Tuesday, July 28, 2015

What economic models tell us about the TPP

As Congress debated whether to authorize negotiations to complete a Trans-Pacific Partnership this year, the arguments were fraught with old misunderstandings about trade agreements, what they are and their intended economic effects.

     Trade agreements are not job creators, job killers or deals that will detrimentally alter the nature of our economy. But they are agreements that promote best practices in trade (for example, through environmental and labor standards), shift people to higher paying jobs and bring competition that moves resources to the most efficient sectors of the economy.

     Through economic modeling, which entails dividing the world economy into 18 sectors in 24 countries and regions and examining how the partnership would change these markets, we can make four predictions for the broad effects of the TPP.

1. The TPP will not have large, early effects on the U.S.

More than 90% of U.S. economic activity involves markets and jobs minimally affected by trade, and the TPP will apply best practices that are mostly already in place in the U.S. Passing the TPP will therefore not have an immediate or dramatic effect on the U.S. economy.



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