On Oct. 5, the United States and 11 other countries finalized the Trans-Pacific Partnership (TPP) free-trade agreement after seven years of negotiations. Besides the United States, the other countries involved are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The goal of the TPP is to “promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty; and promote transparency, good governance, and enhanced labor and environmental protections.” If only! Grandiose promises aside, the TPP would, among other things, reduce tariffs and establish an alternative method of resolving trade disputes outside of court.
Ratifying the TPP has long been a goal of the Obama administration. “At a time when 95 percent of our potential customers live outside our borders, this agreement will open up new markets to made-in-America goods and services,” President Obama said. “[The TPP] would eliminate more than 18,000 taxes that various countries put on made-in-America products. For instance, last year, we exported $89 billion in automotive products alone to TPP countries, many of which have soaring tariffs—more than 70 percent, in some cases—on made-in-America products. …Thanks to the TPP, those taxes will drop drastically, most of them to zero.”
Reaction has been mixed. Republican presidential candidates Jeb Bush, Ben Carson, Marco Rubio and John Kasich support the TPP. Democratic candidates Bernie Sanders and Hillary Clinton oppose it, as do Republican candidates Carly Fiorina, Mike Huckabee and Donald Trump. Sanders has denounced the TPP as “a disastrous trade agreement designed to protect the interests of the largest multinational corporations at the expense of workers, consumers, the environment and the foundations of American democracy.”
The TPP has been endorsed by a number of economists, including former Federal Reserve chairmen Alan Greenspan and Ben Bernanke. Joshua Meltzer, senior fellow for global economy and development at the Brookings Institution, predicts the TPP could generate $14 billion in economic benefits to the U.S. in 2025. He says the agreement would be particularly important for small- and medium-sized businesses, which accounted for 40 percent of U.S. goods exports in 2012. Such businesses tend to benefit disproportionately from trade liberalization, since they are less likely than large enterprises to establish overseas subsidiaries to overcome trade barriers.
Will the TPP be a boon or bane for U.S. manufacturers? As it was with the North American Free Trade Agreement, the truth likely lies somewhere in the middle.
Congress must accept or reject the TPP within 90 legislative days once the deal is formally submitted for review. Congress will likely vote on the deal either during the summer of 2016 or in the lame-duck session after the 2016 elections.
While the negotiations may not have been as open as some might have liked, the TPP agreement itself is no secret. You can read it all—hundreds of pages of glorious legalese—here: https://ustr.gov/tpp/#text.