Judging the Trans-Pacific Trade Partnership

Although it may be poorly understood, international trade is important to Americans. In August 2015, we imported $233.4 billion in goods and services, pushing down prices and enriching consumers’ choices. In the other direction, we exported $185.1 billion in goods and services supporting millions of American jobs. International trade rules matter to us because they shape fair competition and fair treatment of labor. The latest cluster of international trade rules is the Trans-Pacific Partnership (TPP), a twelve-country deal.

In the summer of 2015, Congress authorized the President to use so-called fast-track negotiation of a TPP agreement and to submit it for Congressional approval. Congressional approval had to be straight up or down – no amendments. A vote on the TPP agreement is expected by April of 2016.

Our other TPP partners would be Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Collectively, TPP partners would account for 36 percent of the world’s gross domestic product.  The TPP has been crafted to allow other nations to join if they pledge to meet the standards, and South Korea has expressed interest. The European Union, Brazil, Russia, India, and China are notable traders who are not in the TPP.   While Russia and China are Pacific Rim nations, evidently they rely on more government-control of exports than TPP allows. China’s absence from TPP gives the US a slight advantage in influencing the other TPP members.

The TPP accord addresses tariff reductions for agriculture and automobiles, intellectual-property rights for movies and pharmaceutical drugs, the free flow of information on the Internet, wildlife conservation, online commerce and dispute settlement practices for multinational corporations

The TPP will make American companies somewhat more successful at selling their goods and services in Pacific Rim countries, leading to a stronger US economy, more jobs and higher incomes for American workers. However the benefits are not uniform across sectors nor among workers. In some instances, workers will experience job losses and income reductions as more of the work they once did moves overseas

The US manufacturing sector would experience wins and losses, overall with a slight loss of $39 billion. There is no material change expected for agricultural products. The service sector would find a $79 billion uptick in sales as a result of TPP removing current barriers against the operations of foreign firms. As well, TPP brings intellectual property improvements such as a 5-year exclusive right to sell new pharmaceuticals and exclusive rights protections for entertainment. The US pharmaceuticals industry had hoped for 12 years of patent-style protection.  The shorter period of protection may benefit US consumers

As expected, organized labor opposes passage of the TPP, as do Sen. Hatch, Sen. Sanders and Donald Trump. Only 28 of 188 House Democrats supported negotiating the trade bill in June of 2015. Passage of TPP within the other 11 countries is also not automatic. Leaders in Canada, New Zealand, and Australia face a difficult task harvesting political support for the TPP.

Assessing the net economic value of TPP for the US is difficult. For US workers, TPP may be a slight negative as lower income workers may experience some job and wage level losses, much as has happened over the last few decades. However, some facets of TPP will bring more jobs and higher incomes for those in intellectual property and high tech sectors. Overall, the TPP is probably a mild benefit, through lower prices and wider choices for consumers. The mild economic plus and improved influence among Asia Pacific nations may be enough to earn passage in Congress.

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