The Economics of Analyzing the TPP: Submission to the US International Trade Commission
The Trans Pacific Partnership (TPP) is a landmark agreement for the United States and the global trading system. In a paper included in the Peterson Institute's submission for these Hearings (Petri Plummer, 2016) we estimated that the TPP will increase US real incomes substantially and establish new, market oriented rules in a host of rapidly changing areas of international commerce. We use a comprehensive, state of the art computable general equilibrium (CGE) model to analyze the TPP. The model is based on the GTAP database, but also includes new theoretical features and information on tariffs, non tariff barriers, trade agreements and other variables. It covers trade among 29 countries and regions and is documented on asiapacifictrade.org. Over the last three decades the granular microeconomic structure of CGE models has made them the tool of choice for trade policy analysis. They enable researchers to study changes in specific trade barriers and to trace effects on output, productivity and wages across countries. CGE models have been extensively tested and refined, and are now ubiquitous in policy analysis in fields ranging from trade to agriculture, energy and the environment. Given the Commission's expertise in CGE modeling, we expect that such analysis will also play an important role in its assessment of the TPP. Yet many contributors to the public debate fail to appreciate why long run, microeconomic models are needed, how they work, and what their limitations are. Comments at these Hearings have echoed such misperceptions, arguing for vaguely defined new approaches. In the following, we offer evidence that established