An Analysis of the Trans-Pacific Partnership

By: Kyanna Ouyang

In 2006, Brunei, Chile, Singapore and New Zealand signed into the Trans-Pacific Economic Partnership Agreement, also known as the P4 trade agreement, which set guidelines for trade in goods, rules of origin, trade remedies, sanitary and phytosanitary measures, barriers to trade, trade in services, intellectual property, government procurement and competition policy. After the United States agreed to enter into talks with the original Pacific 4 members regarding trade liberalisation in 2008, the negotiations became known as the Trans-Pacific Partnership (TPP). The TPP focuses on significantly expanding free trade by reducing trade barriers, while facilitating global efforts in reducing the environmental harms of trade, and encompasses twelve countries as of now: Australia, Canada, Japan, Malaysia, Mexico, Peru, United States, Vietnam, Chile, Brunei, Singapore and New Zealand.​

A strong supporter of the trade liberalisation agreements, President Barack Obama regarded the TPP as a priority during his eight-year presidency from 2008 to 2016. Supporters of the TPP argue that the significant reduction of trade barriers, such as long-standing tariffs, guaranteed by the agreement will greatly benefit the United States economy. According to the Office of US Trade Representative, “With the elimination of TPP countries’ tariffs on manufactured products U.S. products will compete on a more level playing field with goods from TPP countries’ other free trade agreement (FTA) partners – including China, India, and the EU.”

Furthermore, economists project that the partnership will increase the productivity of all member countries. According to the Peterson Institute, “Overall, the TPP should boost the GDP of member countries by $285 billion over baseline projections. Japan and the United States would account[ing] for $181 billion of that total or 63 percent of the combined gains of the 12 participating countries.”

More importantly, the TPP provides smaller nations with the opportunity to build up their economies independently from China, thus increasing economic stability. Patrick Mendis of George Mason University explains that, “Economically, through trade engagement and transparency via the TPP, Washington affords smaller countries the opportunity to collectively rebalance asymmetries in bilateral trade with China without undermining China as a valued and vital trade partner.”

However, critics of Trans-Pacific Partnership warn of severe repercussions, both economic and environmental.

According to the Sierra Club, the TPP “would empower multinational corporations to sue the United States government in private trade courts over domestic laws.” Critics claim that the Lone Pine Resources case, where an American mining company successfully sued Quebec for passing a ban on fracking by citing provisions from the North American Free Trade Agreement, is evidence for how trade agreements, such as TPP and NAFTA, allow companies to ignore environmental regulation through taking advantage of investor protection provisions. The Sierra Club furthers that “the Department of Energy loses its authority to regulate exports of natural gas to countries with which the United States has a free trade agreement”; the automatic approval of liquefied natural gas export will hence increase fracking.

More importantly, for the most severe critics of the TPP, including former Democrat Presidential candidate Bernie Sanders, the gravest harm of trade liberalisation is hurting the poor. The core of the opposition is outsourcing, where lower tariffs between the US and developing countries with cheap labor will ultimately remove jobs from the United States. The Economic Policy Institute explains that “free trade agreements impact a lot more than exports—they increase imports and encourage outsourcing, which means fewer American jobs.” In fact, “According to industry projections, the U.S. could lose more than 600,000 jobs just in the auto and textile sectors due to the TPP” (The Communication Workers of America).

Moreover, not only will the TPP cause American job losses, it would result in greater income inequality. On the TPP, the Center for Economic and Policy Research finds that, “the median wage earner will probably lose as a result of any such agreement. [As a result] The long­ term losses have been 25 times greater than the potential gains of the TPP the median wage would fall 0.72 percent relative to the [current] median as a result of the TPP.” That is, Public Citizen’s Global Trade Watch predicts, “for 9 out of 10 U.S. workers, these tiny gains likely would be outweighed by a TPP-spurred [the TPP will spur an] increase in income inequality. The net result? A pay cut for all but the richest 10 percent.”

At any rate, the shocking results of the 2016 Election cast a shadow over the United States’ trade agreements as president-elect Donald Trump is stands strong in his anti-trade rhetoric. As of November 11, 2016, it was reported Washington will no longer pursue passing the Trans-Pacific Partnership.