impact on countries that "are not parties to the [TPP]."
The TPP originally had stalled due to lack of information and not enough research supporting the Obama Administration's arguments. When it successfully passed, it became even more politicized and Washington and 2016 presidential candidates were quick to disassociate themselves from the Partnership. One of the most evident of this response was in Hillary Clinton, who previously backed the TPP but then shifted to not supporting it.
I believe that the TPP is not beneficial to the US economy, after looking more into the deal on ustr.gov, it is clear that this deal is being marketed as an agreement that will level the playing field so to speak by removing barriers and influencing trade. The portrayal of this agreement to the public is brought about in a very positive manner. Yet after all of these economists thoroughly investigate the implications on the deal, the two end results are on different spectrums. USTR says the deal has economic benefits for everyone, from small businesses to agriculture, and an increase in middle class jobs. However, after economic analysis, the impact will be insignificant if there is any positive impact at all. America will in fact lose jobs after a closer look, and the wealth gap will rise as a result. My question is who is gaining from this? Also why is the USTR allowed to advertise this deal in such a positive manner when economists have concluded that the benefits are almost nonexistent? This deal seems like it is being made in order to benefit some political group and it is not in the best interest for the people of the United States. Also, this deal is supporting stricter regulations on wage and standards within countries in order to level the playing field but isnt this only putting us at a greater disadvantage to foreign countries who are not a part of this pact? and are able to make their goods cheaper with less regulation on labor?
ReplyDeleteAfter numerous studies on the TTP and how it could, or will negatively effect the US and many other nations worldwide if it is to be agreed upon by all the TTP nation members. The studies released have contradicting conclusions, evidenced by studies done separately by many qualified economists causing a rift within Congress to approve the deal. As the TTP deal creates a heightened sense of economic awareness I think it will require further analysis to find the realistic outcome. As such drastic negative impacts loom over the US economy and many other nations, there is much hesitance to agree upon the deal when policy makers are divided. How can the TTP create a deal that is agreeable to all nations, including the US without such a diverse set of analysis conclusions. What is the right study? How could we know how bad, or good this deal could be?
ReplyDeleteThis article is a prime example of why economics is such an interesting study. The different studies surrounding TTP have such contrasting results, and that is because Economics as a science is still developing and our models are good predictors but can not offer 100% accurate data. I feel that TTP, whether it affects unemployment or not, offers no real benefit to the United States. Based on the reports, I feel that congress members will chose the study that supports their initial belief, seeing as neither report discredits the other. Because TTP does not seem to benefit the US very much, I would personally vote against the passage, however, I can not be certain how it would affect the global economy in the long run. The increased riskiness of global instability is enough to persuade many not to support TTP and I feel that without one study being clearly dominate over the other, TTP will remain divided in congress.
ReplyDeleteThe TTP does not have any benefits to the united states’s economy. It was reported that they used a more realistic model for their analysis to project the economic benefit from the trade. They used unrealistic assumptions like full employment and unchanging income distribution to mislead everyone. The Tufts report projected that would cause the income in the United States to decline by a half percentage point compared with the change that is expected without the Trans Pacific Partnership. It also projected that the overall economics of the US and Japan would be some contracts. The employment in the United States would decline to 448,000 jobs which means the total job losses in the whole nations would be 771,00 which is completely shocking and unbelievable of the effects it causes. The decline employment will targets especially those in manufacturing and in industries that have lower skills. In addition, it has reported that TPP increases the risk of global instability and causes labor incomes to be under increasing pressures.
ReplyDeleteThe agreement has the main objective to "promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and promote transparency, good governance, and enhanced labor and environmental protections." So with this said, there is the question of the agreements long-term affects, how will this agreement create more jobs than what it will take from the US economy? The so-called "new jobs created in export-reliant industries" will doubtably be in the hundreds of thousands, and if so will not look for workers with low education and skill levels (the people who truly need a job). The agreement is simply a boost for the US in outsourcing, to reduce or eliminate trade tariffs and other trade barriers which will increase its Americas' imports and decrease its exports that may continually decline the American industrial work force. The pro side to the TTP agreement is the possible increase in Purchasing Power as it is estimated that by the year 2030 the U.S real income would increase by 0.5 percent, but is that worth the possibility of losing almost half a million jobs?
ReplyDeleteThe TPP is a trade agreement between the United States, Japan, and ten other Pacific nations. These countries are representative of 40% of the world’s GDP and combined would form the largest free trade area ever created (much larger than the current NAFTA). The primary purpose of TPP is to eliminate barriers to trade. Some see this deal as a stretch, based on idealistic expectations, causing some job losses, worsen income inequality in each of the 12 participating nations, but especially in the US (the largest). Employment in the US would decline by 448,000 jobs and 771,000 across the 12 nations. The article states that the Obama administration has acknowledged that some jobs would be lost, particularly in manufacturing and in industries that employ workers with lower skills. It has also stated that these job losses would be balanced by new jobs created in industries that focus on exports, which typically pay more.
