- Trans-Pacific Partnership is a high-standard, comprehensive trade agreement between 12 countries in Asia and the Americas, now discontinued as a result of U.S. withdrawal.
- Negotiated from 2005 to 2015, the agreement would have been the world’s largest free trade agreement, with 800 million people, 40 percent of the world’s GDP, and over a quarter of the world’s trade.
- The agreement would have eliminated 99 percent of tariff and substantially reformed non-tariff barriers (including removing Canadian dairy quotas recently in the news) among signatory countries.
- President Obama signed TPP in February 2016, and it was quickly embroiled in election-year politics with candidates from both parties criticizing the agreement.
- Opponents of the agreement levied criticism at the secretive negotiation process and argued the agreement was set up to benefit big multi-national corporations at the expense of U.S. workers and taxpayers.
- TPP also came under fire for insufficient labor and environmental protections, although the agreement included the strongest labor and environmental regulations ever negotiated in a U.S. free trade agreement.
- Supporters of TPP argued it would promote economic growth, lower prices for American consumers, open foreign markets to U.S. exports, and drive innovation and productivity gains.
- Proponents also pointed to the agreement’s potential to further American geopolitical goals in Asia—fortifying the American-led liberal economic order against Chinese challenges to norms in the region.
- Polling data indicated most Americans knew little about TPP. A March 2016 survey indicated 62 percent of respondents knew “not much” or “nothing at all” about the agreement; a poll in September of that year indicated over 70 percent had not heard or read anything about it.
- President Trump withdrew the U.S. from TPP via Executive Order in January 2017 as one of his first acts as President, but in early 2018 signaled he might reconsider the agreement.
2005: Singapore, New Zealand, Brunei, and Chile sign the Trans-Pacific Strategic Economic Partnership, removing all tariffs among the four countries.
2008: The U.S. begins trade talks with the original Trans-Pacific Strategic Economic Partnership members under President Bush; Australia, Vietnam, and Peru also join negotiations. As talks proceed, Canada, Japan, Malaysia, and Mexico also join.
2009: The U.S. takes the lead in TPP negotiations, and TPP becomes one of the key pillars of the Obama Administration’s “Rebalance to Asia.”
2015: TPP negotiations conclude in October, with implementation to follow once each country ratifies the agreement.
2016: President Obama signs the TPP agreement in February. The debate on ratification is rapidly embroiled in election-year politics, with candidates from both parties making negative comments about the agreement and blaming it for various domestic ills.
2017: President Trump signs an executive order withdrawing the U.S. from TPP. The remaining 11 TPP countries sign the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), keeping most of the original TPP agreement intact.
2018: President Trump indicates he would be willing to reconsider TPP if the U.S. were to get a significantly better deal; other partners note that there is no appetite for renegotiation.
TPP was held up by its negotiators as the “gold standard” for trade agreements. It set a high bar for trade openness and included several first-of-its-kind components that dealt with shortcomings criticized in other agreements. Its provisions eliminate or reduce tariffs and non-tariff barriers across the full spectrum of trade – including goods, services, the digital economy, and investment—eliminating 99 percent of tariffs quickly. American businesses that stood to gain substantial export opportunities included companies in sectors as diverse as agriculture, media, express mail services, insurance, and textiles. The U.S. already has free trade agreements with six of the countries involved in TPP: Australia, Canada, Chile, Mexico, and Peru, but TPP would have been the single largest liberalization of the Japanese market, opening the world’s third-largest economy to U.S. goods.
TPP was supposed to promote transparency, good governance, and labor and environmental protections, raise living standards, reduce poverty, facilitate cross-border integration, and encourage innovation, productivity, and competitiveness. So why did Bernie Sanders, Hillary Clinton, and Donald Trump all denounce the agreement? In the President’s words: “The Trans-Pacific Partnership is another disaster done and pushed by special interests who want to rape our country, just a continuing rape of our country.”
A significant contributor to the volume level of the debate was the 2016 election cycle. Both Republican and Democratic candidates criticized TPP as a symbol of the old regime and what needed to change; perhaps also as a scapegoat for some of America’s domestic economic ills. But the agreement was also criticized by various special interests, often from both sides of an issue.
