The Economic Effects of the Trans-Pacific Partnership (TPP)

SINCE WE DON’T KNOW THE PROVISIONS OF TPP, HOW CAN WE PREDICT ITS ECONOMIC EFFECTS?

by Rev. Robert Emerick  bob.brumc@verizon.net  May 17, 2014

There are a number of speculative sources based on “leaks.” See for example, “Eyes on Trade,” a Public Citizen report, 1 May ’14.  Perhaps we can draw some tentative conclusions about TPP by learning about NAFTA.  There are many “authoritative” but questionable reports available on NAFTA. For example, see “NAFTA at 20: Ready To Take Off Again?” in The Economist magazine, 4 Jan. ’14; or “NAFTA’s Economic Impact” report in Council of Foreign Relations, 14 Feb. ’14; or “NAFTA at 20: Overview and Trade Effects”, a report by the Congressional Research Office, 28 Apr. ’14.  My report will address this question by comparing some key economic indicators from three distinct periods in U.S. economic history:

1) 1946 to 1971 - the “post-war” economy.

2) 1972 to 1993 – the “trickle-down” economy, before NAFTA. 

3) 1994 to 2013 – the “trickle-down” economy, with NAFTA (NAFTA went into effect in 1994).   

COMPARISON OF U.S. ECONOMIC INDICATORS: (Sources available on request)

                                                                                                 1946 to 1971      1972 to 1993       1994 to 2013

Average annual unemployment rate:                                        4.6%                   6.85%                       6%

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Average annual real GDP growth rate (in 2009 dollars):        3.2%                   3.1%                         2.5%

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Average annual Income Inequality (as the per cent of           34%                     36.6%                      46.6%

Total national income received by the top 10% of the                            (7.6% increase over    (37% increase over  

population filing tax returns)                                                                       the post-war period)  the post-war period)                     

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Average annual inflation rate:                                                   3.3%                   6.1%                          2.4%

   [NOTE Re: inflation - Maybe NAFTA has caused a lower inflation rate due to “cheap” goods being sold in the U.S.  Cheap goods, along with “easy credit,” may have been easing some of the social tension resulting from the higher unemployment, slower economic growth, and higher income inequality in the U.S. since 1972.]

Another important economic and political effect of NAFTA is that US taxpayers can be forced to pay claims from foreign companies and governments, if they claim to have lost revenue due to US government action or inaction. For example, according to The Financial Post (Canada) 30 Apr. ’14, and The Christian Science Monitor, 8 May ’14, the Canadian government and The TransCanada Corp. are considering a lawsuit, under the “investment rights and protections” NAFTA provisions, to recoup lost revenue due to the fact that the U.S. government has not approved the Keystone XL pipeline.  The claim would be enforceable under NAFTA, and would be paid by US taxpayers.  THE IMPLICATIONS FOR THE DETERMINATION OF ECONOMIC POLICY, AS WELL AS VERY MANY OTHER PUBLIC POLICIES AND PRACTICES, ARE OBVIOUS.  More than $430 million has already been paid by US taxpayers under the “investment rights and protections” provisions of NAFTA (see Public Citizen, TABLE OF FOREIGN INVESTOR-STATE CASES AND CLAIMS UNDER NAFTA AND OTHER US TRADE DEALS, Feb. 2014).

SUMMARY:

1. According to key economic indicators, the primary beneficiaries of NAFTA in the U.S. are the top ten percent of incomes in the US, and the commercial and financial interests who receive higher profits.

2. If the provisions of TPP are similar to those of NAFTA, most of our most important political and economic policy and practice decisions will be heavily influenced, if not determined, by trade “agreements” negotiated in secret, and kept secret, even from Congress (see “Froman Takes Heat from Senators for a TPP that Does Not Promote ‘Our Values’”, Public Citizen, Eyes on Trade, 1 May ’14---- “Froman” is U.S. Trade Representative Michael Froman).  Many of us are concerned that government policies are now determined by private financial interests.  NAFTA (and TPP?) seem to by-pass democratic process entirely, “trumping” even “our” government.