IndustryWeek: TPP: Another Nail in the Coffin of American Manufacturing
A new analysis of the proposed Trans Pacific Partnership Agreement (TPP) argues the most likely outcome of the trade pact will be "job destruction and industry shrinkage."
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The Peterson Institute analyzed the TPP using the "computable general equilibrium (CGE) model." I'm not an economist. I live and work in the real world of manufacturing. Thus, I am not familiar with some of the terms economists use for economic models, and had not heard of this term previously. I tried to find explanations that make sense, but even the Wikipedia definition was complex: "A CGE model consists of (a) equations describing model variables and (b) a database (usually very detailed) consistent with the model equations... CGE models are useful whenever we wish to estimate the effect of changes in one part of the economy upon the rest. For example, a tax on flour might affect bread prices, the CPI, and hence perhaps wages and employment. They have been used widely to analyse trade policy."
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Untrue facts assumed ─ "full employment always exists, trade is in balance, that wages and productivity stay in alignment rather than diverge, and that all countries have perfectly free markets with rational economic behavior." These assumptions are false ─ "full employment rarely exists; trade is almost never in balance; wages have diverged downward from productivity for the past several decades; and many TPP countries have state-directed capitalism or strong industrial policies to influence and alter market outcomes."
Untrue past results ─ The CGE model was used to analyze China's being granted Permanent Normalized Trade Relations with the U.S. (China PNTR) in 2000 and the Korea-U. S. trade (KORUS) agreement in 2012. A reduction in the trade deficits were predicted for both countries, but the reality is that the U. S. trade deficit with China increased from $68.7 billion in 1999 to $337 billion in 2015, and the Korea trade "deficit worsened by $12 billion annually between 2012 (date of KORUS implementation) to 2015." (US Census Bureau)
Untrue assumption of no net job losses─ "The CGE model wrongly assumes that there are no job losses to produce its results. The International Trade Administration assumes that every billion dollars of U.S. exports supported 5,796 jobs, down from 7,117 jobs per billion dollars of U.S. exports in 2009. Conversely, every billion dollars of imports has the opposite result. Thus, where trade agreements result in worsening trade deficits, as is the case for the NAFTA, Korea and China PNTR deals, the job losses are drastic."
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http://m.industryweek.com/trade/tpp-another-nail-coffin-american-manufacturing
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