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The Biggest Losers?

Summary:
The world turns even if America doesn’t. That’s certainly true on trade, where a rebranded Trans-Pacific Partnership has begun with the new year in 11 countries two years after President Trump withdrew. The biggest losers are American producers. The CPTPP, as it’s known, entered into force in Canada, Japan, Mexico, New Zealand, Australia and Singapore last week, where it will slash 95% of tariffs on goods among its members, which account for 13% of global GDP. The others include Vietnam, where CPTPP is in force Jan. 14, and Brunei, Chile, Malaysia and Peru, which are in the midst of ratification. These are the opening two paragraphs of a Wall Street Journal editorial titled “America’s Lost Markets,” January 6, 2019 (January 7 print edition.) Underneath the title

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The world turns even if America doesn’t. That’s certainly true on trade, where a rebranded Trans-Pacific Partnership has begun with the new year in 11 countries two years after President Trump withdrew. The biggest losers are American producers.

The CPTPP, as it’s known, entered into force in Canada, Japan, Mexico, New Zealand, Australia and Singapore last week, where it will slash 95% of tariffs on goods among its members, which account for 13% of global GDP. The others include Vietnam, where CPTPP is in force Jan. 14, and Brunei, Chile, Malaysia and Peru, which are in the midst of ratification.

These are the opening two paragraphs of a Wall Street Journal editorial titled “America’s Lost Markets,” January 6, 2019 (January 7 print edition.) Underneath the title is the following summary of the article: “The Pacific trade pact is up and running, and U.S. exporters are the losers.”

Here are two later paragraphs:

Despite the U.S. withdrawal, member economies still stand to make significant gains—some $147 billion in global income benefits, according to the Peterson Institute for International Economics. The research finds Malaysia and Singapore would see additional increases of 3.1% and 2.7% in real income by 2030, respectively. According to another estimate, Vietnam will see textile and apparel exports grow $3 billion among CPTPP countries.

Canada is due for a larger GDP boost than if the U.S. had remained in the pact, and that comes largely at the expense of U.S. farmers who are likely to be edged out of Japanese markets. Tokyo’s regular 38.5% tariff on beef, which applies to the U.S., will fall to 9% for imports from Canada, New Zealand and Australia. Ottawa estimates total beef exports will increase 10% as a result.

The editorial is almost excellent. Why almost? Look at the summary after the title. Also look at the last sentence of the first paragraph that I quoted. Both contain a key error and it’s the same error. What is the error?

HINT: Put aside foreigners, which you shouldn’t. Within the United States, what other group contends for being the biggest losers? Why?

BIGGER HINT: Read this piece that I wrote for Fortune in 2000.

David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

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