Pacific Rim Nations Reach Free Trade Deal
The United States and 11 other Pacific Rim countries reached a contentious trade pact that cuts trade barriers, sets labor and environmental standards and protects the intellectual property of multinational corporations. The Trans-Pacific Partnership (TPP) is a proposed trade agreement between twelve Pacific Rim countries concerning a variety of matters of economic policy, about which agreement was reached on 5 October 2015 after 5 years of negotiations. The pact, aims to encourage trade between the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Together, the countries are responsible for 40 percent of the world’s GDP and 26 percent of the world’s trade. That makes it roughly the same size as the Trans-Atlantic Trade and Investment Partnership. The deal is seen as a challenge to China’s growing dominance in the Pacific region. China had been invited to join the trade group but balked at restrictions that the deal would have placed on its financial sector and other areas.
The Trans-Pacific Partnership (TPP) writes the rules for global trade—rules that will help increase Made-in-America exports, grow the American economy, support well-paying American jobs, and strengthen the American middle class. TPP will make it easier for American entrepreneurs, farmers, and small business owners to sell Made-In-America products abroad by eliminating more than 18,000 taxes & other trade barriers on American products across the 11 other countries in the TPP—barriers that put American products at an unfair disadvantage today. It will guarantee intellectual property rights for drugmakers, especially on the cutting edge of biotechnology, and reduce tariffs on goods from food to cars. American farmers will get to sell more rice to Japan, while Japanese automakers will have lower barriers for entry to the U.S. market. One of the Pacific accord’s potentially biggest benefits will be in the further market opening of Japan, the world’s third-largest economy. Its markets, especially for autos and agricultural goods, have long been heavily protected and considered almost impenetrable by American companies.
Separately, the U.S., Mexico, Canada and Japan also agreed rules governing the auto trade that dictate how much of a vehicle must be made within the TPP region in order to qualify for duty-free status. The North American Free Trade Agreement between Canada, the U.S., and Mexico mandates that vehicles have a local content of 62.5 percent. The way that rule is implemented means that just over half of a vehicle needs to be manufactured locally. The accord is also expected to give a boost to Hollywood and other entertainment firms, which sought the U.S. term of 70 years of protection for copyrighted films, music and other works despite criticism from groups that advocated shorter terms and a freer flow of information.
Supporters of the pact, including the U.S. Chamber of Commerce, argue that The Trans-Pacific Partnership (TPP) will make it easier to sell made- in-America goods and services overseas and support U.S. jobs and economic growth. Opponents, such as the AFL-CIO Labor 0rganization, argue that it will lead to additional outsourcing of U.S. jobs. They are expected to pressure Congress to reject that pact. Ford Motor Co. is recommending Congress not approve the agreement in its current form because it fails to adequately address currency manipulation overseas, which may tip the playing field.
Congress, which now must either accept or reject the final agreement, won’t vote on it for at least a few months, and possibly not until the end of next year.