President Donald Trump made the abandonment of the Trans Pacific Partnership (TPP) trade agreement one of the key parts of his 2016 election campaign. During his first day in office, he made good on his promise to take the United States out of the agreement.
The TPP involved 12 countries that bordered the Pacific Ocean who agreed in principle to having closer ties with one another. The agreement would slash tariffs, create better economic conditions, and foster trade within the region to encourage economic growth in every nation. Members also hoped that the Trans Pacific Partnership would bring everyone closer together on economic policies and overall regulations.
Because all 12 members had to ratify the TPP for it to go into effective, the Trans Pacific Partnership would become defunct with the U.S. withdrawing support for it. The other countries in the free-trade agreement are working without the influence of Americans to create something that works for them, including Japan, Canada, New Zealand, Australia, and Vietnam.
Do the biggest pros and cons of the Trans Pacific Partnership suggest that it was a horrible deal, as President Trump often suggested, favoring large businesses at the expense of American jobs? Or do they indicate that closer ties in the Asia-Pacific region with North America would help to counter China’s influence on the global stage?
Biggest Pros of the Trans Pacific Partnership
1. Individuals would have more spending power with the TPP in place.
If the Trans Pacific Partnership were to go into effect, then over $220 billion per year in wages would be added to the global economy. That’s the power of having a dozen of the world’s top players in the import-export market coming together. Even without the influence of the U.S. in the revised Pacific Trade Deal, there are over $150 billion in new wages.
This figure includes all of the indirect benefits that come from surrounding services, the presence of new jobs, additional sales tax revenues, and a rising standard of living around the world. With the TPP, the local governments become the real winners because SMBs and SMEs would have more access to the global economy.
2. It would reduce the influence of tariffs on global trade.
The goal of the Trans Pacific Partnership is to prepare more markets for chances at free trade. There is a push to reduce the number of tariffs which are already in the current export market, even without the TPP in place. More than 18,000 taxes are currently active on commodities exported from country-to-country that affect the costs which customers pay at the store.
By eliminating them from the buying process, there would be additional opportunities for each member nation in this deal to have their economy grow. Although some firms might see fewer local sales levels because of the TPP, the overall impact on the worldwide market would make up for their damages by generating gains in different markets.
3. Economies at every level would grow with the TPP.
When the U.S. was associated with the creation of the final draft of the Trans Pacific Partnership, the initial assessments for economic growth with each participating country totaled more than $300 billion per year. Americans would have seen about one-third of this increase in global exports.
Industries such as plastics manufacturing, agriculture, automotive production, and machinery would be the greatest winners of this opportunity because of the new access that would have been available to member nations outside of the Asia-Pacific Region.
When there is more commerce going on everywhere around the world, then there are more vocational opportunities available to the ordinary worker. The new version of the Pacific Trade Deal is already creating this benefit today.
4. There were wildlife protections put into place with the Trans Pacific Partnership.
All of the member nations involved in the Trans Pacific Partnership agreed that there were advantages for each country if they would work to prevent wildlife poaching and tracking from all hunting activities. The goal of the TPP was to reduce the demand for animal-based merchandise that comes from critically at-risk species.
Rhinos, elephants, and several water-based animals would receive security under this agreement, which was going to be a first for the world. It would expand on the global treaties and informal arrangements which regulate items like shark fins, rhino horn, or ivory from elephants or walruses.
5. The TPP included several environmental protection clauses in the agreement.
The Trans Pacific Partnership extends protections in various industries that defend against the use of unsustainable systems during the production, distribution, and sales processes which could harm the environment. The structure of the TPP was such that it forced all member nations to no longer use angling or timber practices that could cripple the local economy for decades after that. Substantial punishments were in place for the countries who were not adhering to the rules put in place by the TPP.
6. There were IP protections put into place with the Trans Pacific Partnership.
Another reason why the United States initially wanted to be associated with the Trans Pacific Partnership was that it extended an opportunity to defend the intellectual property rights of Americans and other nations which do business in the Asia-Pacific region. Over $600 billion worth of potential sales escapes from the economies in North and South America, Europe, and Australia because of IP theft difficulties that occur in Asian countries, with China being the primary protagonist.
The TPP would stop the illegal transference, implementation, or benefiting from the intellectual property where there are no licensing agreements or buying contracts that permit its use.
7. It would improve technology access throughout the region.
The TPP allowed businesses of any size in the participating countries to receive access to the newest technologies from the multiple relationships or investments that became available under this agreement. This arrangement made it possible to add a micro-economy that could thrive domestically because there would be access to a global market for anyone.
Even freelancers, independent contractors, and individuals who earn a living in the gig economy would get an opportunity to find additional levels of achievement with this power because the Trans Pacific Partnership provides new opportunities that would typically go to more substantial firms under the standard agreements which traditionally govern trade.
