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With TPP signing, pact still hot button

By Chen Weihua in Washington | China Daily USA | Updated: 2016-02-03 11:49

As the 12 nations of the Trans-Pacific Partnership (TPP) prepare to hold a signing ceremony on Thursday in New Zealand, the potential benefits of the trade agreement are stirring a heated debate, at least in the US.

On Tuesday, the Peterson Institute for International Economics issued 10 essays arguing that the TPP, if ratified, would deliver significant economic benefits to the US and the 11 other participating countries from a sweeping liberalization of barriers on trade and investment.

"Trade has become a highly emotional and political issue, but it remains possible to provide nonpartisan economic analysis that fairly sets out the best estimate of the costs and benefit of the TPP overall and in specific areas," said Adam Posen, president of the Washington-based think tank.

According to the report, annual income gains generated by the TPP by 2030 will be $131 billion for the US, and account for 0.5 percent of US baseline GDP. The gains for the world will be $492 billion.

Besides the US, other TPP members are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The report also projected large income gains for Japan, Malaysia and Vietnam, but it said TPP is not generally expected to have large income effects on nonmembers, with gain for some and loss for others.

China, India and Thailand, which compete with TPP members for TPP markets, are listed as countries with tangible losses. The same is true for South Korea, because TPP will erode its advantage in the US market under their bilateral free trade agreement.

The report said the real income loss for China would amount to $18 billion a year by 2030, a figure that Jeffrey Schott, a senior fellow at the Peterson Institute, described on Tuesday as "moderate income loss". He said Chinese officials are looking at the issue very carefully, but expressed that he doesn't know if and when China wants to join the TPP.

TPP was originally seen by many Chinese as a US scheme to curtail China's rise economically, but the attitude has evolved over the years, with Chinese officials expressing interest to better understanding the trade deal.

He Yafei, a former vice-foreign minister, argued that TPP could be a chance for China to stimulate its reforms. Former Chinese Premier Zhu Rongji used the country's accession to the World Trade Organization (WTO) in 2001 as a way to boost domestic reforms.

In the US, the TPP remains a controversial issue. On Monday, economists at the Tufts University Global Development and Environment Institute said that projections claiming TPP will boost economic activity in the US are "based on unrealistic assumptions".

They argued that the trade deal will likely lead to the loss of some 450,000 jobs from the US workforce while lowering GDP by more than a half-percentage point over the next decade and increasing inequality.

The signing in Auckland will be ceremonial. The legislatures in the 12 nations have yet to ratify TPP to make it legally effective.

Larry Summers, a former chief economic advisor for President Barack Obama, expressed pessimism last week that the TPP will be passed by the US Congress during the lame duck session later this year. He said the Republicans are unlikely to give Obama such "final legacy gift."

Presidential race front-runners in both parties, such as Hillary Clinton, Bernie Sanders, Donald Trump and Ted Cruz all oppose the TPP.

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