The Trans-Pacific Partnership (TPP), an international trade agreement being negotiated behind closed doors, continues to spark controversy among U.S exporters and the world. Originally, in 2005, TPP was a four party agreement between New Zealand, Chile, Singapore, and Brunei.
Since then, the trade agreement expanded its membership to include the U.S, Australia, Canada, Japan, Malaysia, Mexico, Peru, and Vietnam. In total, the twelve nations currently negotiating the agreement comprise 40% of the world’s economy.
Although the text of the agreement has not yet been released, WikiLeaks has managed to expose several secret chapters to the public.
How will U.S. exporters benefit from TPP?
According to a report released by the U.S. Trade Representative (USTR) on June 2, 2015, “American manufactured goods face tariffs of up to 100% on certain goods in TPP markets, and American agriculture exports face tariffs of over 700% on some products.” The USTR says TPP is an opportunity to limit these trade barriers.
“The United States ships nearly $2 billion in goods to TPP countries every day, and in 2014, we exported more than $638 billion of manufactured products to TPP countries,” according to the report released by the USTR.
Supporters envision the U.S. benefiting through access to cheaper products. TPP partners are continuing to impose non-tariff trade barriers, as they pledge to slash tariffs on imports. Big businesses support this agreement, as a reduction on tariffs is in the plan. Products produced overseas and shipped to the U.S. would count for tariff reductions.
TPP Targeted Products
According to the report, with the elimination of tariffs on manufactured products in TPP countries, “U.S. products will compete on a more level playing field with goods from TPP countries.” In particular, the USTR is focusing on securing tariff reductions for:
- machinery products
- chemicals and plastics
- automotive products
- footwear and textiles
- medical devices
- food and agricultural products
These product categories represent some of the highest revenue producing U.S. exports to TPP countries. Ironically, these goods are most restricted with the highest tariffs.
For example, the report states that “The United States exported $824 million in footwear to the world in 2014, and $370 million of that was to TPP countries.” Corresponding with the other highest revenue products, U.S. footwear exports to TPP countries face quotas and tariffs above 100%.
In 2014, U.S. food and agricultural exports were over $155 billion, an all-time high. According to the USTR report, of that total, $66 billion was to TPP countries, “a figure that would increase as a result of tariff elimination under TPP.” In the same year, almost half of the corn and corn products exported by the U.S. were to TPP countries, facing tariffs up to 40%.
With supporters, there are opponents.
What are the concerns that come along with TPP?
In addition to the lack of transparency during the agreement’s negotiation process, leaked drafts show potential negative ramifications that could come with implementing an investor-state dispute settlement (ISDS) system. According to the agreement’s Intellectual Property Chapter, the ISDS would allow foreign companies to challenge U.S. regulations and court rulings before special tribunals, rather than within the U.S. court system.
What’s Trade Promotion Authority and why should we care?
Both TPP supporters and opponents agree that Trade Promotion Authority (TPA) is crucial to locking down TPP sooner rather than later. Sometimes referred to as “fast-track,” TPA speeds up the legislative approval process for international trade agreements by limiting Congress to an up or down vote only. If approved, TPA would give the President more power to negotiate and implement trade agreements without Congress making amendments.
The Trade Act of 2015, which includes TPA, was passed with changes by the Senate on May 22, 2015. TPA is now in the House awaiting consideration for it to become a law. After nearly ten years, the negotiations are still in the works; the controversy over the agreement will continue and indeed become no less complex.