8. There would be fewer issues with turnover thanks to the TPP.
When specific industrial segments receive protection from the government against outside trade, then there is less of an urge to push profits toward R&D projects. This problem creates stagnation within specific divisions because there would always be access to a customer base that would obtain the items in the supply chain. The Trans Pacific Partnership encourages engagement on a global scale by creating new labor markets, specialties, and other benefits that build macro-competition on micro-levels for the member nations.
Biggest Cons of the Trans Pacific Partnership
1. The U.S. withdrew because it reduced their overall negotiating power.
The United States felt that the TPP took away many of the advantages that it currently has on the global stage. Many of the medical patents, vocational IP, and exports of agricultural goods bring plenty of riches to the country that are not considered standard elsewhere in the world. Although the other countries wanted the U.S. to be present because of the value access they would receive to the American economy, the idea that there would need to be more concessions was a deal breaker for the other countries involved with the project.
2. The TPP could have encouraged the rich to get richer at the expense of the poor.
The United States is one of the global leaders in terms of total wages within its various economic sectors. There are areas in the Asia-Pacific range where the median income is 100 times less than what the poverty line is for Americans. When looking at where the benefits of the Trans Pacific Partnership would be with this agreement, almost all of the additional earnings would go to those making more than $90k per year.
When there are workers in Vietnam surviving on less than $2.50 per day in some rural areas, there is no way for them to access the market benefits that the TPP promised to offer. Although job creation would improve the overall economy, the actual employment shift through offshoring and other methods would impact anyone in the middle class or below.
3. Many of the benefits found in the TPP were based on American participation.
Although the Trans Pacific Partnership covered 40% of the overall value of the global export market with its 12 members, almost 30% of the possible economic benefits from the TPP were centered on the United States. There will still be imports and exports among all of the participating nations even after the Trump Administration pulled out of it, but the benefits will not have the same exclusion from tariffs or the benefits of free trade to consider. That means the agreement was fairly one-side in the first place, giving the U.S. more control over economic standards that are not present in other nations.
4. Consumers would pay the higher cost of copyright protections.
The original version of the Trans Pacific Partnership included copyright protections that would reduce the availability of generic drugs. It was a provision insisted upon by the United States, despite the fact that one of the top complaints for most Americans is the price of prescription medication. Over $170 billion in savings comes from the generics market each year, but much of this would have gone away with U.S. participation.
Pharmaceutical companies wanted this protection in place so that they could distribute their products to patients in need around the world. That could possibly start a global trend where cheap medications suddenly become very expensive because of the impact of free trade on the market.
5. There is more focus on the front end of the supply chain with the TPP.
When one looks at the structure of the Trans Pacific Partnership, the primary benefits of the agreement are loaded disproportionately on the front end of the supply chain. Most of the new job opportunities would be in the member nations that had the lowest standard of living, such as Vietnam. Good-paying jobs in the wealthier nations would migrate away, with companies relying on their import-export matrix to ensure a higher level of profitability.
Although proponents say that this disadvantage would not happen, any treaty in world history where a wealthy nation and one with a lower standard of living come together in free trade will show evidence of offshoring movement. Even when the first days of NAFTA came along, there was an influx of jobs to Mexico that had originally been located in the United States.
6. The reduction in tariffs would reduce the income levels of each government.
Tariffs are usually a cost that consumers pay at some point in time, but it does produce an economic benefit for the authorities who decide to issue them. Purchasers can change their spending habits to countries which aren’t included by a tariff policy like the TPP, but a total reduction with vital trading partners does reduce or eliminate incoming resources that support domestic programs or services.
Because of this issue that ties directly to free trade, there may be a time in the future when members of the Trans Pacific Partnership would need to increase taxes in other ways to make up for the reduction of profits that this agreement authors because of the slashing of tariffs.
Conclusion of the Biggest Pros and Cons of the Trans Pacific Partnership (TPP)
Whether President Donald Trump was right to pull the United States out of the Trans Pacific Partnership or it was one of his biggest mistakes is an issue that history can judge. Although there were some advantageous terms in place for Americans that could help the 11 other members as well, there are times when free trade is not always the best solution.
Because of the number of concessions made to the U.S. to keep them in the TPP in the first place, a renegotiation of the Pacific trade deal is unlikely in the future. The other nations have already put together and ratified a different arrangement that is slowly going into effect in the coming years.
The biggest pros and cons of the Trans Pacific Partnership show us that there are still opportunities to create economic stimulus events under the right conditions. There might be a chance in the future for these countries to encourage more import-export transactions, but for now, the original version of the TPP is dead.
Natalie Regoli is our editor-in-chief. The goal of ConnectUs is to publish compelling content that addresses some of the biggest issues the world faces. If you would like to reach out to contact Natalie, then go here to send her a message.