The Trans-Pacific Partnership (TPP), one of the most ambitious free trade agreements ever signed, has both its supporters and opponents. The deal involves 12 countries: the United States, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. The pact aims to deepen economic ties between these nations, slashing tariffs, and fostering trade to boost growth. Member countries are also hoping to foster a closer relationship on economic policies and regulation. But opponents of the TPP say it could mean jobs will move from the U.S. to developing countries, and jeopardize intellectual property and patent protections. The agreement has yet to be ratified in the U.S. In fact, most feel because of the opposition, it’s highly unlikely it will pass through Congress during President Obama’s remaining tenure.

What’s Inside the TPP? 

The TPP would eliminate more than 18,000 taxes that various countries impose on Made-in-America exports – everything from plastics to poultry, seafood to steel, chemicals to cotton, apples, to aircraft parts. Currently, for example, when American firms export their products to the other 11 nations in the Trans-Pacific Partnership, they get hit with tariffs as high as 55% on such items as wine, 50% on motorcycles, 35% on plywood, 30% on tractors, 24% on headphones, and 20% on beauty products, for example. If and when the TPP goes into effect, those foreign tariffs will all disappear.

The TPP conversely would also eliminate 6,500 U.S. tariffs on imported products ranging from grapefruits to rice to automobiles.

The TPP also requires countries to meet core, enforceable labor standards as stated in the International Labor Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work. According to the U.S. government, “the fully-enforceable labor standards we have won in the TPP include the freedom to form unions and bargain collectively; prohibitions against child labor and forced labor; requirements for acceptable conditions of work such as minimum wage, hours of work, and safe workplace conditions; and protections against employment discrimination. These enforceable requirements will help our workers compete fairly and reverse a status quo that disadvantages our workers through a race to the bottom on international labor standards.”

What’s more, the TPP addresses trade barriers that pose disproportionate challenges to small businesses, such as high taxes, overly complex trade paperwork, corruption, customs “red tape,” restrictions on Internet data flows, weak logistics services that raise costs, and slow delivery of small shipments. The TPP, say supporters, will make it cheaper, easier, and faster for American small businesses to get their products to market by creating efficient and transparent procedures that move goods quickly across borders.

The TPP includes standards to protect digital freedom, including the free flow of information across borders – ensuring that Internet users can store, access, and move their data freely that is subject to public-interest regulation, for example fighting spamming and cyber crime.

For and Against TPP

According to think thank Peterson Institute for International Economics (PIIE), the TPP is projected to boost U.S. inflation-adjusted annual income by $131 billion by 2030, and annual world income by $492 billion. The U.S. Chamber of Commerce along with other industry groups and associations support the TPP, including the American Farm Bureau, the Business Roundtable, the Emergency Committee for American Trade, the National Association of Manufacturers, and the Semiconductor Industry Association. Proponents of the TPP says the agreement makes sure U.S. farmers, ranchers, manufacturers, and small businesses can compete—and win—in some of the fastest-growing markets in the world. Moreover, by a 20-point margin, Americans think the TPP is good for this country, according to the Pew Research Center, and nearly 7 in 10 Americans say the same about trade in general.

Opponents, however, fear that since the U.S. will also remove tariffs on all manufactured goods it will not only lower prices for American consumers but will end up creating more competition for domestic producers who have enjoyed government protection in the past. For example, some unions and politicians fear that the deal could flood the U.S. auto supply chain with cheaper Asian parts—and encourage U.S. automakers to shift manufacturing operations to non-TPP countries like China. Critics argue that prior trade deals have contributed to national and global inequality, the U.S. trade deficit, and the steady decline of U.S. manufacturing jobs. They also see it as encouraging higher prices for pharmaceuticals and other high-value products by spreading American standards for patent protections to other countries. Furthermore, TPP’s critics were not happy about the secrecy of the agreement’s negotiations.
Roanoke Underwriting serves the commercial marine insurance and customs bond needs of property and casualty agents and brokers throughout North America working with global supply chain risks and logistics service providers. We will keep you updated on TPP developments as they unfold. To learn more about our insurance products, contact us at 1.855.213.4545.

Sources:  BBC, Politico, The Hill, New York Times, Ustr.gov