	Introduction

In February 2016, the United States signed the Trans-Pacific Partnership (TPP) with 11 countries: Canada, Mexico, Chile, Peru, Japan, Australia, New Zealand, Singapore, Malaysia, Vietnam, and Brunei. In addition, some observers have tied U.S. trade deficits to existing U.S. free trade agreements (FTAs) by arguing that the agreements have worsened the trade deficit and, thereby, have negatively affected U.S. employment and wages. Both proponents and opponents of trade agreements often cite the results of these studies to support their respective positions. Estimating the Economic Effects of Trade Agreements

The TPP, considered by participants to be a high-standard and comprehensive agreement, is designed to eliminate and reduce trade barriers and establish and enhance trade rules and disciplines of the trading system among the parties to the agreement. Due to the limitations of data and other theoretical and practical issues involved with services, investment, and non-tariff barriers, most estimates of the economic and employment effects of trade and trade agreements focus narrowly on the goods sector, where data on trade and tariff rates are available, to estimate how demand for these goods may change as a result of changes in tariffs. At times, countries are motivated to participate in trade agreements to forestall this type of trade diversion. In contrast, economists Jeronim Capaldo and Alex Izurieta use a different model to develop their estimates of the impact of TPP. United States International Trade Commission

The United States International Trade Commission (ITC) is tasked by Congress to provide economic assessments of U.S. trade agreements: it released a comprehensive assessment of the economic impact of the TPP agreement in May 2016. Services exports were projected to increase by 0.6% and services imports by 1.2% by 2032. Peterson Institute for International Economics

An analysis conducted by Peter A. Petri and Michael G. Plummer and published by the Peterson Institute for International Economics also used the GTAP model, assumed full employment, and made some adjustments to the standard GTAP model to estimate the economic impact of the TPP. This estimate concluded that the agreement would increase U.S. income and directly generate jobs in the U.S. economy. The study also estimated that the TPP could increase U.S. annual GDP by $131 billion, or 0.5% of GDP, and could increase annual exports by $357 billion, or 9.1% of U.S. exports, by 2030 when the TPP would be expected to be fully in force, as indicated in Table 6 . 2. 3. Tufts University, Global Development and Environment Institute

Tufts University's Global Development and Environment Institute sponsored another study of the economic impact of the TPP, using the United Nations Global Policy Model (GPM). This study differs markedly from the previous studies, because the GPM model is not a GTAP-type CGE model and the structure of the model and the assumptions that are used differ substantially from those used in the three previous examples. The study also estimates that the TPP will negatively affect growth and employment in non-TPP countries, with Europe losing 879,000 jobs and non-TPP developing countries projected to lose about 4.5 million jobs by 2025. The authors "assume" that this process would lower nominal unit labor costs through the combined actions of business managers and "policymakers" who negotiate lower wages; Contending that this process would affect the distribution of income between labor and business profits in favor of profits for businesses, thereby lowering labor's share of income, because the TPP would affect the incentives for countries to "tilt income distribution in favor of profits," which the authors analyze by "estimating the impact of changes in unit labor costs on international market shares;" Assuming that economic sectors of the economy that are affected negatively by the TPP agreement would create a demand shortfall in the economy, because, as a sector contracts, "other sectors may suffer as well," leading to "large job losses and drive the economy into recession;" Arguing that the TPP would push firms and other borrowers to seek higher returns in order to avoid losing investors. Part of the debate surrounding the agreement likely will focus on the potential impact of the agreement on the U.S. economy, particularly the effect on employment. Consequently, estimates of the impact of the TPP on the U.S. economy can vary from positive to negative, reflecting the importance of the assumptions that are used to derive the results.
Congress plays a major role in formulating and implementing U.S. trade policy through its legislative and oversight responsibilities. Under the U.S. Constitution, Congress has the authority to regulate foreign commerce, while the President has the authority to conduct foreign relations. In 2015, Congress reauthorized Trade Promotion Authority (TPA) that (1) sets trade policy objectives for the President to negotiate in trade agreements; (2) requires the President to engage with and keep Congress informed of negotiations; and (3) provides for Congressional consideration of legislation to implement trade agreements on an expedited basis, based on certain criteria. The United States is considering the recently concluded Trans-Pacific Partnership (TPP) among the United States and 11 other countries. The 12 TPP countries signed the agreement in February 2016, but the agreement must be ratified by each country before it can enter into force. In the United States this requires implementing legislation by Congress.
The agreement is viewed by the participants as a "comprehensive and high standard" mega-regional free trade agreement that may hold the promise of greater economic opportunities and closer economic and strategic ties among the negotiating parties.
For Members of Congress and others, international trade and trade agreements may offer the prospect of improved national economic welfare. Such agreements, however, have mixed effects on U.S. domestic and foreign interests, both economic and political. In considering the TPP, Congress likely will examine various economic studies to assess the impact of the agreement on the economy. The results of these studies vary depending on the model and the assumptions that are used to generate the results. The U.S. International Trade Commission is tasked with providing the official U.S. government estimate of the economic effects of the agreement. This report provides an analysis of various studies and information on the types of economic models that are used to assess the impact of trade agreements and the importance of the assumptions that are used in generating these estimates.
Estimating the employment effects from a trade agreement is imprecise because (1) estimates can vary widely as a result of the model and assumptions that are used; (2) limitations arise from the types of data available, particularly concerning non-tariff barriers; and (3) it is difficult to disentangle the effects of trade and trade agreements from other factors that affect the U.S. economy, among other things.
This report analyses some studies of the economic impact of TPP that are playing an important role in affecting the public policy debate, including the following:
U.S. International Trade Commission (USITC): estimated the TPP would increase annual U.S. GDP by 0.15%, and trade by 1.0% by 2032; U.S. annual employment would be higher by 128,000. Peter A. Petri and Michael G. Plummer (Peterson Institute for International Economics) estimated that the TPP would increase annual GDP by 0.5% and increase U.S. exports by 9.0% by 2030. World Bank: estimated the TPP would increase U.S. GDP by 0.5% by 2030. Tufts University, Global Development and Environment Institute study by Jeronim Capaldo and Alex Izurieta: estimated that all TPP participants would lose 770,000 jobs and non-TPP developing economies would lose 4.5 million jobs. Other studies that use such proxy indicators as trade balances and jobs associated with exports to assess the impact of the TPP.