[CTC] Initial statements on ITC Report

Wed May 18 15:45:42 PDT 2016

The U.S. International Trade Commission report on the TPP is now out at: https://www.usitc.gov/publications/332/pub4607.pdf

Below are initial statements from CEPR, Public Citizen, the Sierra Club and the Steelworkers.  More will follow.

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826

 <http://org.salsalabs.com/dia/track.jsp?v=2&c=guaHWGuO7kHAcxnyRcvi8RT8lBQPvdjW>
NEW RELEASE: Dean Baker's Statement on the TPP and Latest United States International Trade Commission Report
For Immediate Release: May 18, 2016
Contact: Tillie McInnis, (202) 293-5380 x117

Key Findings of the ITC Analysis of the Trans-Pacific Partnership Agreement

Washington, D.C. — CEPR's Dean Baker issued the following statement on the latest USITC Report and the TPP:

“The United States International Trade Commission (USITC) report on the Trans-Pacific Partnership (TPP) was far closer in its assessment of the impact of the TPP on the U.S. economy to the earlier report from the United States Department of Agriculture (USDA) than the recent report produced by the Peterson Institute for International Economics.

“Some of the highlights of the report are:
The ITC projected a net increase in exports of $25.2 billion in 2032 (in 2032 dollars). By contrast, the Peterson Institute’s projection of the gains in exports was more than an order of magnitude larger, projecting an increase in exports of $357 billion in 2030 (in 2015 dollars).
The report projected a slightly larger increase in imports of $48.9 billion (in 2032 dollars).
The report projected that agricultural exports would rise by $7.2 billion, while imports would increase by $2.1 billion, for an increase in net exports of $5.1 billion, a bit over 1.0 percent of the sector’s output.
The report projected manufacturing exports would increase by $15.2 billion, while imports would increase by $39.2 billion, for a net increase in the deficit in manufactured goods of $24.0 billion. It indicated this would result in a drop in manufacturing employment of 0.2 percent.
The projected growth in imports of services would be $7.0 billion, slightly exceeding the projected growth of exports of $4.8 billion, which means that the agreement would lead to a modest reduction in the surplus on services.
The overall projected gains to national income by 2032 are$57.3 billion or 0.23 percent. Since this gain is realized over the next 16 years, it implies an increase to the annual growth rate of just over 0.01 percentage point. In other words, the USITC projects  that as a result of the  TPP, the country will be as wealthy on January 1, 2032 as it would otherwise be on February 15 of 2032.
“It is worth noting that the ITC modeling exercises in the past have not been good predictors of the outcomes of trade deals. For example, their models failed to project the large increases in the deficit with Mexico following NAFTA, the increase in the deficit with China following PNTR, and the increase in the deficit with Korea following the U.S.-Korea trade agreement.

“The USITC also has not done well in projecting winning and losing sectors from trade agreements. A recent analysis <http://org.salsalabs.com/dia/track.jsp?v=2&c=UYw662FXhfecvD2Iy4TUChT8lBQPvdjW> by CEPR found no relationship between the industries that were projected to be export and import gainers and losers from the trade deal with Korea and the actual outcome.

“Also, this analysis does not seem to incorporate any of the losses associated with the stronger and longer patent and copyright protection required under the TPP. Higher prices for drugs, software and other protected items are likely to impose substantial costs on the United States and other parties to the agreement. For example, the New Zealand government estimated <http://org.salsalabs.com/dia/track.jsp?v=2&c=XfrjBRqNUAZ34au7el8wRBT8lBQPvdjW> that just one provision – extension of copyright protection from 50 years to 70 years – would cost the country 0.024 percent of GDP. This amount is 10 percent of the total gains projected in the USITC report. It is entirely possible that a full assessment of the cost of these provisions would show that the TPP  would lead to a net reduction in income for the United States and other countries in the pact.”
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For Immediate Release:                                   Contact:
May 12, 2016                                                  Nicholas Florko, (202) 454-5108,  nflorko at citizen.org <mailto:nflorko at citizen.org>

