06 February 2016

TPP—trading down?

According to its proponents, the "trade" agreement the Trans-Pacific Partnership (TPP) will generate economic benefits to all parties by eliminating obstacles to trade and investment.

A study out of Tufts University—Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement—offers another opinion. The Tufts' economists made their projections using the United Nations Global Policy Model which they claim "provides more sensible projections because it allows for changes in employment and inequality and incorporates the impact those changes have on aggregate demand and economic growth."

Their results show that some countries, including Japan and the U.S., would suffer net losses of GDP, and all countries would suffer employment losses and higher income inequality. Specifically, by 2025 Canada would trade a .28 per cent increase in GDP for a loss of 58,000 jobs and a .86 drop in labour's share of GDP. In other words, what benefits do occur will go to capital at the expense of labour.

Quite aside from the long list of problems already identified with the proposed agreement, it now appears the promised benefits may be an illusion.

International Trade Minister Chrystia Freeland has formally signed the TPP, however she has also pledged to hold broad consultations and a full and open debate in Parliament before it is ratified. It would be utter foolishness to ratify the deal before the U.S. presidential election in November as both Bernie Sanders and Hilary Clinton oppose it. If the democratic candidate becomes president and backs off the deal, our government will have an easy out. And that, it increasingly seems, would be a very good thing.

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