A Pacific Rim trade deal championed by the Obama administration represents a “landmark accord” that would yield considerable economic gains for the United States and 11 other nations, boosting exports by 9 percent a year and increasing wages, according to an analysis released Monday.
But the Trans-Pacific Partnership (TPP) would not increase job creation overall, and it could force 50,000 U.S. workers each year to find new jobs, a process that might require them to pursue new training, the nonpartisan Peterson Institute for International Economics said in its report.
Those workers, mostly in low-wage manufacturing, “may experience serious transition costs including lasting wage cuts and unemployment,” economists Peter A. Petri and Michael G. Plummer wrote. The report stated that as jobs were eliminated in traditional manufacturing, an equal number of about 50,000 new jobs would be created each year in high-tech manufacturing and service sectors as the U.S. economy undergoes structural changes.
The Peterson Institute study is the most thorough independent assessment of the economic impact of the TPP, the largest regional trade accord in history. The Obama administration hopes the findings will help persuade Republican leaders in Congress to schedule a vote on the deal before the November presidential vote.
Overall, the Peterson study concludes that the TPP could be as consequential for the United States as the North American Free Trade Agreement, which Congress ratified under President Bill Clinton. The economists said the U.S. economy would lose $77 billion in benefits if lawmakers delay ratification by one year.
“We’re at a point where the American economy is stronger and the case for a big international agreement is stronger than it has been for 20 years,” Petri said in an interview. “This will not cure all of the problems in the U.S. economy, but put all together it does seem to me that it is a strong case the president is making.”
President Obama has called the pact his top economic priority and said it is crucial for the United States to meet the challenge of a rising China. In recent weeks, major business organizations, including the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers, have endorsed the accord.
But at a time when middle-class Americans remain concerned about stagnant wages, the pact has come under fierce criticism from front-runners on both sides of the presidential campaign trail. Republicans Donald Trump and Sen. Ted Cruz (Tex.) and Democrats Hillary Clinton and Sen. Bernie Sanders (Vt.) have said they do not support the TPP. A coalition of hundreds of labor, environmental, faith and public health organizations denounced the accord in a letter to lawmakers this month.
U.S. Trade Representative Michael Froman is scheduled to travel to New Zealand on Feb. 4 to join 11 other trade ministers in a formal signing ceremony for the TPP, which was finalized in October. After that, lawmakers could begin scheduling votes, but Senate Majority Leader Mitch McConnell (R-Ky.) has raised concerns about provisions in the deal and suggested that the process could be delayed until after the elections.
“This independent analysis shows that TPP will raise wages for American workers, grow our economy, and help farmers and businesses export more ‘Made in America’ products,” Froman said in a statement. “Importantly, it also shows that sitting on the sideline and delaying TPP, even for a short time, will cost us dearly.”
The International Trade Commission began hearings two weeks ago for its own analysis of the TPP, a report that officials said will be finished by May 18.
The Peterson Institute’s analysis suggests that the agreement would boost exports by 9 percent above what they would be in 2030, when the deal is fully implemented, and would lift the U.S. economy overall by 0.5 percent a year. In part, that is because the agreement does more than the analysts had originally expected to reduce tariffs, the import taxes in other countries that make it harder for U.S. companies to sell goods and services there.
If those projections are correct, that additional growth would help a domestic economy that has struggled to regain the growth rates of previous decades in the wake of the Great Recession.
The analysis projects a larger payoff for U.S. growth from the agreement than a similar study from the World Bank predicted earlier this month. Both studies, however, agree that the deal would benefit other trading partners much more than it would benefit the United States.
In sheer dollar terms, the United States would benefit the most from the agreement, the Peterson researchers estimate. But other countries, such as Vietnam and Malaysia, would see far greater benefits when measured as a share of their economies: as much as 10 percent each annually.
Those calculations could give fodder to politicians, such as Trump, who have criticized the agreement as a bad deal for the United States. Petri, a professor of international finance at Brandeis University, acknowledged as much, saying that it “bothers a lot of people.”
Obama has said the TPP is crucial to maintaining U.S. primacy in high-tech manufacturing and service industry sectors such as finance, Internet services and entertainment. He has won little support among congressional Democrats, who have sided with labor unions that have decried the impact that NAFTA and previous trade deals have had on traditional manufacturing.
The Peterson study said that although manufacturing would continue to grow, it would do so at a slower rate: By 2030, there would be 121,000 fewer manufacturing jobs than there would be without the deal. The authors suggested that lawmakers should enact policies to help displaced workers.
Although the overall economy could be improved by the deal, Petri said, the negative impact on “individual people or individual communities could affect them quite hard.”