NS3040 Fall Term 2018 Case for The TPP Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

Overview Mireya Solis, The Transpacific Partnership: The Politics of Openness and Leadership; in the Asia-Pacific, Brookings, October 2016 Main point: TPP is vitally connected to the national interests of: Prosperity, Security, and Governance Strengths New rules on the digital economy High tariff elimination targets and Disciplines to address behind-the-border protectionism

Security/Globalization Trilemma

TPP I TPP creates opportunities for sectors that enjoy competitive strength Services Advanced manufacturing, and Agriculture To expand their reach in overseas markets Projected annual income gains from deal range between $57 billion and $131 billion by 2032 compared with baseline scenario

TPP II For the U.S. in contrast to experience of import competition with China – TPP will Not impose large adjustment costs in terms of employment and wages Generate a net (albeit small) positive effect on job creation ad wage rates However individual costs for displaced employees are very high But new pro-adjustment safety net will enable workers to navigate difficult economic transitions (brought about by technological change or trade)

TPP III Geopolitical aspects TPP enhances American influence in Asia and world by Reassuring allies and rivals that the U.S. Being fully anchored to the region and Being capable of supplying novel institutions for regional cooperation Having a smart strategy vis-à-vis China’s regional and global leadership bid since it is both Proactive (building a new economic architecture and Inclusive (leaving the door open for a potential Chinese accession in the future.

TPP IV TPP also aims to close the governance gap in the trading regime caused by the inability of the WTO to update the multilateral rules on trade and investment over last 20 years. TPP can advance dissemination of new rules – already covers 40% of world trade, but also diversity – countries of very different levels of development.

TPP V Unfortunately, Congressional ratification clouded by the rise of anti-trade movements in the U.S. Conventional case for trade focuses on gains to be had while downplaying costs of transitional unemployment Does not resonate in environment of marked increased in income inequality or job losses in recent years Advocates need to Show technological change is the largest force behind job loss in manufacturing Develop pro-adjustment safety nets for all workers Close the skill deficit through better, more appropriate education and training