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What is Trans-Pacific Partnership (TPP) and Why it is still important for the U.S.?
By admin May 7, 2018

Source: http://choose-forex.com/

Although the Trump Administration withdrew from TPP more than one year ago, it has always been a heated topic that has often been brought back to the table. In April, 2018, Trump signaled the United States might be willing to rejoin the TPP.

 

The TPP is a trade agreement negotiated by the Obama administration aiming to deepen economic ties and foster trade between member nations: the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. During the 2016 presidential campaign, TPP became particularly controversial. In many ways, the trade agreement became a campaign symbol for lost manufacturing jobs and unfortunately, some are exploiting this anxiety for political gain. Trade liberalization may initially entail small losses for some firms and workers. However, these should be dealt with thorough relocation and adjustment assistance, such as the Trade Adjustment Assistance program, and transition rules for affected industries, firms and their workers that allow gradual adjustment. In the long term, the TPP would bring more advantages to the whole country.

 

The first benefit to labor comes in the form of increased exports in both goods and services. With the TPP, the United States expects to grow exports of goods with a group of countries that already represent the largest export market for the U.S. In 2013, TPP members represented 44 percent of all received U.S. exports, and with the TPP, the country hopes to further open the markets. Another potential benefit to labor market is the increase in service exports expected with the TPP. With TPP, the United States should expect service exports to increase to $76.4 billion.

 

The second benefit for labor with TPP is an increase in income. An income increase in the United States is expected through TPP due to lower prices on purchased goods. The logic follows that free trade will lead to a lower cost of goods, stretching the value of current labor incomes. Calculations estimate an income increase valued at $77 billion by 2025.

 

Increased tariff incentives will benefit capital and industry, which will both have new markets for exports. The agriculture market in Japan and in the United States serves as an example of how powerful these tariff incentives can be. Agriculture accounts for 7 percent of all U.S. exports, and Japan, which currently has high tariffs against U.S. agriculture, is the world’s third-largest economy by GDP. Agriculture is a major component of the New York economy and  could see tremendous growth if the world’s third-largest economy removes tariff barriers.

 

Intellectual property rights are an additional benefit to capital increases. The current draft of the TPP has included copyright laws that go beyond current U.S. regulations for the entertainment and pharmaceutical industries, among others. Boosting intellectual property rights is a bonus to capital, as these industries will no longer have to fear losing their competitive advantages to stolen capital. A New York Times study claims that the clearest winners of the TPP would be “technology and pharmaceutical companies” who could expand their exports.

 

Finally, the TPP helps advance the U.S.’s geopolitical strength in the Asia Pacific Region. With the rising of China, the U.S. economic and trade influence in Asia is declining. If China is allowed to form preferential trade agreements that exclude the United States, the U.S. economy and exporters will suffer. The negotiation of the TPP can play a role against the Asian Infrastructure Investment Bank (AIIB) and the Belt and Road of China, weakening the influence of the Chinese economy globally so as to ensure U.S.’s geopolitical, economic and security interests in East Asia.

 

For more information:

https://www.thebalance.com/what-is-the-trans-pacific-partnership-3305581

https://www.npr.org/sections/thetwo-way/2018/03/08/591549744/the-tpp-is-dead-long-live-the-trans-pacific-trade-deal

https://www.usatoday.com/story/opinion/2018/05/06/donald-trump-revive-tpp-pressure-china-editorials-debates/513233002/

 


Thanks for sharing !


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