Supporters of TPP generally insist it’s absolutely worth doing, despite any infelicities it might contain, because of the huge overall economic benefit it will bring to participants. But when challenged, they are unable to cite any credible evidence for that claim. We now have a new report from the World Bank, which takes into account all aspects of the proposed deal. Here’s the summary of what it found:
The model simulations suggest that, by 2030, the TPP will raise member country GDP by 0.4-10 percent, and by 1.1 percent, on a GDP-weighted average basis. pThat’s a little vague: 10% GDP increase is very different from only 0.4%, so it really matters who gets what. The detailed figures are as follows:
Vietnam — 10%
Malaysia — 8%
Brunei — 5%
New Zealand — 3.1%
Singapore — 3%
Japan — 2.7%
Peru — 2.1%
Mexico — 1.4%
Canada — 1.2%
Chile — 1%
Australia — 0.7%
US — 0.4%
But those figures too are misleading, because they refer to the cumulative GDP gain from TPP by 2030. It’s not clear when the World Bank econometric model assumes TPP will come into effect, but by 2030 it’s clearly been running for at least ten years, and maybe even 12. That means all of the figures above need to be divided by at least a factor of 10 in order to arrive at the annual boost to growth, which provides a better measure of TPP’s impact than the overall figure.
So according to the World Bank’s figures, the US will gain an extra 0.04% GDP per year on average, as a result of TPP; Australia an extra 0.07% annually, and Canada a boost of 0.12% per year. In other words, they differ from the USDA’s earlier projection of “no measurable impacts on real GDP” by amounts that are so small they will be swamped by the general imprecision of the model — trying to predict what will happen to a big chunk of the global economy out in 2030 is hard, and that’s putting it mildly.
The fact that two econometric models of TPP’s effects, both from highly-respected institutions, predict that TPP will produce vanishingly-small economic benefits for key countries, including the US, could explain why there are so few such studies. A cynic might suggest that others were started but generated such inconveniently-awful outcomes that they were quietly dropped and never published.
(Source: Techdirt https://www.techdirt.com/articles/20160112/07433333306/world-bank-report-tpp-will-bring-negligible-economic-benefit-to-us-canada-australia.shtml Glyn Moody!)
It is the mechanism for handling disputes that I, and most people who know about it, most heartily detest. But this bit of information makes one wonder who has been fooling who? Why hasn’t the (highly intelligent) president asked some searching questions? Or is it really just a China Containment Treaty, with little or no economic benefits involved or expected?
Any GDP gains the US makes will be undermined by the fact that nearly all of that extra wealth will go to rich employers who will save money on wages. Any benefits to the rest of the country that a more affluent upper class will bring, will be more than offset by wage cuts and increased unemployment. People are turning to Donald Trump and Bernie Sanders becausee they realise that these trade deals benefit the rich at the expense of the poor. It’s time to end unregulated free trade, and bring offshored jobs back home.
You are absolutely right! I remember being in a room full of economists many years ago. All were praising globalization and free trade, and I said there would be a backlash, given time, because we were trading cheaper goods for fewer jobs. No point in cheaper goods if people don’t have an income. Well, welcome the backlash!