Trade groups in the United States are pushing their support for the Trans-Pacific Partnership (TPP) to encourage a positive outcome for this landmark trade agreement.
The American Apparel & Footwear Association (AAFA), a trade association that represents more than 1,000 brands with members from across the entire fashion supply chain, has urged the Barack Obama administration and Congress to work together for timely approval and seamless implementation.
The TPP is regarded a “legacy” accomplishment by the Obama administration. While formally signed on February 4 by 12 trade ministers encompassing the TPP nations who met in New Zealand for the occasion, a yes vote by the legislative branch of the US government, the US Congress, is still needed.
Obama is pushing for a positive vote before US presidential elections in early November. At stake is the largest free trade agreement in history that regulates trade between the 12 nations that border the Pacific Rim. These nations encompass 40% of the world’s economy.
The National Foreign Trade Council (NFTC), which closely monitors the TPP and supports it, recently confirmed, however, that the US Congress is not entirely on board with the “legacy agreement” and view the TPP “with ambiguity.”
“But there’s no sign that the TPP is going to die or not happen,” said Jake Colvin, NFTC vice president, global trade issues. Based on the general rhythm of free trade agreements, he sees the TPP as being “in a good place.”
The TPP is primarily hailed by Congressional Republicans and not by Obama’s own Democrat party, but key US presidential candidates are not on board with the trade agreement. Republican candidates Donald Trump and Ted Cruz oppose it, as do Democratic candidates Hillary Clinton and Bernie Sanders.
NFTC emphasizes that the TPP shows a path forward in trade liberalization, in new rules for the digital economy and in new disciplines governing the participation of state-owned enterprises in commercial competition. A number of members of the NFTC are particularly concerned with achieving a high standard for data exclusivity for biologics, avoiding product specific carve-outs from dispute settlement, exclusion of financial services from data flow rules, and trade and investment distortions that can be caused by currency manipulation.
It says that the costs to the American economy of a failure of the United States to participate would be enormous. NFTC emphasizes that without the TPP, other countries would continue to negotiate preferential trade agreements that would have serious costs for the American economy, discriminating against American commerce.
“The template for the future of international trade would be a world more divided and with lower standards than the US government wants and that the American economy needs,” said Alan Wm. Wolff, NFTC chairman and a Washington-based senior counsel at law firm Dentons. “The terms of agreements in Asia would be dictated by China’s perceived needs. China would not at present opt for the kind of agreements the United States has led. This holds true both for any Asian regional accord as well as for what is done in the World Trade Organization (WTO).”
Further, Wolff maintains that the United States would not be in a position to replace this agreement with either individual bilateral agreements nor broader agreements in the WTO. “Failure to implement this agreement would mean the loss of the WTO Environment Goods Agreement (EGA), Trade in Services Agreement (TiSA), and any further trade agreement progress for an extended period. What countries would chance reaching an agreement with the United States were the TPP not approved?” Wolff asked.
Colvin emphasized that proponents should focus on how the TPP is already having a positive impact on partner countries. “The TPP stands out as a primary means to drive reforms abroad – for example, assisting Vietnam to continue its transition away from state ownership to an economy in which market forces can determine competitive outcomes,” Colvin said.
He also pointed to how the TPP provides a means for Japan to modernize its agricultural sector. “These important steps will also benefit the economies enacting the reforms,” he said. “The very fact that the TPP contains within it what is essentially a US-Japan FTA is itself a remarkable achievement. Just a few short years ago, a US-Japan FTA was unthinkable as economic reforms in Japan had not progressed to the point where an agreement of this kind would have been possible. As it turned out, in a welcome departure from its stance in prior trade talks, Japan turned out to be perhaps America’s best ally in negotiating new and enhanced rules in the TPP.”
For example, Vietnam is undergoing structural changes by passing laws and paving the way for increased foreign direct investment.
According to NFTC, the TPP specifically benefits the digital economy, tariff and non-tariff measure, and disciplines governing state-owned enterprises (SOEs).
“While Vietnam has made strides in reducing very substantially its number of SOEs and the share of the Vietnamese economy that they account for, the role of SOEs is growing not declining in world trade,” said Wolff.
This is an area of the TPP negotiations that Wolff has followed most closely. “In the TPP, parties are to assure that SOEs buy and sell on the basis of commercial considerations, that SOEs in doing business do not discriminate against another party’s companies and that regulators do not exercise their discretion to discriminate against other parties’ companies,” he explained. “SOEs are to be made subject to domestic courts. Important transparency requirements are imposed. Non-commercial assistance provided to SOEs that causes harm in most instances is made actionable under state-to-state dispute settlement (including with respect to the cross-border provision of services and the provision of services through an SOE investment in the territory of another Party). The TPP’s SOE provisions provide a foundation for disciplines in future agreement.”
For the United States, the Peterson Institute for International Economics, a Washington think tank, found that the TPP would boost US exports by US$357 billion annually, and by US$1.025 trillion annually for all TPP countries.
Annual income for the 12 TPP countries would be US$465 billion higher after full implementation in 2030 and US$492 billion higher for the whole world, the Institute found.
The study assumes that implementation of the TPP would start in 2017. If this were delayed by one year to 2018, it would reduce the present value of the increased US income generated by the trade deal by around US$77 billion, with a possible range of US$59 billion to US$115 billion.
By Karen E. Thuermer
Correspondent | Washington
