Dissecting the Trans-Pacific Partnership: A Look into Obama’s Massive Trade Deal

November 1, 2015

 

On October 5, 2015 the United States, along with 11 other nations as varied as Canada to Malaysia, reached an agreement on the Trans-Pacific Partnership. The agreement has been in the works since 2009 and culminates in furthering free trade and eliminating economically inefficient non-tariff barriers. In the United States, news of an agreement has proved a short-lived victory as the agreement now faces Congress’ scrutiny. While the Obama administration did win a 60-38 Senate vote granting fast-track authority (thus allowing the President to present the agreement in its final form rather than having individual sections reviewed and voted on by Congress), Congress will still have ample time to review the bill, and interest groups have already weighed in their growing concerns. The media has largely focused on how this deal could serve as President Obama’s economic legacy. Therefore, understanding the political and economic implications of the deal give an important glimpse into what Congress will be deciphering and critiquing before approving or voting down the agreement. 

 

When looking broadly at the partnership, any observer will quickly notice what country is not included: China. While discussing the ramifications of the TPP, President Obama even stated, “[the U.S.] can’t let countries like China write the rules of the global economy.” Such a strong stance highlights the agreement’s effort to create a fair playing field with regulations applying across global borders. Efforts to modulate environmental and labor regulations point directly at China’s woes in these controversial areas. Focusing on labor specifically, opening the door to more economies may urge American firms, otherwise inclined to move production to China, to instead move to a TPP partner nation because of eliminated tariffs and uniform regulations. Yet, a perception of this agreement as merely a response to China’s rising power and export control would not be sufficient. In six years of negotiations, each nation has added its’ own concerns and interests to the pool. These issues range from intellectual property and state owned enterprise regulation to dairy exports and biologics.

 

As Congress and interest groups begin looking into the fine details of the agreement, each will find sections they wish to promote and portions they view as harmful towards their constituents or business. Yet, when it comes time to vote on the bill, the fast track authority requires only one vote; Congress does not hold the authority to amend the agreement. Almost paradoxically, President Obama has had more support from free-market endorsing Republicans than his Democratic cohorts. For those promoting free trade in any means necessary, this deal makes complete sense; it opens the door for American producers to more easily move production abroad, send goods and services abroad, and receive less expensive imported goods from partner countries. For those worried about the agreement, problems stem from the possibility of losing American jobs, especially in the vulnerable manufacturing sector.  Inefficiencies that are protected by non-tariff barriers, such as import quotas or government purchases of goods, could be exposed to the sometimes-harsh reality of a truly free market. To counter concerns about decreased labor regulations, proponents of the bill can point to uniform labor standards as a combatant to the supposed “race to the bottom” of regulations often cited as a result of nations’ trying to attract big business to their economies. In fact, as labor conditions improve in the global economy, some firms may remain in relatively expensive places like the U.S. because the cost of investing abroad would be greater as foreign wages increase. Moreover though, the constituency concerned about the deal’s effects point to the obvious fact that the benefits possibly claimed from the agreement are largely immeasurable: only time will reveal the true benefits or downfalls. 

Beyond the U.S., the TPP represents an important step away from multilateral agreements. Furthermore, the new agreement solidifies a movement away from multilateral negotiations previously achieved through the World Trade Organization (and before that by the General Agreement on Tariffs and Trade). A wide range of scholarship tackles the question of whether agreements like the TPP, otherwise known as regional trade agreements, really increase global free-trade. Multilateral agreements apply to all nations in the WTO and have historically stood as the most impressive promoters of free trade. Multilateralism’s downfall is the WTO requirement that all agreements be approved by all nations; this ensures any desired agreement will take extreme efforts to negotiate between very different nations. Most recently, the failure of the Doha Round to culminate in agricultural and other trade agreements has expanded pushes for regional trade agreements like the TPP. Scholars fear that as regional trade agreements increasingly segment the global economy rather than integrate it, free trade as a whole will decline. Others contend that agreements like the TPP serve as a model for other countries aspiring to extend free trade, and that as the agreement proves worthy, other nations will join and free trade will increase globally. 

The initial victory of simply reaching an agreement is massive; the TPP encompasses 40 percent of world trade, and this could rise. Yet, even if the TPP passes Congress, the deal must also be approved in the eleven other states in the agreement. Therefore, President Obama and world leaders alike must now push for increased congressional coalitions backing the negotiation. Additionally, critics will continue to condemn the TPP and other regional trade agreements like it until they make efforts to work with China. As recent economic instability has proven, China remains a world player in financial and trade markets. Further negotiations could help the U.S. heal its trade deficit with China. Globally, the TPP stands as a point of analysis from scholars interested in measuring free trade. Unless more countries sign on to the agreement, the TPP could serve as an exclusionary measure because developing nations are left out of the deal.

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