The truth behind the Trans-Pacific Partnership

Perhaps most surprising, that in a world in which the average person has access to information and whose analytical skills maybe far more developed than a few generations ago, there is no desire to disregard and dismiss those who peddle falsehood.

The last election in the US is a good case in point, and more specifically, the issue of the Trans-Pacific Partnership (TPP).

This partnership signed by Barack Obama and other world leaders in February 2016, is the result of over seven years of negotiations.

President-elect of the United States, Donald Trump said that he is going to issue a note of intent to withdraw from the Trans-Pacific Partnership trade deal on his first day in office claiming that it will be disastrous for the United States.

The member states are the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. These nations cover 40% of the world’s economy and 26% of the world’s trade. The intention of the TPP is to deepen economic ties between these nations, slashing tariffs and fostering trade to boost growth and includes everything from agriculture to car makers and technology firms.

The agreement was designed to potentially create a new single market, something like that of the EU. The 12 countries have a collective population of about 800 million - almost double that of the European Union’s single market.

Admittedly, the 2016 presidential elections raised legitimate concerns about the TPP and how it will affect vulnerable groups. However, the discourse appears to have suggested that the US was forsaking 70 years of support for international economic integration. The driving force behind such a course of action could be a combination of populism, the effects of the recent economic crisis, the work of anti-trade lobbies through social networks as well as the fact that immigration and trade have become prominent political targets. Now the prospects of the Trans-Pacific Partnership (TPP) agreement becoming a reality appears in serious doubt due to fears that it can be harmful.

Extrapolating to make it appear that liberalization and globalization have been destructive to the US and to the UK is very curious.

It is these two countries that touted the values of liberalizing an economy.

All the studies point out that trade agreements are implemented gradually. It is expected that the changes under TPP will take ten years and some changes as long as 30 years. Implementing TPP will by 2030, result in additional US real national income of $131 billion annually, growth in US exports each year by $357 billion. The studies also found that income growth will lead to higher wages for American workers. Importantly, the studies found that if TPP is delayed by as little as a year, there will be a one-time national loss of $94 billion.

Macroeconomic shocks due to the TPP could generate employment effects in the short run. The TPP is also expected to increase productivity and returns for all three factors (skilled labour by 0.63%, capital by 0.39%, and unskilled labour by 0.37%).

The problem is that the information was not presented during the election and without such knowledge the average person could arrive at the wrong conclusion about a very important agreement for the US.

Notably, the TPP does not include China and some have called the TPP an attempt to keep China at bay and build a strong free trade area to rival its growing economy. It is obvious that China appeared to provide a diplomatic “agreement” to TPP but could clearly be the big winner if the TPP is not implemented.

The first lesson here is that we must not pursue economic, financial or any other business decisions based on emotions.

Indeed, as a society we must learn from the mistakes of those countries around us. Certainly, allowing persons of influence to shepherd us into accepting decisions or conclusions about economic or financial decisions without checking the facts ourselves, means we abandon the thought process and analytical effort to someone else. This is not healthy for a democracy.

Far worse, it means each of our interests is abandoned in support of some else’s interest and agenda.

The second and equally important lesson is that we must place emphasis on developing timely and accurate data sets from a source that has the confidence of all stakeholders. In this regard, the work of the committee to restructure and re-engineer the Central Statistical Office (CSO), especially the input from the diaspora, is critical if we are to move forward with a properly constituted organization.

Third, there is a host of decisions for which the requisite empirical work or appropriate study has to be conducted. It is in this regard we should support the government’s request for IMF assistance with the HSF and other areas of help.

We encourage the government and the Prime Minister, who was a Research Fellow and later Head of the Seismic Research Unit at the University of the West Indies to emphasize the importance of research. It is carefully explored research, especially at this time, that would provide us with the empirical results to arrive at the best decisions for our country and thus avoids emotional decisions.

Nothing else is acceptable.