The Benefits of the Trans-Pacific Partnership

August 1, 2015

Negotiations for the Trans-Pacific Partnership (TPP) are ongoing and are expected to yield an outcome in August. The trade deal has been shrouded in secrecy but Jeffrey Bader and David Dollar of the US-based Brookings Institution have recently estimated the benefits available from the deal.

 

According to their analysis, the largest gains go to large economies and particularly those that have stringent trade protection. They estimate that, the United States stands to gain $77 billion annually, while Japan's benefit is an even larger $105 billion.

 

The big winner relative to the size of its economy is Vietnam, which could gain more than 10 percent of gross domestic product; followed closely by Malaysia, gaining about 6 percent.

 

However, stronger gains, especially for relatively undeveloped Asian economies are dependent on additional policy reforms.  According to Bader and Dollar, "if joining TPP ushers in additional reforms in Vietnam that attract more investment and productivity growth, the gains could be much larger." 

 

China is expected to see significant negative impacts if, as a result of the TPP deal, trade gets diverted from it to other countries in the region, such as Vietnam.  If more developing countries—especially large ones such as India, Indonesia, and Thailand—are attracted to join, then China’s losses from being left out will mount.

 

However, it will still be difficult to get the deal passed in the United States, where there has been significant opposition and legislative processes mean an extended wait to pass the deal.

 

In an optimistic scenario, the deal can get passed by February 2016.  However, that assumes that the current negotiations will bear fruit, and the current US administration will be able to get it through Congress, which given recent experience, will be extremely tricky. 

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