Trans-Pacific Partnership Rewrites Rules

Twenty-one years after the enactment of the North American Free Trade Agreement (NAFTA), the debate over free trade has risen to the top of the U.S. political agenda once again, this time in the form of the looming Trans-Pacific Partnership (TPP), a 12-nation trade bloc that would bring the United States and 11 other Pacific Rim nations together in a wide-ranging pact that would establish the rules for international trade, investment and foreign investment during the coming decade and beyond. Total trade between the U.S. and the other TPP countries exceeded $1.7 trillion in goods and $260 billion in services in 2012, making the TPP the largest free-trade agreement in world history.

Like NAFTA, which brought together three neighboring nations — the U.S., Canada and Mexico — the TPP has become a divisive political issue, not only among the general public, but within both the Democratic and Republican parties. There are questions about what kind of impact the TPP would have on the U.S. economy, and on the competitiveness of U.S. multinationals in the years ahead, in addition to concerns related to job growth, and U.S.-China trade and political relations. For example, Public Citizen, a left-leaning advocacy group, stirred opposition to the TPP recently with this message: “In one fell swoop, this secretive deal” could “offshore American jobs and increase income inequality, jack up the cost of medicines, expose the U.S. to unsafe food and products, and empower corporations to attack our environmental and health safeguards.”

By contrast, supporters say the TPP goes well beyond making additional cuts in tariff and duties to include the implementation of higher standards for the protection of labor rights, intellectual property, foreign investment and other barriers that thwart further trade in high-value services in which the U.S. has a competitive advantage. Its provisions would likely cost the U.S. economy some additional jobs in certain areas, supporters say, but generate large numbers of new jobs by boosting exports of U.S. high-value goods, and attracting further investment by foreign manufacturers and service providers in the United States.

Originally published by Knowledge@Wharton May 18, 2015

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