TPP, TTIP, RCEP, TiSA – these are just a few examples of the raft of trade agreements that have taken, or are currently taking place across the world. Take a look at our interactive infographic about the evolution of trade agreements between 1947 and 2014 to witness this staggering number at a glance.

So, what makes the Trans-Pacific Partnership (TPP) any different to the others? To start with, the TPP is much more geocentric and limited in members than many other agreements – only including 12 countries in the Pacific Rim. The stated goal of the agreement is to “promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and promote transparency, good governance, and enhanced labour and environmental protections”. As with most trade agreements, the TPP hopes to achieve a number of these targets by lowering trade barriers such as tariffs.

For the US government, the TPP is considered a fellow trade agreement to the proposed Transatlantic Trade and Investment Partnership (TTIP), which is, generally speaking, a similar agreement between the US and the EU. TPP is an extension of the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4), originally signed by Brunei, Chile, New Zealand and Singapore in 2005. At the start of 2008, a further eight countries joined proceedings to create a wider agreement along the Pacific Rim region: Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States and Vietnam. The 12 members making up the Trans-Pacific Partnership agreement came to a consensus of terms on 5 October 2015, seven years after negotiations began.

Who’s the Biggest Winner with the TPP?

The Pacific Rim is already a major hub of trade and an economic powerhouse. The 12 member countries of the TPP make up a third of all global GDP – at around $28 trillion annually – and a third of all global trade. In successfully ratifying the agreement, the member countries hope to consolidate their place at the summit of global trade dynamics. But when the last signatory puts pen to paper, who stands to benefit most? Many TPP reports point to the US.

The TPP would reduce 18,000 tariffs, completely erasing tariffs on all US manufactured goods and almost all US agricultural products, with most tariff eliminations occurring immediately. The impact of measures such as these, according to American think tank the Brookings Institution, are estimated to result in $5 billion in economic benefits to the US in 2015 – rising to $14 billion in 2025. These numbers, however, are conservative; the economic benefits to the US could be much greater if the effect of investment liberalisation under the TPP was also considered. The Brooking Institution’s TPP study concluded that the agreement should lead to extensive opportunities for growth for small to medium sized business exporters in the US, which, in 2012, made up 40% of US goods exports. Small businesses usually benefit disproportionately from trade liberalisation, since there is less chance of them creating subsidiaries abroad in order to hurdle trade barriers.

The Trans-Pacific Partnership agreement will also contribute toward more meaningful economic integration in the Asia-Pacific region for the US, which, for the most part, has been excluded from many major deals until now. For instance, ASEAN has existing free trade agreements with China, Japan, South Korea, Australia and New Zealand. Here, the US is conspicuous through its absence.

Some reports on the TPP claim that the new pathways for exports between the US and other signatory countries will greatly benefit a number of American industries, namely agriculture, insurance, technology, pharmaceutical, and many large-scale manufacturers. The optimism is being felt by American stakeholders already: In January 2016, the national Association of Manufacturers made vocal its backing for the Trans-Pacific Partnership deal, stating “without such agreement, the United States would be ceding economic leadership to other global powers, letting them set the rules of economic engagement in the region”.

Clearly the TPP is held in high regard by American entities heavily invested in export and trade, and is seen as a prime opportunity for the US to expand its export portfolio in the Pacific Rim – one of the fastest growing regions in the world. On top of this, American citizens stand to benefit from the projected growth in jobs. The Trans-Pacific Partnership agreement could potentially result in 650,000 new jobs for Americans, however, some TPP studies refute this claim. A number of trade economists view trade agreements like the TPP to be more of a changer of jobs than a creator. As such, these commentators believe that the TPP will transform workers’ jobs into more productive ones, in turn increasing incomes, but not increasing the amount of jobs. In any case, Americans stand to enjoy tangible benefits from the TPP; whether that entails more jobs or simply better paid jobs remains to be seen.

Beyond the Pacific Rim – the Wider Impact of TPP

Once the TPP comes into effect it will create a powerful economic bloc in one of the most rapidly expanding regions of the global economy – uniting some of the wealthiest and most developed countries in the world with much poorer ones as they step into a new era of trade. But what about the neighbouring and associate countries? Our study, Who Wins and Who Loses with TPP contributes important findings to the discourse around TPP with regard to its impact on both its members and for those outside of the agreement. In this study, we look at the impact of the TTP on the EU, as well as potential repercussions for the Chinese economy, among others.

It goes without saying that major multinational trade agreements reap various rewards and degrees of positive outcomes for the those involved, and their neighbours. Right now we are in an age where trade agreements like the TPP are reaching an unprecedented scale, bringing together regions and economies through trade like never before. If you are interested in the general impact of such deals on the wider world in the 21st century – especially in regard to your country – then you can examine the typical knock-on effects of trade agreements by accessing our country fact sheets in our post, TTIP, TPP, RCEP … How do Mega Trade Deals affect your Country?

Discover New Perspectives with The Global Economic Dynamics Project

Aside from our coverage and studies on TPP, we offer a wide range of thoughtful and intriguing analysis on the state of play in global economic dynamics. We do this by looking at events with a studious eye and an inquisitive mind – we believe this helps us and our peers to get to the root cause of global issues, and in turn, uncover more holistic and meaningful solutions. We always share our solutions in a range of formats – such as our award-winning factsheets and tools – so that they have the greatest reach and can be understood and processed as fast as possible. Keep up with our findings and reports by signing up to our newsletter today.

Related Posts: