The Trans-Pacific Partnership: What It Is and How It Benefits the U.S.

Globalization is no longer a “when it happens” issue—it’s already here. We’re living in a time when commerce and trade are more interconnected than ever.

As countries across the globe compete and partner with each other, it’s crucial that the United States leads the way in solidifying its leadership and fostering trade relationships. Moreover, it’s crucial that U.S. businesses—including small to midsize businesses—have clear paths to success in global trade. 

To that end, the Trans-Pacific Partnership (TPP) is extremely important for leveling the playing field for U.S. companies in the Asia-Pacific region. Just how important? TPP member countries account for nearly 40% of global GDP, and TPP countries account for 36% of U.S. two-way trade in goods and services.

With TPP, businesses of all sizes can compete on price in countries participating in the negotiations. And as I’ve previously written, when U.S. goods can compete on price, they win on so many other levels. Here’s a basic background on the TPP, some benefits to the trade agreement, and a few resources that can help you dig deeper.

What Is the Trans-Pacific Partnership?

The Trans-Pacific Partnership is an accord between 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States. Once implemented, it will lower barriers to trade and investment in goods and services, and it will help increase made-in-America exports, grow the American economy, support well-paying American jobs, and strengthen the American middle class.

The TPP will determine who writes the rules of international trade. While other countries like China are primarily interested only in access to new markets, this agreement crafts trading rules and standards in important areas such as intellectual property rights, state-owned enterprises, digital trade, labor, and the environment.

Where Does the Agreement Stand?

While the five-year deal was signed by all 12 countries on February 4, 2016, it still requires considerable work within each country before it becomes functional. Currently in the U.S., the Obama administration and Congress must work together to draft implementing legislation and resolve outstanding issues that may hold up bipartisan support for the deal.

Benefits of the Trans-Pacific Partnership

1. The TPP should increase American jobs.

By eliminating the taxes on more than 18,000 made-in-America exports, the TPP will level the playing field for U.S. workers and should increase the number of American jobs available. When burdensome tariffs are reduced or eliminated, American businesses (especially small and midsize businesses) have greater freedom to grow their companies—and that means creating new jobs to handle greater exporting capacity.

According to the United States Trade Representative (USTR), “more than half of American CEOs would hire more U.S. workers, support existing jobs and U.S. suppliers, and grow and become more competitive” if their companies could sell more goods and services to foreign markets. The TPP makes that possible and realistic for companies of all sizes.

2. The TPP should increase wages and annual exports.

The Peterson Institute on International Economics estimates the TPP will increase annual real incomes in the U.S. by $131 billion, or 0.5 percent of GDP, and annual exports by $357 billion, or 9.1% of exports, over baseline projections by 2030 (when the agreement is nearly fully implemented).

3. The TPP allows the U.S. to set the stage for globalization.

Internationalization is happening whether or not we want it to. The questions is, do we want a country like the U.S.—that is concerned with the environment, workers protection and rights, intellectual property protection, etc.—setting the stage? Or do we want a country that cares only about trade—not about workers having a living wage or the environment, for example—to be setting the rules?

The TPP takes this into consideration by including labor enforcement requirements that allow unions to form, sets minimum standards of health and safety, and preserves the environment (just to name a few).

Reacting to Pushbacks

The TPP is not without criticism and pushbacks. However, much of this criticism is, I believe, unfounded. One such criticism is over the Investor-State Dispute Settlements (ISDS). Critics say ISDS provides a way for investors to sue governments, including a belief that all disputes (even international law disputes) should be resolved in domestic courts, and other countries will use the ISDS to prevent environmental and labor requirements in the United States.

This is just not true. ISDS has been part of all recent trade agreements. Under those agreements, there has only been 13 or 14 ISDS cases in the U.S., and we’ve never lost one case. The TPP is not an opportunity to change laws in other countries.

In fact, the TPP clearly addresses this issue; to safeguard against potential abuses of ISDS, TPP will have state-of-the-art protections and safeguards to ensure the investment obligations are interpreted carefully and in a manner consistent with governments’ intent, and that the ISDS process is not susceptible to abuse. 

Additional Resources

You can read the full text of the Trans-Pacific Partnership here.

Additionally, the Peterson Institute for International Economics website has an entire section on the TPP that is worth your investigation.

Finally, we’ve published several TPP-related articles on this blog that you may find helpful:

• Promoting Export and Job Growth through the Trans-Pacific Partnership (TPP)
• 18 Non-Tariff Trade Barriers Exporters Need to Know
• Beware of Non-Tariff Barriers in Global Markets