WASHINGTON — A report issued by Tufts University on Monday found that the Trans-Pacific Partnership trade pact will have a negative impact on the U.S. and Japanese economies, leading to losses in employment and increases in wage inequality.
While the report outlined the negative impact of TPP, the American Apparel & Footwear Association endorsed the agreement, joining a long line of business groups and some economists that argue it will lead to gains for businesses and partner countries.
Trade ministers reached a deal in October on TPP, which includes the U.S., Australia, Japan, Mexico, Canada, Vietnam, Malaysia, Peru, Singapore, Chile, Brunei and New Zealand, and have now set a formal signing for Thursday in Auckland, New Zealand. The countries will then send it to their legislatures for approval.
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The new Tufts working paper, titled “Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement,” comes on the heels of other reports and analysis about the impact of the 12-nation trade deal in the past month.
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Some studies, such as the one from the World Bank, found the U.S. will benefit the least, while others have shown the U.S. has the most to gain in gross domestic product.
In the new study, released by Tufts’ Global Development and Environment Institute, the researchers concluded that the TPP would generate net gross domestic product losses in the U.S. and Japan. According to the paper, GDP in the U.S. would decline 0.54 percent 10 years after a potential implementation of TPP, while Japan’s GDP would fall 0.12 percent over the same period.
According to the Tufts researchers, economic gains for other TPP countries would be “negligible,” amounting to less than one percent over 10 years for developed countries and less than 3 percent for developing countries.
They also found that TPP would lead to overall employment losses of 771,000 jobs. They surmised the U.S. would be hardest hit, with a projected job loss of 448,000.
The researchers said the projections are changes in TPP economies.
“Businesses in participating countries would strive to become more competitive by cutting labor costs, thereby seeking higher short-term profits while undermining efficiency and productivity in the long-term,” the report said. “As a result, the TPP would negatively affect income distribution, further weakening domestic demand and significantly undercutting possible gains from trade.”
Meanwhile, the AAFA joined a list of major business groups that have recently endorsed the TPP, which could help the Obama administration garner support for the trade deal in Congress.
Stephen Lamar, executive vice president at the AAFA, said the group publicly revealed its support after thoroughly reviewing the trade deal and consulting with its members.
“Our members view it as a way to reduce costs, help drive costs out of the supply chain, as a way to enter markets and as a way to support trade-based jobs in the United States, and also in TPP countries,” Lamar said.
While widespread benefits are expected over time, some AAFA members have flagged issues in TPP, including a labor mechanism for Vietnam that subjects the country to a penalty process that could lead to the U.S. withholding or suspending tariff reductions if the country does not live up to its labor commitments, Lamar noted.
The labor provision “disproportionately” affects the apparel and footwear industry because many of the longer tariff phaseouts — up to 10 years for “sensitive” knits and 12 years for wovens — are on apparel imports and could be suspended if the mechanism is triggered, Lamar said.
But on balance, the TPP, encompassing some 40 percent of the world’s GDP, is expected to provide significant benefits for AAFA members. Items that would see benefits up front include travel goods, footwear and certain dresses, skirts and cotton sweaters.