What’s the Trans-Pacific Partnership Trade Agreement?

May 27, 2015 at 8:31 AM

If you live in a country that borders the Pacific Ocean, the Trans-Pacific Partnership may affect you, either personally or through its effects on your country’s economy and trade culture.

The Trans-Pacific Partnership, or TPP, is a trade agreement being negotiated among countries bordering the Pacific Ocean. Its goal is to create new rules for trade between the countries and increase commerce and prosperity.

What would the Trans-Pacific Partnership Trade Agreement do?

The TPP would be the largest international trade agreement since 1994, when the World Trade Organization (WTO) was created. The TPP tentatively includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam – countries that, together, make up almost 40 percent of the global economy. (Currently, China isn’t a party to the discussions, but it would likely be able to enter into the agreement at a later date.)

It would reduce trade barriers among these countries, lowering tariffs on goods such as rice, meat, and sugar and on consumer products like vehicles and textiles. In addition to this, however, it could require countries to abide by labor regulations and environmental policies, provide stronger legal protections to drug companies, lengthen the term of international copyright protection, and impact international banking and investment regulation.

Why are people concerned?

Because the TPP would address an enormous range of industries, political and social causes, and international regulatory and legal issues, many people are very concerned about its provisions.

Foreign policy considerations

The TPP would have provisions to enforce its components, creating a dispute resolution process by which countries or companies may complain to a panel of arbitrators. That panel would be able to assign targeted trade sanctions, if warranted, to persuade the complained-of country into changing its behavior. Previous treaties, including the WTO, have generally limited the right to bring complaints against national governments to an enforcing body. The TPP might allow corporations to directly influence global foreign policy by permitting them to complain directly to the arbitration panel about a country’s trade activities.

Intellectual property law changes

Other changes included in the TPP could significantly change intellectual property laws, which govern patents, trademarks, and copyrights. Broadening the scope of these protections will provide some benefits (particularly to large, multinational companies) that could produce undesirable effects. For instance, world health organizations are concerned that increasing patent protection for pharmaceuticals will make generic drugs scarcer and much more expensive in developing countries.

Other regulatory concerns

Many open questions revolve around how the deal will handle services such as banking, insurance, and education; changes in these areas are complex and controversial. The United States has been demanding that the other parties in the TPP agree to increased global environmental regulations, which are being soundly debated; if they aren’t included, increased trade may lead to increased pollution. There are also concerns about proposed wage and labor regulations and other cross-border issues facing a globalized workforce. Depending on what terms are ultimately included in the agreement, the TPP could improve working conditions and wages or result in an exodus of jobs from higher-paying, more regulated countries without recourse.

What kind of economic benefits are we talking about?

Even though tariffs are generally fairly low between the countries that the TPP would cover, certain products and markets remain heavily restricted. The TPP could dramatically reduce many of these barriers.
Currently, for example, the United States imposes a 25-percent import tariff on Japanese trucks, which might be reduced or eliminated by the TPP, making Japanese trucks cheaper for American buyers. Agricultural products such as rice and sugar as well as meat products are also highly regulated among these countries and currently have steep tariffs.

Opening the Asian markets to increased US trade could be very lucrative indeed. Prominent, non-partisan international economic research group The Peterson Institute estimates that the TPP could increase US income from trade by $77 billion per year by 2025, with global income benefits of an estimated $223 billion per year.[1] And advocates hope the TPP could set a precedent for broader trade deals with other parts of the world, such as China and Europe, which could have larger economic benefits.

Canada, too, would enjoy significant economic benefits. Since it recently entered into the Comprehensive Economic and Trade Agreement with the European Union (CETA), the passage of the TPP would make Canada the only country in the world with preferred access to both European and Pacific markets – a $46 trillion free trade zone of 1.3 billion people representing two thirds of the world economy.[2]

Discussions continue about the TPP, with many concerns being raised around the world about the perceived secrecy of the process. One thing is certain, however: now more than ever before, both countries and corporations are thinking globally about trade, workforces, and regulation. How to adapt to the challenges associated with a cross-border workforce will continue to be a crucial part of economic growth and success.

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