CPA Statement re US ITC Report on Trans-Pacific Partnership

May 18, 2016


Contact: Paola Masman, Media Director
202-688-5145 ext 2, paola@prosperousamerica.org

The following statement may be attributed to Michael Stumo, CEO of the Coalition for a Prosperous America. 


CPA appreciates the hard work of the US International Trade Commission (USITC) Commissioners and staff that created their recent report: “Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors”. The report found that US trade performance will worsen under the TPP overall and for the majority of sectors analyzed, including services.

The Commission’s report should be viewed as the most optimistic result possible from the TPP if everything goes right. It is worth remembering that the economic projections in the Commission’s prior reports on Permanent Normalized Trade Relations status with China and the Korea-US Free Trade Agreement were vastly more optimistic than the actual results.

The computable general equilibrium model, which the USITC used to analyze the TPP, makes optimistic-but-false assumptions including full employment over the long term, the absence of currency misalignment, and perfectly rational economic behavior by other TPP countries (the absence of gaming the system).

However TPP countries do game the system with modern mercantilist tactics by, for example, replacing tariff cuts with value added tax hikes, which Japan is engaging in now.  Japan, Vietnam, Malaysia and Singapore also use comprehensive and strategic industrial policies that benefit national champion, state-influenced or state-owned companies so they can win the global competition for jobs and growth.

While the report is nearly 800 pages, the following core facts in the report are important in this “most optimistic possible” scenario: 

1. Worsening US Trade Deficit: The overall US trade deficit (with the entire world including TPP countries) will worsen by at least $21.7B annually in the next 16 years because imports will rise more than exports, even as our trade deficit improves with the TPP countries. In other words, our trade balance with TPP countries may marginally improve, but will worsen it with the world. (pg 21)

2. Insignificant and Highly Questionable Income Gains: US annual real income will be less than one quarter of one percent higher than it would otherwise be. That amount is less than a rounding error.  This gain in annual real income is the ONLY economy wide benefit projected by the USITC. (pg 21)

3. Worsening Manufacturing Deficit:  The TPP will worsen our already terrible manufacturing trade deficit by $24.1B per year. (pg 30-31)

4. Worsening Textile and Apparel Deficit: The TPP will worsen our already terrible textile and apparel trade deficit by $1.9B per year. (pg 32)

5. Poor Trade in Services Performance: The TPP will will increase imports of services by $7B per year and increase exports by only $4.8B per year, for a net negative of $2.2B per year. (pg 34)

The economic rationale for the TPP does not exist. It will worsen America’s trade performance. The national security and foreign policy rationale is dubious, unproven, and based upon rhetoric.  The TPP is another dumb trade agreement.  American does not need more dumb trade agreements.  Congress should reject it.

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