On October 5, after 10 years of negotiations, 12 Pacific Rim countries that account for a combined 40 percent of global GDP agreed to a sweeping trade deal called the Trans-Pacific Partnership (TPP).
The final text of the agreement isn’t public yet, but it appears that it would eliminate a large number of tariffs on goods and services, require state-owned enterprises to obey international trade laws, set stricter environmental and labor standards, and establish international tribunals to settle disputes between businesses and nations over laws that corporations see as unfairly restrictive. It’s now up to the legislatures in participating countries to approve the deal – and in places like the United States, where the treaty is controversial, that promises to be more than a mere rubber-stamp exercise. If the agreement does take effect, however, Credit Suisse economists believe it will have mixed economic effects on the countries involved and potentially significant consequences for one that is conspicuous by its absence.
Jay Feldman, a U.S. economist at Credit Suisse, cites research that estimates the TPP would only increase American GDP 0.2 percent by 2025. After all, the U.S. already has free-trade agreements with six of the 11 other participating countries – Australia, Canada, Chile, Mexico, Peru, and Singapore.
The same research that predicts only a slight increase in GDP for the United States anticipates a bigger boost for Japan—1 percent of GDP—but Credit Suisse’s chief Japan economist Hiromichi Shirakawa believes that may be overly optimistic. Japan’s Cabinet Office says GDP would only increase by 0.66 percent if all import tariffs disappeared, and some would remain in place under the TPP. Lifting Japan’s import taxes on food products such as beef and pork would reduce overall consumer prices by 0.075 percent a year. That might encourage consumers to spend a little bit more freely, but not enough to send GDP soaring.
Of the 10 other countries in the partnership, Malaysia and Vietnam stand to benefit the most, with a potential GDP boost of 5.5 percent and 10.4 percent, respectively, by 2025.
New Zealand, Peru, and Singapore all stand to see GDP rise by between 1 and 1.5 percent (1.3 percent, 1.2 percent, and 1.4 percent, respectively). Australia (0.3 percent), Brunei (0.9 percent), Canada (0.3 percent), Chile (0.7 percent), and Mexico (0.5 percent) would see economic growth increase less than 1 percent, according to the study.