Policy Research

The Economic Effects of the Trans Pacific Partnership: New Estimates

Peter A. Petri, Michael G. Plummer

Summary

The article attempts to estimate the upcoming effects that the Trans-Pacific Partnership (TPP) will have on the U.S. and world economy. The study estimates that the implementation of the TPP will result in an increase of U.S. income by about $131 billion per year in real terms. Additionally, the study estimates that annual income increases for the world overall will be roughly $492 billion. The article continues to estimate that overall employment and wage rates will rise, however this rise will disproportionality benefit skilled labor. Further, unskilled workers in manufacturing jobs will likely see large transaction costs such as extended unemployment and lowered wage rates due to cheaper manufacturing in other markets. The article also estimates that the implementation of the TPP will likely set the tone for larger free trade agreements that will lead to even greater gains in GDP.

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Policy Implications

This article can be used to both estimate upcoming changes to the economy from the TPP, and also to prepare for possible adverse effects. The study mentions that unskilled workers will face negative effects from the TPP and advocates for policy to offset the potential upcoming hardships. Policy such as safety nets, and assistance in relocating could proves especially useful. The article mentions that these policies would cost a fraction of total gains from the TPP.