Patent protection for pharmaceuticals, for example, was an area in which U.S. negotiators bargained hard for concessions. The final form of the agreement provides a five-to-eight-year confidentiality period after a new drug is introduced to prevent the marketing of generic substitutes—thus allowing innovative companies to recoup the hundreds of millions of dollars it takes to bring a new drug to market. This provision was significantly shorter than the 12-year period set forth under current U.S. law—thus making it unpopular with pharmaceutical companies; however, the data restrictions were longer and stronger than the current international norm, raising the alarm that TPP would deny poorer consumers timely access to medication.
The pharmaceutical fight mirrored that of the broader intellectual property debate, as TPP included wide-ranging e-commerce provisions, consumer privacy, and protection of proprietary technologies. Media and technology companies condemned insufficient protections, while digital civil liberties groups—who campaign against current U.S. intellectual property laws—were dissatisfied that U.S. IP practices were to be extended to other parts of the world.
Other areas of criticism seemingly stemmed from opposition to globalization and trade more generally, rather than TPP specifically. Labor advocates, for example, constituted another vocal critic of TPP, though the agreement provided the most stringent and enforceable labor provisions ever seen in a trade agreement, protecting collective bargaining, prohibiting child and forced labor, and requiring minimum wages, caps on work hours, and workplace safety regulations. The U.S. also negotiated an ancillary agreement with Vietnam, Malaysia, and Brunei so that those countries would meet specific additional provisions before the U.S. would accord them full privileges under TPP.
Similarly, TPP set out the most comprehensive environmental commitments ever included in a U.S. trade agreement. TPP contains provisions to strengthen enforcement of multilateral environmental agreements and combat illegal fishing, wildlife trafficking, and illegal logging.
On dispute settlement (see more on Industry-State Dispute Settlement below), TPP included additional protections, explicitly recognizing the inherent right of governments to protect public welfare objectives and requiring full case transparency and the right to appeal.
Opposition to TPP on the grounds that it lacked enforceable currency provisions was understandable given recent U.S. history with trade agreements: South Korea devalued its currency to make its exports more competitive not long after the Korea-U.S. free trade agreement came into effect in 2012. Currency manipulation and macroeconomic policy were covered under a separate declaration, however—the first time such measures have been addressed by an FTA. More to the point, key U.S. constituents argued against an enforceable currency provision in order to safeguard U.S. freedom of action in this regard.
Studies of the probable impact of the TPP generally agreed it would benefit the U.S. economy. Analysis by the Peterson Institute for International Economics estimated TPP would increase real incomes in the U.S. by between $86 billion and $174 billion annually and increase exports by $357 billion. Projections showed both workers and investors benefitting, with workers benefitting slightly more. The U.S. would see the most substantial absolute gains among the signatories, though TPP would have a proportionally higher impact on other, smaller, countries.
Several studies predicted overall employment levels in the U.S. would remain the same after TPP, with most expecting productivity and wage gains for both skilled and unskilled labor. All models, however, expect adjustment costs—what economists call transitional unemployment, and what typically provides the ripest fodder for politicization when it comes to the trade debate.
The scale of the job-loss impact is worth examining. The Peterson study predicted 53,700 jobs per year moving from less productive to more productive companies and sectors—roughly a 0.1 percent increase in transitions over a 2014 baseline when 55.5 million Americans changed jobs. This model also predicts a slight lessening of inequality, as rising wages and lowering prices realized from productivity gains disproportionately impact low-income households. Still, some workers with specific skills and some unwilling to move would undoubtedly face a reduction in wages or lasting unemployment.
Given the substantial gains likely to be realized through TPP, 50,000+ workers in transition seem easily provided for, yet the U.S. track record with adjustment assistance is spotty at best. Supporting retraining and re-employment is cited by many observers as a moral and political imperative; moreover, better policies will benefit workers impacted not only by trade but also by innovation and technological change. A study at Ball State University’s Center for Business and Economic Research found that while the U.S. manufacturing sector has experienced almost a century of growth in production, employment levels have stagnated during that same period. The data suggests this trend is best explained by increased productivity driven by automation and information technology. Of the manufacturing jobs lost between 2000 and 2010, the researchers attribute 13.4 percent to trade, and 87.8 percent to improvements in productivity.
