New Report on Benefits of TPP
On May 18, the U.S. International Trade Commission (USITC) released a highly anticipated report, entitled: “Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors,“ which estimates the Trans-Pacific Partnership (TPP) will boost U.S. annual real income by $57.3 billion by 2032.
The USITC is directed by Congress to prepare a report assessing the likely impact of the agreement on the U.S. economy as a whole and on specific industry sectors in advance of congressional consideration of a new trade agreement. The report encompasses TPP’s impact on the U.S Gross Domestic Product (GDP), exports, and imports; U.S. aggregate employment and employment opportunities; the production, employment, and competitive position of U.S. industries likely to be significantly affected by TPP; and the interests of U.S. consumers.
The TPP Agreement would affect the trade and investment relationship between the U.S. and the region in many areas. In addition to the U.S., the parties to the agreement are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Together, these countries accounted for 36 percent of global GDP in 2014. The agreement would influence bilateral trade in goods and services, rules governing trade and investment, and the regulatory environment facing U.S. exports to the region.
The USITC 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). U.S. exports and U.S. imports would be $27.2 billion (1.0 percent) and $48.9 billion (1.1 percent) higher, respectively, relative to baseline projections. U.S. exports to new FTA partners would grow by $34.6 billion (18.7 percent); U.S. imports from those countries would grow by $23.4 billion (10.4 percent).
Among broad sectors of the U.S. economy, agriculture and food would see the greatest percentage gain relative to the baseline projections; output would be $10.0 billion, or 0.5 percent, higher by 2032. The services sector would benefit, with a gain of $42.3 billion (0.1 percent) in output. Output in manufacturing, natural resources, and energy would be $10.8 billion (0.1 percent) lower with the TPP Agreement than it would be compared with baseline estimates without the agreement.
The report cites that many stakeholders consider two new electronic commerce provisions that protect cross-border data flows and prohibit data localization requirements to be crucial to the development of cross-border trade in services, and vital to optimizing the global operations of large and small U.S. companies in all sectors.
According to the report, TPP would generally establish trade-related disciplines that strengthen and harmonize regulations, increase certainty, and decrease trade costs for firms that trade and invest in the TPP region. Finally, the USITC states that interested parties particularly emphasized the importance of TPP chapters addressing intellectual property rights, customs and trade facilitation, investment, technical barriers to trade, sanitary and phytosanitary standards, and state-owned enterprises.
Upon release of the USITC report, U.S. Trade Representative Michael Froman stated that it provides another strong argument for why TPP should be passed this year. However, the TPP faces an uphill battle to passage this year with a majority of congressional Democrats opposed to the deal and Republicans concerned about several issues they want fixed in the massive agreement including pharmaceuticals and data collection from financial firms, before they will consider the agreement on Capitol Hill. Election-year politics and anti-trade rhetoric have pushed the chances of House and Senate votes on TPP into the lame-duck—after the November election at the earliest. Meanwhile, President Obama is on a trip to Vietnam and Japan — both TPP nations — this week where he is touting the economic and geopolitical benefits of the sweeping agreement.
NSBA and its international trade arm, SBEA support the TPP, as it is expected to ease the cost and complexity for small firms doing business in TPP countries, eliminating more than 18,000 tariffs currently put on U.S. products and services. NSBA/SBEA is pleased that there also is a more enhanced focus on small business with this major trade deal than in past deals. The findings in this USITC report, which examines which sectors would benefit under the deal and its impact on consumers, will certainly further drive the debate on the agreement on Capitol Hill and in the 2016 election campaigns. NSBA continues to urge Congress to enact the TPP this year to seize this key opportunity to support U.S. growth and jobs.