Jomo Kwame Sundaram
A US government agency acknowledges that the Trans-Pacific Partnership (TPP) will not deliver many economic benefits promised by its cheerleaders. The 2016 report by the United States International Trade Commission (ITC) acknowledges that the TPP will not deliver many gains claimed by the US Trade Representative (USTR) and the Peterson Institute of International Economics (PIIE) although it uses similar methodology and assumes that the TPP will not change the US trade deficit as a share of GDP.
The ITC’s credibility has declined over the years as it earned a reputation for cheer-leading FTAs. It had grossly underestimated US trade deficit increases following virtually every ‘free trade’ pact it assessed. Its projections understated the large US deficit increase with Mexico following the North American Free Trade Agreement (NAFTA), the huge trade deficit explosion with China following ‘permanent normal trade relations’, and the trade deficit spike with South Korea following the US-Korea trade agreement.
To assess the impact of the TPP, the ITC used its variant of a computable general equilibrium (CGE) model modified to take account of foreign direct investment (FDI) effects. To be sure, the ITC accepts growth to rise due to a significant increase in FDI, although there is no strong evidence or even logic that the TPP provisions will ensure the increase in FDI and growth projected. In fact, the procedure used involves many arbitrary elements, such as the impact on the OECD’s Regulatory Restrictiveness Index (RRI), and the impact of the latter on productivity, FDI flows and GDP, both in the US and abroad.