How the TPP Will Affect Manufacturing and Retail Industries

A news item that has gotten a lot of attention lately is the TPP (Trans-Pacific Partnership). It’s for good reason, as the agreement could have a big impact on our economy and by extension affect many U.S. companies and their employees.

If you operate in the manufacturing or retail industries and have a global supply chain footprint that relies heavily on the Trans-Pacific trade lanes, the impact on your business and freight shipping operations may be the most direct.

Making the TPP story all the more interesting is the divisive nature of the potential pact. There are strong partisan opinions from both political parties. To add a twist however, it’s primarily Republicans supporting our President and not the Democrats in Congress. To further exasperate the issue, the details of the agreement as it is being negotiated are secret and not publicly available. That said, drafts of the agreement have been leaked but have not been verified as real.

What is TPP?

At a high level, the TPP is a trade agreement designed to remove barriers to trade between select countries in Asia and the Americas.

According to the Office of the US Trade Representative website, the TPP will “…boost U.S. economic growth, support American jobs, and grow Made-in-America exports to some of the most dynamic and fastest growing countries in the world.”

You can read more from www.USTR.gov – CLICK HERE.

According to its supporters TPP would, among other things, reduce trade barriers and export taxes between the countries involved. It’s no surprise that every country does things (such as charge tariffs) to protect the value of certain homegrown products as a way for its own companies and economy to stay competitive. The TPP would strive to remove many of those protections, in much the same way as NAFTA works in North America. In fact, Canada, Mexico, and the U.S. (the members of NAFTA) are all part of the TPP negotiations.

The 12 countries involved in negotiating the agreement include: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.

The total amount of trade involved in the agreement is significant, with the total GDP of the 12 countries comprising 40 percent of global GDP and one-third of world trade (approximately $27.7 trillion).

The agreement will do a lot of other things too. For one, it could require countries to adopt stricter labor and environmental rules. Other parts of the agreement are likely to touch on things like copyright laws and new rights for how foreign companies can make legal challenges in other countries. Establishing greater protections for intellectual property is also likely to be a significant tenant of the agreement.

Furthermore, TPP is reportedly intended to serve as a model for future trade agreements and also provide the opportunity for other countries to join at a later time.

Of course given the all secrecy, the actual substance and impact of any agreement is speculative.

Why is it controversial?

The negotiations for the TPP (which was originally called the Trans Pacific Strategic Economic Partnership Agreement) started in 2005, so it’s clearly been a long time in the works. But, the wait may soon be over as a key hurdle to getting the pact finalized was recently overcome.

After months of struggle, on June 23rd the White House finally secured Fast Track, or Trade Promotion Authority (TPA) approval from Congress. This approval means that a new trade deal can be sent to Congress for an up or down vote. In this scenario, lawmakers are not able to amend or filibuster the document and this was widely seen as the last key hurdle to TPP itself getting approved.

Strangely enough, it was GOP lawmakers advocating for TPA while Democrats were against it. Critics site a concern that the TPP will make it easier to send American jobs overseas. Not surprisingly this puts TPP at odds with many Democrats.

Other concerns are less politically divisive, but important nonetheless as they relate to the secrecy of the agreement itself. There is fear that certain corporations and special interests are getting access and therefore able to influence the negotiation process. This, even before the agreement has been made public.

On the other side, supporters believe the pact will open new economic opportunities for the U.S. by embracing the new global economy. It’s argued that free trade agreements are important to maintaining our economic influence, and if the U.S. doesn’t lead in the creation of new global trade partnerships we’ll be left behind.

What is the current status of TPP?

Getting Fast Track approval from Congress was a big step in completing the TPP agreement, but doing so does not make it a done deal. The White House is still required to make public the full text of the new trade agreement for 60 days in advance of being sent before Congress. Subsequent to that, Congress then needs to wait at least another 30 days before voting.

It’s still not clear when TPP can be held for a vote in Congress but it could happen later in 2015. Stay tuned.