TPP cannot enter force without the U.S., but the 11 other parties have gone ahead with a TPP-like agreement, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). This agreement keeps most of the original TPP agreement intact, though 22 sections are suspended (not deleted—leaving room if the U.S. were to decide to rejoin at a later date) cutting out several measures that were high-priority issues for the U.S. but did not have broad support among other signatories. CPTPP is expected to take effect in 2018; Japan and Mexico have already ratified, and legislation is in progress in Australia, Canada, and New Zealand. At least one other country has formally expressed interest in joining. Without the U.S. the beneficial impact of the agreement will be significantly less than it would have been; yet by moving forward with the agreement, the signatories affirm the benefits of globalization and competitive pressure.
Helping educate our members to understand the bigger picture.
Subtopic: What is Investor-State Dispute Settlement (ISDS)?
- ISDS is a mechanism built into many trade agreements that allows foreign companies to bring a case against a host government in front of an arbitration panel for discriminatory treatment or government seizure of property. While ISDS provisions standardize procedures for foreign investors to challenge host states, they also protect a country’s rights to pass nondiscriminatory laws for the public interest, such as those to protect health, safety, and the environment. As written in U.S. agreements, ISDS provisions are limited to providing compensation for loss or damage and cannot impact domestic laws.
- From an American perspective, ISDS measures carry forward protections written into U.S. law to protect U.S. firms operating abroad. Though critics argue allowing companies to sue the U.S. government puts U.S. taxpayers at risk of a large payout to big foreign corporations, the multiple-decade history of free trade agreements with ISDS protections should assuage this concern. The U.S. is party to 51 agreements with ISDS and has never lost an ISDS case, while in many cases the U.S. has been awarded legal fees after successfully defending against charges determined to be unfounded. A 2015 study found during the decades when the U.S. was party to trade agreements containing ISDS provisions, the U.S. had faced only 17 cases (four of which were dismissed).
- ISDS agreements have historically been far more likely to benefit U.S. companies abroad than impact taxpayers at home. As of 2017, U.S. companies have brought the highest number of ISDS complaints internationally (almost twice as many as the next most frequent claimant country-of-origin), while the U.S. didn’t make the top 12 of countries responding to foreign businesses’ claims. ISDS provisions are often of particular benefit to small- or medium-sized companies, which are more likely to lack in-house expertise and resources to deal with foreign legal systems. Roughly half of ISDS cases have historically been heard on behalf of small- and medium-sized businesses.
Peterson Institute for International Economics – Trans-Pacific Partnership: An Assessment
Council on Foreign Relations What Is the Trans-Pacific Partnership?
Fox News What is the TPP trade deal?
Office of the U.S. Trade Representative – Trans-Pacific Partnership
Office of the U.S. Trade Representative – Fact Sheet: Investor-State Dispute Settlement
United Nations Conference on Trade and Development – Special Update on Investor-State Dispute Settlement: Facts and Figures
Ball State University The Myth and the Reality of Manufacturing in America
Center for Strategic & International Studies – From TPP to CPTPP
Electronic Frontier Foundation – Trans-Pacific Partnership Agreement
Nikkei Asian Review New Zealand sees TPP 11 as antidote for ‘turbulent times’
Campaigns opposing or supporting TPP have quieted with U.S. withdrawal from the agreement by Executive Order, though there are still options to take action:
The U.S. Coalition for TPP has a page of graphics and videos for use on social media. Businesses and trade organizations can join the Coalition or share your story by emailing TPPCoalition@USChamber.com.
Story inspired by: President Trump reconsidering TPP after initially saying it was a “horrible deal” for the U.S.
Anna Swanson, The New York Times, “Trump Proposes Rejoining Trans-Pacific Partnership” 2018 April 12
Point: In an op-ed written before the U.S. withdrawal from the agreement, an economist and a trade scholar present rebuttals to frequent criticism of TPP and argue America’s participation would result in huge gains for the U.S. economy and put U.S. foreign policy in Asia on sounder footing.
Cathleen Cimino-Isaacs and Gary Hufbauer, PBS, “Why the Trans-Pacific Partnership isn’t a bum deal” 2016 February 5
CounterPoint: Public Citizen celebrates the U.S. withdrawal from TPP, which it calls a “massive corporate-rigged deal.”
Public Citizen, “Trans-Pacific Partnership (TPP)” accessed 2018 June 22