Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement

Jeronim Capaldo, Alex Izurieta and Jomo Kwame Sundaram

No 16-01, GDAE Working Papers from GDAE, Tufts University

Abstract: Proponents of the Trans-Pacific Partnership agreement (TPP) emphasize its prospective economic benefits, with economic growth increasing due to rising trade volumes and investment. Widely cited projections suggest modest GDP gains after ten years, varying from less than half a percentage point in the United States to 13 percent in Vietnam. However, these projections assume full employment and constant income distribution in all countries excluding some of the major risks of trade liberalization. In this paper, we provide alternative projections of the TPP’s economic effects using the United Nations Global Policy Model. Allowing for changes in employment and income distribution, we obtain very different results. We find that the benefits to economic growth are even smaller than those projected with full-employment models, and are negative for Japan and the United States. More important, we find that the TPP will likely lead to losses in employment and increases in inequality.

Date: 2016-01
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