Lost Jobs, Lower Incomes, Rising Inequality
Jomo Kwame Sundaram
Jomo Kwame Sundaram was an Assistant Secretary General working on Economic Development in the United Nations system during 2005-15, and was awarded the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.
Originally published as a Global Development and Environment Institute Policy Brief explaining GDAE’s recent working paper on the economic impacts of the Trans-Pacific Partnership Agreement, and the debates over its critique of prevailing economic modeling of the pact. The paper and other materials on the debates are available here.
The Trans-Pacifc Partnership (TPP) Agreement, recently agreed to by twelve Pacifc Rim countries led by the United States,1 promises to ease many restrictions on cross-border transactions and harmonize regulations. Proponents of the agreement have claimed significant economic benefits, citing modest overall net GDP gains, ranging from half of one percent in the United States to 13 percent in Vietnam after fifteen years. Their claims, however, rely on many unjustified assumptions, including full employment in every country and no resulting impacts on working people’s incomes, with more than 90 percent of overall growth gains due to ‘non-trade measures’ with varying impacts.
A recent GDAE Working Paper finds that with more realistic methodological assumptions, critics of the TPP indeed have reason to be concerned. Using the trade projections for the most optimistic growth forecasts, we find that the TPP is more likely to lead to net employment losses in many countries (771,000 jobs lost overall, with 448,000 in the United States alone) and higher inequality in all country groupings. Declining worker purchasing power would weaken aggregate demand, slowing economic growth. The United States (-0.5 percent) and Japan (-0.1 percent) are projected to suffer small net income losses, not gains, from the TPP.
This GDAE Policy Brief is intended to help clarify the differences with other modeling studies and to present our findings in a less technical manner.