A Defense of the TPP
Free trade has always been an incredibly divisive issue politically, if not economically. As long as more free trade agreements are signed into law, politicians will always be able to gain clout opposing them, feeding off populist anger directed at trade deals like the NAFTA, the TPP, or TTIP. With every trade deal have come impassioned claims that trade will lower our wages, ship our jobs overseas, and circumvent our country’s sovereignty.
This visceral anger targeted at trade trade, partly stemming from a fear and distrust of globalization, creates a backdrop is misinformation and deception in our political discourse against trade, and has recently flared up again as president Obama attempts to push the Trans Pacific Partnership, also known as TPP.
The benefits of trade are as obvious to economists as the existence of climate change are to climate scientists. A recent poll by the Chicago’s Booth school found that 95% of all economists (across the entire political spectrum), agree that free trade creates tangible economic benefits.
Still, arguments that trade will harm one’s economic are still prevalent. One of the most prominent arguments against trade is that it somehow enriches the rich and powerful while leaving the middle class and poor behind, an argument that has no basis in reality. In fact, the poor gain actually gain the most from free trade, as economists have always know. A recent NBER paper found that the bottom 10th income percentile of Americans see a 62% gain in purchasing power as a result from trade, while the 90th percentile only sees a 3% gain in purchasing power.
Trade doesn’t destroy jobs either, as two million jobs were created in the immediate aftermath of NAFTA. The general economic consensus today is that NAFTA has a general positive impact on the United States and Mexico. We should expect the same from the TPP
The United States is expected to experience similar welfare gains as a result of the Trans Pacific Partnership. The Peterson Institute of International Economics found that the TPP would increase US and Canadian incomes by $131 and $37, respectively. Astonishingly, the country that will see perhaps the most benefit is Vietnam, which may see 11% gdp growth as a result of the TPP, economic growth that will raise the incomes of Vietnamese as well as lift many out of poverty. In addition, constant criticism about the TPP outsourcing the United States’s manufacturing jobs fall a bit flat when even the National Association of Manufacturers supports the TPP.