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Cutting Through the Noisy TPP Debate
By Peter A. Petri and Michael G. Plummer
Note: This commentary first appeared in The Honolulu Star Advertiser on April 12, 2015.
The Trans-Pacific Partnership, or TPP, negotiations are in their final phase and the policy debate is in full swing. Unfortunately, it's shaping up as a debate about trees, not forests; it ignores the central goal of the TPP: to renew the Asia-Pacific trading system and firm up America's role in it.
World trade rules have not changed since 1994 — not since the rise of the internet, China and ubiquitous global production chains — and so trade has become very contentious and its growth has slowed. The TPP is controversial because it addresses varied obstacles to trade and investment — not just tariffs, but many conflicting regulations and standards (or lack of them, in the case of labor and the environment) in 12 countries at various stages of economic development.
It's "Catch 22": Because trade rules are so hard to change, the TPP has to take on many issues at once. This invites an onslaught of criticism, from corporations and unions to the activists of the right and left. In fact, the provisions of the TPP — results of long, painstaking negotiations — will simply not be as extreme or consequential as those opponents will claim.
What is really at stake? For the past four years, we have studied the TPP closely with a data-intensive, state-of-the-art economic model. We have published many detailed results, but three conclusions stand out:
1. The TPP will not have early, large effects in the United States. More than 90 percent of our economic activity involves markets and jobs minimally related to trade, and the TPP will apply best practices that are mostly already in place here. Changes will be gradual — some stretching to 10 years or more — giving companies, workers and countries time to adjust.
2. The agreement will generate significant, if not dramatic, increases in U.S. living standards over time. It will stimulate America's most competitive sectors and help them gain a stronger foothold in production chains centered in Asia. For example, the TPP's investment and intellectual property provisions will make sure that American computer technologies, robots, medical devices, medicines and music have access to and are safe from piracy in dynamic markets.
U.S. real incomes should increase by $77 billion per year by 2025. The benefits will extend across the economy through higher wages and lower prices. We do not calculate an increase in the number of people at work — our economy cannot add jobs permanently once it reaches full employment — but by 2025, around 650,000 more people should be working in export-related jobs that pay as much as 18 percent more than jobs in import-competing industries.
3. Ultimately, the TPP should stimulate further deals with Europe and other Asian and Latin American countries, establishing its updated rules as a global benchmark. In this case, benefits to the United States and the world would be multiplied by a factor of three.
The TPP will not cure all of our economic ills. With or without it, America's prosperity depends on investments in innovation, infrastructure, workers and education for data-hungry services and manufacturing. These investments will make the gains from the TPP larger and address fundamental problems like wage growth and inequality. And we have to make sure that people who face difficult changes — due to technological advances, trade policy and other forces — are generously supported in making adjustments.
The TPP debate should be confident and forward-looking, befitting America's enormous assets and recovering economic engine. The TPP offers significant economic benefits and an historic opportunity to deepen U.S. ties with the Asia-Pacific, the world's most dynamic economic region.
Peter A. Petri is the Carl J. Shapiro Professor of International Finance at Brandeis University, and a Nonresident Senior Fellow with the East-West Center. Michael G. Plummer is Director of Johns Hopkins SAIS Europe and also an East-West Center Senior Fellow.
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The EAST-WEST CENTER promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue. Established by the U.S. Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options
Cutting Through the Noisy TPP Debate
By Peter A. Petri and Michael G. Plummer
Note: This commentary first appeared in The Honolulu Star Advertiser on April 12, 2015.
The Trans-Pacific Partnership, or TPP, negotiations are in their final phase and the policy debate is in full swing. Unfortunately, it's shaping up as a debate about trees, not forests; it ignores the central goal of the TPP: to renew the Asia-Pacific trading system and firm up America's role in it.
World trade rules have not changed since 1994 — not since the rise of the internet, China and ubiquitous global production chains — and so trade has become very contentious and its growth has slowed. The TPP is controversial because it addresses varied obstacles to trade and investment — not just tariffs, but many conflicting regulations and standards (or lack of them, in the case of labor and the environment) in 12 countries at various stages of economic development.
It's "Catch 22": Because trade rules are so hard to change, the TPP has to take on many issues at once. This invites an onslaught of criticism, from corporations and unions to the activists of the right and left. In fact, the provisions of the TPP — results of long, painstaking negotiations — will simply not be as extreme or consequential as those opponents will claim.
What is really at stake? For the past four years, we have studied the TPP closely with a data-intensive, state-of-the-art economic model. We have published many detailed results, but three conclusions stand out:
1. The TPP will not have early, large effects in the United States. More than 90 percent of our economic activity involves markets and jobs minimally related to trade, and the TPP will apply best practices that are mostly already in place here. Changes will be gradual — some stretching to 10 years or more — giving companies, workers and countries time to adjust.
2. The agreement will generate significant, if not dramatic, increases in U.S. living standards over time. It will stimulate America's most competitive sectors and help them gain a stronger foothold in production chains centered in Asia. For example, the TPP's investment and intellectual property provisions will make sure that American computer technologies, robots, medical devices, medicines and music have access to and are safe from piracy in dynamic markets.
U.S. real incomes should increase by $77 billion per year by 2025. The benefits will extend across the economy through higher wages and lower prices. We do not calculate an increase in the number of people at work — our economy cannot add jobs permanently once it reaches full employment — but by 2025, around 650,000 more people should be working in export-related jobs that pay as much as 18 percent more than jobs in import-competing industries.
3. Ultimately, the TPP should stimulate further deals with Europe and other Asian and Latin American countries, establishing its updated rules as a global benchmark. In this case, benefits to the United States and the world would be multiplied by a factor of three.
The TPP will not cure all of our economic ills. With or without it, America's prosperity depends on investments in innovation, infrastructure, workers and education for data-hungry services and manufacturing. These investments will make the gains from the TPP larger and address fundamental problems like wage growth and inequality. And we have to make sure that people who face difficult changes — due to technological advances, trade policy and other forces — are generously supported in making adjustments.
The TPP debate should be confident and forward-looking, befitting America's enormous assets and recovering economic engine. The TPP offers significant economic benefits and an historic opportunity to deepen U.S. ties with the Asia-Pacific, the world's most dynamic economic region.
Peter A. Petri is the Carl J. Shapiro Professor of International Finance at Brandeis University, and a Nonresident Senior Fellow with the East-West Center. Michael G. Plummer is Director of Johns Hopkins SAIS Europe and also an East-West Center Senior Fellow.
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The EAST-WEST CENTER promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue. Established by the U.S. Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options
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