- - Thursday, October 27, 2016

ANALYSIS/OPINION:

“When think tanks pass bad trade deals” (Web, Oct. 16) by Sen. Jeff Sessions and Peter Navarro contains inaccuracies and incorrect interpretations of information attributed to the Peterson Institute for International Economics (PIIE).

Mr. Sessions and Mr. Navarro contend that a PIIE assessment of the Trans-Pacific Partnership (TPP) is based on faulty assumptions. They wrongly allege that the PIIE model fixes unemployment below four-percent unemployment, that labor’s share of national income is constant, and that bilateral trade balances remain constant. Our approach is employed throughout the economics profession, including in the government’s official assessment. We concluded that TPP would increase United States income $131 billion annually when fully implemented under conditions of full employment, the traditional premise in all trade analyses that assess long-run effects abstracting from cycles of economic expansion and contraction. The model permits bilateral balances to adjust, and its simulations show that labor’s income share will actually rise slightly.

The authors make false claims to dispute earlier PIIE statements regarding past trade deals. Contrary to their assertion, the United States did not lose 850,000 jobs because of the North American Free Trade Agreement (NAFTA). The U.S. economy experienced a boom, adding nearly 17 million jobs in the seven years following enactment, with the unemployment rate falling from 6.9 percent to 4.0 percent.

The writers assert that China’s entry into the World Trade Organization cost the United States five million jobs, a figure that surpasses all credible estimates. They ignore the consumer benefits of lower prices on shoes, clothing and other items, especially for the poor, who saw their living standards increase as a result.

Mr. Sessions and Mr. Navarro dismiss a PIIE study which concluded that a trade war provoked by Donald Trump’s proposed imposition of tariffs on Mexico and China would precipitate a slowdown, costing millions of jobs. They claim that such concerns are unwarranted. But historically both Mexico and China have retaliated against trade sanctions imposed by the United States. And even if there were no retaliation, Mr. Trump’s proposal would damage the U.S. economy through the disruption of cross-border supply chains. These networks are critical to domestic production of electronics and motor vehicles — including in Mr. Sessions’ state of Alabama.

International trade creates gains 10 to 20 times greater than costs. The Peterson Institute advocates a greater focus on adjustment and retraining assistance for displaced workers. Mr. Sessions and Mr. Navarro appear oblivious to all of this.

MARCUS NOLAND

Executive vice president and director of studies

Peterson Institute for International Economics

Washington

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