JUL/AUG 2016 EDITORIAL – IS TPP GOOD FOR AMERICA? THE NUMBERS SAY IT ALL

The Trans-Pacific Partnership (TPP) is unlike any other free trade agreement of the past. It covers a host of developed and developing economies across the Pacific Rim: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam, while others, including Colombia, the Philippines, Thailand, Taiwan, South Korea and Indonesia, have shown great interest in becoming signatories of an unprecedented trade agreement that is set to level a large part of the global playing field of international trade.

By design, free trade agreements are a two-way street, allowing participating economies to export their products and services without the forbidding barrier of tariffs often put in place to “protect” the vital industries of a national economy. The elimination of import tariffs is an economic issue as much as it is a political one – a phenomenon very much highlighted in the current US presidential campaigns. In reality, will US businesses and workers benefit from TPP?

Let’s take a look at some numbers provided by the Office of the United States Trade Representative: in 2014, a total of US$56 billion in US machinery products were exported to TPP designated countries, and import taxes were as high as 59 percent; in 2014, a total of US$89 billion in US automotive products were exported to TPP countries, and import taxes were as high as 70 percent; in 2014, a total of US$36 billion in US information and technology products were exported to TPP countries, and import taxes were as high as 35 percent. With TPP, import taxes will be zero.

What about exports of US agriculture products which make up about 20 percent of all farm income across America? TPP will remove import taxes as high as 40 percent on US poultry products, 35 percent on soybeans, and 40 percent on fruit exports. Although not all, most US exports of farm product will be completely import tax-free, and more than half of these US products (by value) will not be subject to any import tariffs in one of the US’s most important export markets – Japan.

Let’s take a look at some more numbers: in 2014, Japan imported over US$1.6 billion worth of American beef, with a 38.5 percent import tariff, and almost US$2 billion worth of American pork, with a 20 percent tariff on ground seasoned pork, costing US pig farmers an additional US$435 million per year. Currently, Japan buys US$86.5 million worth of American wine each year, with import taxes of up to 58 percent. Japan also has a 21 percent tariff on American soybean oil as well as a tariff of 40 percent on cheese made in the US.

Under the TPP agreement, Japan will reduce tariffs on American beef to nine percent and will eliminate duties on 74 percent of its tariff lines within 15 years; it will eliminate 80 percent of its pork tariffs in 11 years and make steep cuts in the remaining lines; it will remove tariffs on US-made wine, soybeans and cheese. Better yet, TPP will help American farmers and ranchers to compete abroad by “ensuring that foreign regulations and agricultural inspections are based on science, eliminating agricultural export subsidies, and minimizing unpredictable export bans.”

In essence, TPP offers more than just the formation of the largest free trade zone by doing away with over 18,000 different trade-related tariffs; it is an important step in the sustainable development of international trade through a high-standard framework designed to protect laborers and the environment, to allow small- and medium-sized enterprises to benefit from global trade, to fight unfair practices and corruption, and to promote e-commerce, internet freedom, corporate governance, inclusive economic growth and future development as well as capacity-building.

To a large extent, the US is already a leader as an export market of high-quality products and services in many of the industry sectors included in the free trade agreement – from precision machinery to communication equipment and software; from poultry, beef and pork to dairy products; from retail to professional services. TPP is all about an expansion of access to existing and potential markets in the Asia Pacific region where American workers and businesses will be able to offer so much more and benefit from international trade in the age of globalization.

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