TPP Study Projects Worsening Trade Balances for 16 of 25 U.S. Economic Sectors, Overall U.S. Trade Deficit Increase
Despite ITC Reliance on Model that Has Systematically Overstated Benefits of Trade Pacts Relative to Outcomes

WASHINGTON, D.C. -- Today the U.S. International Trade Commission released a study on the potential impacts of the Trans-Pacific Partnership (TPP). The report:

·        Estimates a worsening balance of trade for 16 out of 25 U.S. agriculture (p. 124), manufacturing (p.  228), and services (p. 340) sectors that the ITC selected to feature. This includes vehicles, wheat, corn, autoparts, titanium products, chemicals, seafood, textiles and apparel, rice and even financial service. Autoparts would be hard hit with employment projected to decrease by 0.3 percent.

·        Estimates the TPP will increase the U.S. global deficit by $21.7 billion by 2032.

·         Projects even the U.S. services trade balance will worsen by 2032 as service imports of $7 billion swamp the estimated increase in exports of $4.8 billion (p. 35). 

·         Temporarily disregarding the fact that the ITC has underestimated the increase in the U.S. trade deficit caused by almost every pact it has assessed, the trade deficit increase the ITC does project from TPP implementation would equate to 129,484 American job losses, counting both exports and imports, according to the latest administration trade-jobs. This makes even more curious the ITC estimate that the TPP would raise employment levels by 0.07 percent (128,000 jobs) in 2032. 

·         Estimates a decline in output for U.S. manufacturing/natural resources/ energy of $10.8 billion as exports would increase by $15.2 billion and imports would increase by $39.2 billion by 2032.

·         Estimates tiny U.S. economic growth gains (42.7 billion or 0.15 percent) and income gains ($57.3 billion or 0.23 percent) by 2032. In other words, the ITC projects that the United States would be as wealthy on January 1, 2032 with TPP as it would be on February 15, 2032 without TPP.

·         Notes concern that the TPP would empower more foreign corporations to sue the U.S. government in private tribunals to demand taxpayer compensation over U.S. laws they claim violate their TPP  rights and that the Investor State Dispute Settlement System is expanded to allow new grounds for financial service firms to challenge domestic policies. (page 36).

Statement of Lori Wallach, director of Public Citizen’s Global Trade Watch, on the Report:

“This report spotlights how damaging the TPP would be for most Americans’ jobs and wages given it concludes 16 out of 25 U.S. economic sectors (in selected sectors in agriculture, manufacturing, and services) would suffer losses  while the “upside” projection is miniscule gains in economic growth despite these findings being based on the same widely criticized methodology and unrealistic assumptions that have resulted in past USITC reports systematically overstating the benefits from trade deals that ended up causing serious damage.

Given that the ITC’s past studies on pending trade pacts have usually projected improvements in the U.S. trade balance, gains for specific economic sectors and job creation, but the opposite occurred, that this study projects an increase in the U.S. trade deficit, losses for 16 of 25 U.S. economic sectors and no job gains/job losses suggests that if ever implemented, the TPP could really be disastrous.”

How the ITC’s Faulty Methodology Has Systematically Led to Overly Optimistic Projections

The actual outcomes of past trade pacts have been significantly more negative than ITC projections generated using the same methodology employed for the TPP study. This makes today’s unusually negative ITC findings on the TPP especially ominous. 

NAFTA: U.S.-Mexico Trade
1993 - Baseline
ITC Projection
2015 - Actual
$2.6 billion goods surplus (services data not available)
$10.6 billion goods and services surplus
$57 billion goods and services deficit
China-WTO: U.S.-China Trade in Goods and Services
2000 - Baseline
ITC Projection
2015 - Actual
$113 billion deficit
$120 billion deficit
$340 billion deficit
U.S.-Korea FTA: Trade in Goods
2011 - Baseline
ITC Projection
2015 - Actual
$15.6 billion deficit
$10.6 billion deficit
$28.5 billion deficit
The ITC’s TPP report uses the general equilibrium (CGE) model that had led to past ITC trade pact projections being entirely unrelated to actual outcomes by simply assuming away the very results that have often occurred under past pacts: long-term job loss, trade deficit increases and currency devaluations.
By design, the ITC CGE model assumed the U.S. trade balance would not change and that overall U.S. employment levels would remain constant – that workers who lose jobs will simply obtain new jobs in other sectors where wages are presumed to increase. Implicit in the assumption that the trade balance does not change is the assumption of flexible exchange rates. But in reality, currency manipulation is a significant problem among some of the TPP countries. The U.S. Department of Treasury just recently included TPP nation Japan on its new Monitoring List in its semi-annual report on “Foreign Exchange Policies of Major Trading Partners of the United States.”

