Economics / International Business

The Trans-Pacific Partnership: What You and the Rest of the World Doesn’t Know

The Trans-Pacific Partnership (TPP), a trade agreement reached between the United States and 11 additional Pacific-ring countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) was approved by the United States on October 5, 2015 and is on its way to becoming the largest local trade agreement in the world.1  This agreement, representing two-fifths of the global economy and 800 million consumers will shape consumer behavior and choices in a more profound way than anything else before it.2   This agreement also represents a legacy-defining moment for President Obama.  However, there is a lot of mystery still surrounding the deal, on top of many issues that both Republicans and Democrats have about the deal’s contents.  Although the TPP does have a long way to go before it is perfect, there many things to like about the deal as is.

The focus on small and medium-sized enterprises (SMEs) is probably one of the hallmarks of the trade deal.  The TPP has an entire chapter devoted to SMEs by addressing their concerns when it comes to exporting or importing internationally.  The SME chapter focusses on reducing barriers for international trade, which includes decreasing the complexity and shear amount of trade paperwork, reforming and rewriting opaque customs regulations, and addressing the slow delivery of small shipments which has made exporting for SMEs economically infeasible in the past.  The deal also raises standards for preventing government corruption by requiring anti-bribery and conflict-of-interest laws.  Finally, one of the most important aspects for SME’s is the reduction of tariffs through the TPP’s tariff cuts, making the cost, time, and complexity of trading across boarders much more manageable for SMEs.  All of these benefits work to improve the overall climate for small businesses, especially in America where over 95% of businesses have less than 500 employees (constituting an SME).3

Probably the most heavily debated topic included in the TPP is the chapter on intellectual property protection, which is controversial in this case only because the agreement is what has to be adopted by all of the signing countries.  So a country with very relaxed standards for intellectual property (IP) will now have to adopt minimum IP protections, which could limit innovation and growth in the member countries.  But the standards being imposed are very similar to the ones already in place in the United States, and these “stricter standards” would only apply to the countries that, up until now, were not protecting IP in the first place.  So instead of discouraging innovation, broader IP protection would actually provide an incentive to create new goods, services, and ideas.4

Now there is a plethora of other issues within the TPP, some promising (broad labor and environmental standards, protections on data) and some potentially harmful (the ability of corporations to challenge laws and regulations in special state tribunals), that should be addressed.  While some of these allegations are stretched truths by propagators on both sides of the isle (both Democrats and Republicans have reservations with the TPP, whether it be the protections some drug companies are afforded to exclusively produce and market their product for 8 years or the lack of true currency controls, instead setting up a “currency forum” to discuss undercutting prices), there is some merit in questioning the true aspects of the deal.  The agreement itself was only recently released in full to the public on November 5 by the White House on the social media sharing page Medium, and the 5,400 page does pose a challenge to actually read through let alone interpret factually.5  While it might not be important for everyone in the U.S. to read every word of this agreement, understanding the context of how this agreement is going to affect the population at large is paramount to either supporting this historic deal or acting quickly to effect change.

But since I do not wish to write a textbook, I want to point out that Congress hasn’t actually passed the agreement yet.  There will still be a long uphill battle before this deal becomes law in the twelve countries involved.  That means there is still time to make changes, to address some of the issues, and to raise some questions that people are not asking like “Why is China suddenly interested in the TPP?” (Which seems to be true and the New York Times has a very interesting article on the subject which I have included below.)6   My point is that if there is something you don’t like about the TPP, now is the time to act and call or write to your members in Congress and let them know your concerns.  I believe the TPP will benefit the United States by creating more economic opportunity and more protections for those who need them most, but there are aspects of the deal that worry me like the corporate protections for agribusinesses and pharmaceutical companies.  Although I have confidence in our representative democracy to fix the worrisome aspects of the TPP, I will not stop talking about the deal as long as these aspects remain.

Sources:

1)http://www.wsj.com/articles/u-s-reaches-trade-deal-with-11-pacific-nations-1444046867

2)http://www.nytimes.com/2015/10/06/business/international/the-trans-pacific-partnership-trade-deal-explained.html?_r=0

3)http://fortune.com/2015/10/27/tpp-good-for-small-businesses/

4)http://nation.com.pk/columns/28-Oct-2015/the-trans-pacific-partnership

5) http://www.nytimes.com/2015/11/06/business/international/trans-pacific-trade-deal-tpp-vietnam-labor-rights.html?_r=0

6) (China’s interest in TPP) http://www.nytimes.com/2015/04/29/business/international/once-concerned-china-is-quiet-about-trans-pacific-trade-deal.html

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