The Trans-Pacific Partnership (Pros & Cons)

The Trans-Pacific Partnership is a pending Free-Trade Agreement among the 12 Pacific-Rim countries, including USA, Japan, Canada, Australia, Chile, New Zealand, Malaysia, Brunei, Singapore, Vietnam, Mexico, and Peru (Figure 1).

The TTP is forecasted to cover almost 40% of global GDP, as well as it is expected to be `comprehensive and high-standard’ agreement by eliminating tariff and non-tariff barriers among the treaty members. Yet concealed treaty text with over 20 Chapters covers many trade-related areas such as Labor Laws, Intellectual Property, Investment, etc.

TPP countries

Figure 1- SOURCE: CONGRESSIONAL RESEARCH SERVICE, 2015

Benefits & Concerns
Benefits
– Peterson Institute estimates that the treaty will add $77 billion to US GDP annually. Though it is only 1% increase, $77bln is a big sum of money . Total gain for all TPP members by 2025 is forecasted to be $295 billion.
– Having governance not only on the trade of goods and services, but also on intellectual property implies that there is a transition to knowledge-intensive products.
– Reduction (or elimination) of trade barriers will increase trades in all countries. However, when considered that most of the member states already have different multilateral agreements and some are in FTAs it doesn’t have significant impact.
– Standardization of trade policies is supposed to give equal rights to all companies and countries. (Not sure yet)

Sum of all the benefits of TPP shows that decreasing trade barriers will create regional co-operation among member states to develop the trade and the economy of all nations included.

Concerns
– TPP imposes standard policies for all member countries. However, there is an imbalance of power among the states, namely not all countries might agree to one law.
– Moreover, it also prevents the member states to enforce new laws which serve to protect the economy and trade of a country.
– For developed countries, especially US, cheap labor in another member country will create job offshore that will bring unemployment. Though some experts say the treaty will increase employment, this factor displays the opposite.
– Investor-State Dispute Settlement (ISDS) is another concern that is opposed by many activists. ISDS enables corporations to sue the governments in case they believe that any policy change will hurt corporations’ profit. This might prevent any environmental laws, health protection laws, and intellectual property laws. As one Australian Senator puts it, the ISDS could :
o Attack environment laws and legislation designed to address climate change
o Allow companies to sue state over our plain packaging laws and other legislation designed to protect the health of citizens (see the current Phillip Morris case)
o Attack moves to tighten rules on foreign investment in agricultural land and water
o Prevent moratoriums on genetically modified organisms and coal seam gas extraction
o Remove county or region of origin food labeling

There are other factors needs to be made clear before the deal is officially accepted. For instance, US law grants 12 years patent to the pharmaceutical companies, namely there cannot be any generic drug in the market for 12 years. In other members states this patent span is either low or doesn’t exist at all. In developing countries where purchasing power of people is low, access to medicine gets limited by this law, and countries cannot do any changes in policies because ISDS mechanism does not let it.
Moreover, early reports indicate that copyright laws will force all the members to adopt the same long copyright terms that prevail in US: the life of the author plus 70 years. This means that countries whose laws are based on the previous “life plus 50” standard will now have to wait two extra decades before classic works from the 20th century are free for anyone to use .

Conclusion
On October 4, 2015 ministers of TPP countries declared the conclusion of their negotiation and signed the treaty. By mid-2016 the deal should be ratified by all the member countries, especially by congress, because some congress members are opposing the deal. If the deal is ratified, TTP will be the biggest FTA ever made by covering 12 Pacific-Rim nations which account to 40% of global GDP.

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