The Tufts findings noted above spotlight just how drastically the assumptions baked into a CGE model used for the TPP study can affect the outcomes; the Tufts economists actually employed the Peterson Institute trade flow simulation data. They plugged the Peterson findings on import and export levels at full TPP implementation derived from one set of unrealistic assumptions into a model that applies more realistic assumptions about how trade flow changes affect growth and employment – and found that the TPP would cost hundreds of thousands of American jobs and drag down growth rates.

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FOR IMMEDIATE RELEASE:
Wednesday, May 18, 2016
Contact: Dan Byrnes, (202) 495-3039 <tel:%28202%29%20495-3039> or daniel.byrnes at sierraclub.org <mailto:daniel.byrnes at sierraclub.org>
View as webpage <https://content.sierraclub.org/press-releases/2016/05/sierra-club-statement-us-international-trade-commission-s-tpp-study>
Sierra Club Statement on the U.S. International Trade Commission’s TPP Study
WASHINGTON, D.C. -- Today the U.S. International Trade Commission (ITC) released a study on the potential impacts of the Trans-Pacific Partnership (TPP), as required by law. The report projects that the controversial trade deal would result in a decline in U.S. manufacturing due in part to an increase in manufactured imports in some sectors from Vietnam and Malaysia, where production spurs far more climate pollution than in the U.S. It also notes the controversy surrounding the TPP’s conservation provisions, which are too weak to actually curb environmental abuses in TPP countries. The report further acknowledges broad concern that the TPP would empower polluters to sue the U.S. government in private tribunals over climate and environmental protections. 
In response, Ilana Solomon, director of the Sierra Club’s Responsible Trade Program, released the following statement:
“Today’s U.S. International Trade Commission report offers further evidence that the Trans-Pacific Partnership would be a disaster for working families, communities, and our climate. ITC reports have a record of projecting economic benefits of trade agreements that have failed to materialize, so it is noteworthy that even the overly-positive ITC acknowledges that the TPP would have real costs and estimates economic benefits that are slim.  
“One of the costs of the TPP indicated by today’s report is that, by shifting U.S. manufacturing to countries with carbon-intensive production, the deal not only would cost U.S. manufacturing jobs, but also would spur increased climate-disrupting emissions. 
“Today’s report is right to note the broad controversy over TPP rules that would empower major polluters to sue the U.S. government in private tribunals over climate and environmental protections. The report gives members of Congress further reason to reject the polluter-friendly TPP so that we can build a new model of trade that protects communities and the climate.” 
###
More information: 
Read the Sierra Club’s report on how the TPP would increase greenhouse gas emissions, including by making it easier to offshore U.S. manufacturing, here: http://sc.org/dirty-deal <http://sc.org/dirty-deal> 
In today’s report, the U.S. International Trade Commission projects that the TPP would spur an overall decline in U.S. manufacturing output and employment, including in these sectors: textiles, chemicals, auto parts and trailers, machinery and equipment, metals and metal products, instruments and medical devices, and electronic equipment. The projected declines in some sectors owe in part to a projected increase in imports from Vietnam and Malaysia. 
This shift in manufacturing from the U.S. to Vietnam and Malaysia would likely spur increased greenhouse gas emissions. Production in Vietnam is more than four times as carbon-intensive <http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=91&pid=46&aid=31>, and production in Malaysia is twice as carbon-intensive, as U.S. production. 
A TPP-spurred shift in manufacturing from the U.S. to countries on the other side of the Pacific Ocean also would increase shipping-related greenhouse gas emissions. 
The report inexplicably and inaccurately states, “Overall, the consensus among interested parties is that...TPP goes further than any other major trade agreement to address environmental concerns.” That is clearly not the consensus of leading U.S. environmental groups, most of whom have come out in opposition to the TPP <http://www.sierraclub.org/tpp-text-release-enviros> given the weakness of its environmental provisions and the threats that the deal poses to environmental protection. Indeed, the U.S. International Trade Commission’s own findings in today’s report defy its false summary of how “interested parties” view the deal’s environmental implications: 
Regarding the TPP’s conservation provisions, today’s report notes, “others have expressed disappointment that much of this new language is not enforceable under the agreement, and is largely characterized by parties’ agreements to ‘encourage’ or ‘promote’ higher environmental standards...a number of groups have argued that the dispute settlement process is unlikely to be an effective means of safeguarding the environment in TPP parties.”
The report further acknowledges, “many organizations have raised concerns about the impact of the ISDS [investor-state dispute settlement] process on the environment. Concerns center around the potential of ISDS arbitration to cause a rollback of environmental laws, or to create a ‘chilling’ effect, whereby parties to investment agreements that include ISDS decline to impose environmental regulations out of concern about being sued, leading to required compensation payments to foreign investors.”
###

