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Manufacture This

The blog of the Alliance for American Manufacturing

New study predicts TPP will cost 50,000 U.S. jobs each year; another study says 450,000 jobs to be lost.

Economists are starting to break out their crystal balls to predict the impact of a proposed massive trade deal on the U.S. economy, and it is becoming clearer that significant factory job losses are to be expected.

A just-released study from the nonpartisan Peterson Institute for International Economics finds that 50,000 U.S. workers could find themselves out of a job each year during the implementation of the Trans-Pacific Partnership (TPP). Most of those jobs would be in manufacturing.

And while the pro-TPP researchers argue that a rise in exports will lead to job growth in other sectors, they note manufacturing growth will be sluggish because of the trade deal:

“While in absolute terms, employment in manufacturing continues to grow irrespective of the TPP, the agreement dampens the growth rate of manufacturing employment by one-fifth. … More detailed results show 121,000 fewer jobs created in the sector relative to the baseline by 2030.”

It should be noted that the picture the Peterson Institute researchers paint is an optimistic one. The study comes on the heels of another from the Global Development and Economic Institute at Tufts University that is far more dire, predicting nearly 450,000 U.S. jobs would be lost due to the trade accord. Our friend Robert E. Scott at the Economic Policy Institute also predicts big job losses, in part because the agreement doesn’t do anything concrete to address currency cheating.

Every trade deal has winners and losers, and TPP proponents (including the Peterson Institute) argue that the United States will benefit because of export growth. The Peterson Institute study predicts an increase in “annual real incomes in the United States by $131 billion, or 0.5 percent of GDP” by 2030, and the World Bank has predicted 0.6 percent growth to the U.S. economy.

But the Tufts researchers argue that the agreement will actually lead to further inequality “as measured by changes in the labor share of the national income.” Scott at EPI also says the TPP will lead to further inequality, noting that even if exports go up, it’s important to remember that imports also are likely to increase.

That, of course, will displace jobs. More than 5 million manufacturing jobs were lost between 1997 and 2014, most due to trade deficits with countries that have trade and investment deals with the United States. Scott continues:

“Growing trade deficits and trade-related job losses also tend to put downward pressure on wages, especially for noncollege-educated workers because manufacturing tends to employ a larger share of such workers, and because manufacturing compensation (including both wages and benefits) is substantially higher than compensation in alternative jobs in, for example, service industries.”

The TPP is now in the hands of Congress, which will vote on it in an up-or-down vote. But the TPP’s potential impact on good-paying manufacturing jobs is one reason why leaders on both sides of the aisle – and presidential candidates as different as Donald Trump and Hillary Clinton – have expressed concern about the pending trade deal.

When it comes to manufacturing jobs, it appears they are right to worry.