Key Points
- The Trans-Pacific Partnership has severe weaknesses as a trade agreement. It offers both commercial and diplomatic benefits, but its value is undermined by extensive nonconforming measures, by rules of origin that risk blocking gains from both the Trans-Pacific Partnership (TPP) and future deals, and by grossly inadequate treatment of state-owned enterprises.
- Many American business groups may see the TPP as an improvement over current global rules and therefore worthwhile for individual issues, but they will typically not consider the national interest. Within the next decade, some TPP rules could become anchors holding the US back.
- To get where the US needs to go, current TPP terms will have to be changed considerably. Ratifying the existing TPP can make the path only more difficult.
Introduction
The Trans-Pacific Partnership has severe weaknesses as a trade agreement. It offers both commercial and diplomatic benefits, but its value is undermined by the extensive set of nonconforming measures, by rules of origin that risk blocking gains from both the Trans-Pacific Partnership (TPP) and future deals, and by grossly inadequate treatment of state-owned enterprises. These and other flaws limit the TPP and, perhaps more important, set precedents that will interfere with free trade and harm the interests of the United States.
The stakes are high: the TPP could serve as the governing instrument for most global trade for the next two decades. The TPP itself will initially have only a small impact on the American economy, because the US already has trade agreements with 6 of the 11 other parties. It has potential to expand, however, to South Korea, Taiwan, the Philippines, and others.
Because it represents the latest American positions, the TPP will function to some extent as the basis for the Transatlantic Trade and Investment Partnership.[1] Through competition, it could potentially raise the standards of the Regional Comprehensive Economic Partnership, an alternative, less ambitious Asia grouping. With the World Trade Organization (WTO) unable to reach consensus on further reforms, the TPP offers the best chance for global liberalization.[2]
This can happen only if the TPP is a sound agreement. Many American business groups may see the TPP as an improvement over current global rules and therefore worthwhile. They will offer detailed and valuable evaluations of individual issues. But they will typically not consider the national interest.
A moderate improvement over the status quo leaves on the table gains from trade among the current members. It limits the TPP’s impact through inducing reforms in any new members. It reduces the value of the TPP as a template for other deals. Worst of all, flawed provisions in the TPP will become new standards, actually serving as a barrier to ensuing liberalization.
It is difficult to meld the many commercial components of the TPP into a single assessment. The endeavor is necessarily shallow, compared to the enormous amount of text. And it is tricky to weigh different issues—automobiles and transparency, for instance.
But it is clear the US could have done better. Some TPP flaws can be traced to self-defeating American protectionism in agriculture and services. An improved American offer requiring, in turn, concessions from partners could strengthen the TPP. If so, this would have a cascade effect on future trade agreements. It would shift the TPP from a mixed blessing in the long term to the transformative event it needs to be.
Notes
- William Louch, “Trans-Pacific Trade Deal Set to Clear Path for TTIP Agreement,” Parliament Magazine, October 6, 2015, http://ift.tt/1HVgGly.
- Laura MacInnis and Missy Ryan, “Timeline: Key Dates in WTO’s Doha Round,” Reuters, July 30, 2008, http://ift.tt/1YZzbcM; and Matt Siegel and Tom Miles, “Disappointment, Uncertainty after India Blocks WTO Trade Deal,” Reuters, August 1, 2014, http://ift.tt/1YZzbcO.
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