About the Sierra Club

The Sierra Club is America’s largest and most influential grassroots environmental organization, with more than 2.4 million members and supporters nationwide. In addition to creating opportunities for people of all ages, levels and locations to have meaningful outdoor experiences, the Sierra Club works to safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and litigation. For more information, visit http://www.sierraclub.org <http://www.sierraclub.org/>.

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FOR IMMEDIATE RELEASE                                 

May 18, 2016                                                       

International Trade Commission Report Validates that Trans Pacific Partnership Is Not Worth Passing

(Pittsburgh) -- United Steelworkers (USW) International President Leo W. Gerard issued the following statement today after the release of a report from the U.S. International Trade Commission (ITC) on the projected economic impact of the Trans-Pacific Partnership (TPP).   The ITC’s report was required by law.

“This report validates that the Trans-Pacific Partnership (TPP) is not worth passing. In the past, similar reports have proven to widely underestimate the negative impact of trade agreements on American workers and the economy. This report as mandated by law indicates the TPP will produce, almost no benefits, but inflict real harm on so many workers.

“Because of this history, average Americans know that economic projections based on rosy scenarios always end up the same. They pay the price with lost jobs, stagnating or declining wages and rising income inequality as Wall Street profits.

“As the report was being finalized for publication, TPP proponents were touting other biased and optimistic studies in an attempt to blunt the impact of this official study. It is time that we jettison theory and deal with reality: Our nation’s trade policies are in dramatic need of reform.

“This year voters across the country are clearly making trade an issue. Most Washington policymakers and politicians are out of touch with the lives of average Americans. The American public is sick and tired of economists projecting fantasies of prosperity for them when, it’s primarily multinational corporations that benefit. On Main Street and in workplaces all across America, working Americans know firsthand the consequences of what economists experience in theory.”

“The report spans almost 800 pages and will require days to parse through and digest.  But, the executive summary paints a grim picture for domestic manufacturing producers and workers.  While proponents have sung the agreement’s praises, the report estimates that output in manufacturing, natural resources and energy would be lower as a result of the TPP. That’s just totally unacceptable. 

“The report also estimates that the trade deficit would increase by $21.7 billion because of the TPP. America cannot afford another trade agreement that adds to our unacceptably high and unsustainable trade deficit.

“Real income is expected to increase, but only by less than one-quarter of one percent in 2032.   That amounts to little more than a rounding error in the 15th year after the agreement is in effect.   In addition, every study done in the past on the effects of trade agreements has dramatically underestimated the negative impact that has occurred once agreements have been in place.

“The ITC should be commended for its thorough evaluation of the proposed TPP and the open process that it pursued. It is clear that they listened to the array of voices that asked to be heard.

“But in the end, this may be the most damning government report ever submitted for a trade agreement. It is clear that the TPP will be DOA if Congress ever decides to bring it up.”

The USW represents 850,000 workers in North America employed in a wide range of industries that include metals, rubber, chemicals, paper, oil refining and the service and public sectors.  For more information: http://www.usw.org/ <http://www.usw.org/>.

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