TPP: Arguments for and against the trade pact

President Trump's order to scrap U.S. participation in the 12-nation Trans-Pacific Partnership agreement reverses decades of pro-trade policies pursued by his predecessors.

Trump isn't entirely opposed to trade deals. But as a real estate developer accustomed to prolonged negotiations, he sees the multilateral treaty as a pact filled with superfluous concessions to other nations. Wilbur Ross, his Commerce secretary nominee, told lawmakers during a confirmation hearing last week that he will sell the idea to Trump that the U.S. should seek more agreements between the United States and one other country, which are "easier and quicker to negotiate" than those involving multiple nations.


In opposing the deal, labor unions are primarily concerned that the TPP inhibits domestic investment, particularly in manufacturing, by offering benefits to U.S. companies that relocate operations and jobs abroad. They say it also loosens restrictions on foreign companies that export to the U.S., hurting domestic competitors.

For example, the agreement with South Korea requires that only 35% of the parts of products coming into the U.S. duty-free originate in Korea, which means the rest could come from parts made in China or other places, according to the Communications Workers of America. The TPP could be used as a "backdoor" for Chinese products to come into the U.S. duty-free and hurt domestic competitors, it said.

About 448,000 U.S. jobs could be lost if the TPP were enacted, according to a study by Tufts University's Global Development and Environment Institute.

Critics also say the TPP would be the latest in a string of failed trade policies that have contributed to wage stagnation in the U.S. Working-class Americans already lose about $1,800 annually because wages have been depressed by companies choosing to operate in countries with lower wages, according to the left-leaning Economic Policy Institute. "It’s a race to the bottom on wages," said Robert E. Scott, senior economist for the institute.


In a report last year, the U.S. International Trade Commission, a nonpartisan federal agency, had a more optimistic outlook, saying the agreement would result in a net increase of 128,000 full-time jobs in 15 years. But the agency estimated that the TTP would boost U.S. gross domestic product only by a modest 0.15%, or $42.7 billion, by 2032.

Output in manufacturing, natural resources and energy would drop of 0.1% with the TPP agreement in place, the agency predicted. In 15 years, output would grow 0.5% in the agriculture industry and 0.1% in the services sector, the ITC said.

The ITC concluded that the TPP would contribute to modest growth in American companies' business abroad. U.S. exports and U.S. imports are projected to grow by 1% and 1.1%, respectively, in 15 years as a result of the TPP.


Former president Barack Obama said the TPP's benefits would touch many sectors of the U.S. economy. "Building walls to isolate ourselves from the global economy would only isolate us from the incredible opportunities it provides," he said.

“Although it is correct that TPP goes beyond previous trade agreements, it also reduces traditional tariffs and quotas,” Jeffrey Frankel, professor of capital formation and growth at Harvard Kennedy School, said in an editorial for The Boston Globe. “It is true that the United States will not be lowering many such import barriers under TPP, because we don’t have many. But other members around the Pacific Rim have lots. TPP will lower their trade barriers.”

The ITC said some details of the agreement — such as rules for protecting data flows and establishing standards for customs, sanitary conditions and intellectual property rights — would be more difficult to quantify but be just as beneficial to U.S. exporters. "TPP would generally establish trade-related disciplines that strengthen and harmonize regulations, increase certainty, and decrease trade costs for firms that trade and invest in the TPP region," the ITC said.

Trump signs presidential directives in the Oval Office on Jan. 23, 2017. (Photo: Ron Sachs, Pool/European Pressphoto Agency)

TPP: What is it and why does it matter?

US President Donald Trump made abandoning the Trans-Pacific Partnership (TPP) trade deal a key part of his election campaign and on his first day in office, he has proved as good as his word.

But what was the TPP designed to do? And does it have any future without the US?

TPP in a nutshell
Twelve countries that border the Pacific Ocean signed up to the TPP in February 2016, representing roughly 40% of the world's economic output.

The pact aimed to deepen economic ties between these nations, slashing tariffs and fostering trade to boost growth. Members had also hoped to foster a closer relationship on economic policies and regulation.

The agreement was designed so that it could eventually create a new single market, something like that of the EU.
But all 12 nations needed to ratify it, before it could come into effect.

Once Donald Trump won last year's election, the writing was on the wall for the TPP.

US participation was the major linchpin for the deal. It may be possible for the other countries to forge a smaller scale pact in it's place, but it can't go ahead in its current form.

Those other member states are: Japan - the only country to have already ratified the pact - Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.

For and against
Former President Barack Obama treated trade deals as a priority during his tenure, and this particular deal would have bolstered America's position in the Asia-Pacific region, where China is growing in influence.

But US opponents have characterised the TPP as a secretive deal that favoured big business and other countries at the expense of American jobs and national sovereignty.

On the campaign trail Donald Trump called it a "horrible deal".

But it's not just Mr Trump who opposed the deal. Critics on the left also said it had cost US jobs and said the TPP would pave the way for companies to sue governments that change policy on, say, health and education to favour state-provided services. And it was also seen as intensifying competition between countries' labour forces.

How big a deal was the TPP?
Pretty big. The 12 countries involved have a collective population of about 800 million - almost double that of the European Union's single market. The 12-nation would-be bloc is already responsible for 40% of world trade.

The deal was seen as a remarkable achievement given the very different approaches and standards within the member countries, including environmental protection, workers' rights and regulatory coherence - not to mention the special protections that some countries have for certain industries.

The US pulling out will be seen as big blow for other nations that signed up.

Without the US does it definitely fail?
To take effect, the deal would have had to be ratified by February 2018 by at least six countries that account for 85% of the group's economic output. The US would need to be on board to meet that last condition.

Some countries, including New Zealand, have suggested some sort of alternative deal may be possible without the US.
But Japan's Prime Minister Shinzo Abe has said a TPP without the US - and its market of 250 million consumers - would be "meaningless".

Is this the same thing as TTIP?
Confusingly not.

The Transatlantic Trade and Investment Partnership, now generally known as TTIP, is a deal to cut tariffs and regulatory barriers to trade between the US and member states of the EU. Negotiations here are at an earlier stage. But given President Trump's hostility towards trade deals in general it's unlikely to be plain sailing for that one either.

Which goods and services are involved in the TPP?
Most goods and services traded between the countries are named in the TPP, but not all tariffs - which are taxes on imports - were going to be removed and some would take longer than others. In all, some 18,000 tariffs were included.
For example, the signatories said they would either eliminate or reduce tariffs and other restrictive policies from agricultural products and industrial goods.

Under the agreement, tariffs on US manufactured goods and almost all US farm products would have gone almost immediately. But some "sensitive" products would have been exempt until a later agreed date.

When did it start?
It began with the P4 trade agreement between just four nations - Brunei, Chile, New Zealand and Singapore - that came into effect in 2006.

That deal removed tariffs on most goods traded between the countries, promised to cut more and also to co-operate on wider issues such as employment practices, intellectual property and competition policies.

Signatories who want to forge ahead with the TPP may need to lower their sights back in line with the earlier incarnation.

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