ReplyDeleteThere are two sides of the argument that legislators, political figures, and the average citizens have on the TPP trade agreement: those who support and those who oppose. The pros include economic growth, increase in exports, and an increase in jobs in the 12 countries. By removing 18,000 tariffs placed on US exports in other countries, TPP will level the playing field for all of the countries to have free and open trade. The cons include that the agreements would contribute to income inequality and the exploitation of low-wage countries by the high-wage countries who can promote cheaper goods. As it is President Obama’s last year in office, passing the TPP is his top economic priority. The future of this deal, however, lies within the votes of a divided government in the United States. Congress will probably not give enough support for passage while other nations are waiting to ratify after American action. Leading candidates in both parties for the upcoming 2016 election oppose the trade agreement, therefore if the votes aren’t in by November, this trade deal will be ceased. Could this potentially hurt our future foreign relations with the involved countries?
The Trans-Pacific Partnership (TPP) free trade agreement aims to extend economic partnerships between these nations: US, Canada, Mexico, Peru, Chile, Japan, Malaysia, Vietnam, Singapore, Brunei, New Zealand, and Australia. By cutting around 18,000 tariffs and nurturing trade the purpose of the TPP is to enhance growth for all countries involved. But what would this mean for the US?
ReplyDeleteFirst of all it solidifies the relationship with the involved countries promoting development. By cutting numerous taxes U.S. export is bound to increase creating more job opportunities. One big fear of this agreement is that U.S. companies will now start outsourcing more their labor taking away these jobs from American citizens. Nevertheless worker and environmental protection are part of the main clauses in the agreement.
In response to the thousands of job positions that will be subtracted to monthly U.S. employment president Obama said that it would create even higher paid job positions in the exporting industry. Another issue that divided the U.S. government in this decision is how the TPP will intensify competition between the countries’ labor force. Low-wage countries will be exploited bringing to higher income inequality.
Other nations have been waiting for the U.S. to take action in agreeing to this partnership but the division of the U.S. government cause this process to slowdown.
They say "hindsight is always 20/20" and in this case, that saying is very highly applicable. There is no way to tell how the Trans-Pacific Partnership will ultimately end up benefiting some countries more than others until it has been fully rolled out. However, for all the proposed benefits there are certainly very plausible risks that come with the agreement, particularly for the United States. There is a distinct possibility that the Trans-Pacific Partnership will actually harm the United States economy by driving business away to more export-reliant economies where labor and corporate tax rates are lower. The argument against this is that the increase in ease of exporting and importing among the countries involved in the agreement will lead to an increase in domestic export job opportunities here in the United States. Although the United States is the world's second largest exporting economy, it is also (by far) the world's largest importing economy. The United States alone imports more goods in a single year than the entire European Union, and substantially more than China. If the Trans-Pacific Partnership goes into effect, there is no telling whether companies will chose to continue to export goods from the United States, or take advantage of the easier international restrictions and move to a country like Malaysia or Singapore where labor rates are much lower and there is less government regulation and corporate taxation. Although the concept of the trade agreement may be one of increased cooperation, it will very likely lead to more (albeit "friendly") competition among the countries involved in the agreement. In fact, the TPP is a much more appealing agreement for the smaller, developing countries involved in it, rather than the larger, more developed countries like the United States, Canada, Japan and Australia where trade agreements already exist. I would argue that more effort should be put toward encouraging domestic manufacturing while we wait for other countries to modernize their labor laws. As it stands now, the United States imports roughly double the amount of products and services (by value) than it exports. Additionally, labor rates in the United States are non-competitive among major exporting countries (like China and Pacific countries) and our corporate tax rates are some of the highest among developed countries. Although these are not necessarily bad characteristics (and in fact, I would argue that wages and corporate tax rates should actually increase), it limits the amount of beneficial opportunities that we may have with countries that are still developing their economies. Because of all this, I think it is an inopportune time to be pursuing the Trans-Pacific Partnership. However, in the future, when countries like Singapore and Malaysia catch up in terms of labor laws and corporate taxation, this could be a very lucrative deal.
ReplyDeleteThe TPP is the version of NAFTA, which was never signed by the united states. The nations involved make up about half of the worlds GDP so something of this nature would have a mission impact on trade and economic development. Economic development being the main thing they are trying to accomplish. The problem is the evident biased on both sides, those in favor and this not in favor. Those not in favor believe that the united states will see no impact and instead be given a bad deal that also harms emerging markets not involved in the treaty. They say it will be a negative impact of half a percent and the counter argument is a positive .5%. These economist are able to impose their own views on the data and manipulation for the result in untrustworthy findings.
