First In-depth Briefing on the Realities and Impact of the Trans-Pacific Partnership Released by the Peterson Institute for International Economics

WASHINGTON—The Trans-Pacific Partnership (TPP) would, if ratified, deliver significant economic benefits to the United States and the 11 other participating countries from a sweeping liberalization of barriers on trade and investment, according to a new volume of essays published by the Peterson Institute for International Economics. The collection of ten essays, published in a new PIIE Briefing on February 2, analyzes the market opening and sectoral aspects of the TPP and the ramifications for governments, businesses, and ultimately for workers and households. Many myths about the TPP, particularly with regard to investor protections and health and safety, fail to hold up to scrutiny upon careful examination of the implications of the now public treaty text—the benefits, however, do not include attainment of some ambitious goals previously hoped for with regard to liberalization of agriculture and other areas.

The PIIE Briefing titled Assessing the Trans-Pacific Partnership: Market Access and Sectoral Issues, is intended to guide specialists and nonspecialists alike through several elements of the accord to contribute to a more educated public debate over its ratification, which the Obama administration is seeking this year. The Briefing starts with an in-depth analysis by Peter A. Petri and Michael G. Plummer of the TPP's overall economic effects (previously published to extensive coverage in an Institute Working Paper on January 25) and builds on it to analyze more fully the impact on US and member countries' tariffs, agriculture, autos, textiles, government procurement, services, financial services, investment, and investor-state dispute settlement. Another set of essays analyzing the new areas of the 21st century's first major trade agreement—including intellectual property, environmental and labor standards—will be released in a subsequent PIIE Briefing in coming weeks. These Briefings and the underlying research have been coordinated and edited by Cathleen Cimino-Isaacs and Jeffrey J. Schott of the Institute.

"Taken together, these studies represent the Peterson Institute's commitment to produce rigorous and thought provoking analysis that contributes honestly to substantive public debate," said Adam S. Posen, the Institute's President. "Trade has become a highly emotional and political issue, but it remains possible to provide nonpartisan economic analysis that fairly sets out the best estimate of the costs and benefits of the TPP overall and in specific areas."

Posen emphasized: "Two basic truths about trade agreements emerge validated for the TPP from these PIIE studies:

• that the real lasting benefits of trade to participants comes from the productivity growth when liberalization promotes innovation and reallocation of capital and labor to their best uses, and
• that American government and business should provide far more assistance to communities and working people who are forced to adjust by competition, which they could easily do with only a fraction of substantial gains that the TPP yields overall."

The PIIE Briefing contains the following specific research by Institute scholars:

• Peter A. Petri and Michael G. Plummer's rigorous model-based assessment of the overall economic outcomes of the TPP, which estimates that the TPP will increase annual real incomes in the United States by $131 billion, or 0.5 percent of GDP, and annual exports by $357 billion, or 9.1 percent of exports, over baseline projections by 2030. They estimate that a year's delay to ratification and implementation would cost the US economy $94 billion;
• Caroline Freund, Tyler Moran, and Sarah Oliver's breakdown of the tariff changes, noting that the majority of tariffs will be quickly eliminated, and the rest will be liberalized over time, in some cases with significant delays;
• Cullen Hendrix and Barbara Kotschwar's investigation of the agriculture sector provisions, concluding that the TPP significantly liberalizes a host of agricultural products but falls short of delivering "free trade" on some sensitive agricultural commodities;
• Sarah Oliver's assessment of the impact of lower auto tariffs and the process of mutual recognition of safety and emissions standards in the auto sector;
• Kimberly Ann Elliott's analysis of the textiles and apparels provision, finding that rules of origin limit the TPP's impact on this sector in Vietnam and other key exporters;
• Tyler Moran's examination of government procurement commitments, which represent the first major liberalization for some countries in this area;
• Gary Clyde Hufbauer's exploration of the payoffs of expanding trade in services, concluding that the United States, Japan, Malaysia, and Vietnam will all experience large gains;
• Anna Gelpern's scrutiny of the financial services provisions, a sector where the United States is a net exporter, discussing the accord's call for greater access for certain types of financial services, for some constraints on government provision of financial services, and for procedural safeguards for regulated service providers;
• Theodore Moran and Lindsay Oldenski's assessment of the investment provisions of the TPP, noting that they will likely encourage greater foreign direct investment (FDI)among member countries; and
• Gary Hufbauer's detailed analysis of the investor-state dispute settlement (ISDS) provision, which stirred controversy in prospect but Hufbauer argues that the actual agreed text improves on the ISDS model in previous trade agreements without imperiling local regulations.