ReplyDeleteThe Trans Pacific Partnership (TPP) was formed in order to promote economics growth by extending economic partnership between areas. These areas are benefited because they cut tariffs and encourage trade. The TPP also has impacts on the U.S. Some believe that these impacts are negative, although there are split opinions. Those who believe that the TPP negatively effects the U.S. state that the deal harms emerging markets, and may lead to domestic U.S. companies outsourcing their services and work. Also, by outsourcing services and jobs, a pressure is put onto less developed countries, which can lead to exploration of workers. With that being said, there are some positive effects of the TPP. It is said to increase income by .5%.
ReplyDeleteThe Trans-Pacific Partnership (TPP) is an exchange assention among twelve Pacific Rim nations marked on 4 February 2016 in Auckland, New Zealand following 7 years of transactions, which has not went into power. The twelve nations are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. In addition to other things, the Agreement contains measures to lower exchange obstructions, for example, levies, and build up a speculator state debate settlement system (yet states can quit from tobacco-related measures). Partaking countries went for finishing transactions in 2012, however disagreeable issues, for example, farming, licensed innovation, and administrations and ventures delayed arrangements. They at long last achieved concession to 5 October 2015. Actualizing the TPP has been one of the exchange motivation objectives of the Obama organization in the US.
ReplyDeleteWhile supporters of the deal maintain that the TPP could make available opportunities not previously available and modernize the global economy, the voice of TPP critics is being heard more clearly than before; Largely, because of the substance and findings yielded from this Tufts report.
ReplyDeleteThis report comes in the form of ammunition for opponents who posit that the deal is largely comprised of contractual terms that act as “give away” to business by incentivizing companies to export more manufacturing jobs to less developed nations. The opposition faction also claims the deal will create the already difficult to enter U.S pharmaceutical industry even more difficult to penetrate by extending U.S patent protections to other nations.
For me, I feel conflicted in making a definitive judgement as to whether or not I agree with this deal and would support moving forward with it. On one hand, I understand President Obama’s strategy in using this agreement to bind us with Pacific trading partners and assert strength in the region to China — The region's most prominent economic power. On the other hand, regulations regarding the pharmaceutical industry (Pfizer has just merged and is now headquartered in Ireland), the Tufts report’s projections, and the incredibly divisive rhetoric surrounding this issue in an already extremely polarized Congress all are causes for concern.
While supporters of the deal maintain that the TPP could make available opportunities not previously available and modernize the global economy, the voice of TPP critics is being heard more clearly than before; Largely, because of the substance and findings yielded from this Tufts report.
ReplyDeleteThis report comes in the form of ammunition for opponents who posit that the deal is largely comprised of contractual terms that act as “give away” to business by incentivizing companies to export more manufacturing jobs to less developed nations. The opposition faction also claims the deal will create the already difficult to enter U.S pharmaceutical industry even more difficult to penetrate by extending U.S patent protections to other nations.
For me, I feel conflicted in making a definitive judgement as to whether or not I agree with this deal and would support moving forward with it. On one hand, I understand President Obama’s strategy in using this agreement to bind us with Pacific trading partners and assert strength in the region to China — The region's most prominent economic power. On the other hand, regulations regarding the pharmaceutical industry (Pfizer has just merged and is now headquartered in Ireland), the Tufts report’s projections, and the incredibly divisive rhetoric surrounding this issue in an already extremely polarized Congress all are causes for concern.
The Trans-Pacific Partnership (TPP) was introduced as a way to promote overall economic growth by economically partnering with other countries. It seems the goal is to support the creation and retention of jobs, enhance productivity through outsourcing, reduce poverty in less developed countries, and perhaps lower trade barriers. This looks good on the surface but as the article conveys there is heavy opposition which argues it could exacerbate income inequality, specifically in the United States. Now, The Obama administration has acknowledged the possibility of job cuts, especially in manufacturing and industries alike but it has said that "those losses would be offset by new jobs created in export-reliant industries that pay more on average." In my opinion, there is definitely some truth to this statement but it always seems more theorized than factual. It is hard to tell if the benefits of the TPP will outweigh the costs.
ReplyDeleteThis article was interesting in that it further expressed how world economics are so affected by politics. The article discusses how this TPP agreement is the biggest thing on President Obama’s plate before stepping out the door, but everyone’s running in their own direction unless they hear what they want to hear, which helps no one. The fact that some other nations won’t even decide, until they see what becomes of America, shows that there is far too a bias view on the topic at hand. No one is deciding based on what’s best for everyone, but more so, on what benefit they gain in the transition from president to president, being that the U.S. according to this article is the biggest participant.
ReplyDeleteThe more interesting part of this article is how it highlights the debate between a net loss job due to the agreement, versus no actual net loss, due to their being a loss of low skill and manufacturing employees, while simultaneously increasing jobs “export-reliant industries that pay more on average”. I think it is interesting because all these predictions are jus that, predictions. I guess the question becomes which of the predictions is conservative enough to be closer to what will actually happen short and long term.