Trans-Pacific Partnership: Boost or Not for Participant Economies?

August 18, 2015 6:46 pm Last Updated: December 29, 2015 8:07 pm

If negotiations are completed successfully and ratified by the dozen Pacific countries involved, is the Trans-Pacific Partnership (TPP) likely to create more jobs and economic activity for participants? The Peterson Institute for International Economics in Washington contends that it will, estimating that the TPP will enlarge the economies of the 12 by $285 billion by 2025.

American, Japanese, and Mexican advocates for the TPP assert that for the nations coming under its umbrella it will lower trade barriers like tariffs, establish more vigorous protection for intellectual property, and institute a dispute settlement mechanism for investors. The TPP will also include local-content rules, which have largely replaced tariffs as the major impediment to the flow of goods over borders, and support for agriculture. Defenders say it will offer new trade opportunities for services, natural resources, and products in booming Asia.

The key aim of TPP is to create a more rules-based and enforceable trade environment among nations, which together produce nearly 40 percent of the world’s economic output and a third of global trade. For example, high labor and environmental standards—so often absent from other trade agreements—are intended to be central and enforceable under the TPP.

The TPP is little understood by most Canadians and probably many Americans, partly because the evolving text as negotiated has never been made public. Three-quarters of Canadians recently surveyed indicated that they had never heard of TPP. The United States and New Zealand reportedly blocked Canada as a full participant until late 2012 out of concern for Canada’s supply management in dairy products and intellectual property laws. Early participants have participated in 19 formal rounds of negotiations since 2005.

High labor and environmental standards—so often absent from other trade agreements—are intended to be central and enforceable under the TPP.

Progress seemed glacial for years. It was WikiLeaks and others who leaked major disagreements over the environment, agriculture, intellectual property, and other important issues. Currency manipulation, including devaluations to boost exports, is hotly contested in America and elsewhere. The TPP should not proceed, many say, unless it credibly prohibits all parties from manipulating the value of their currencies for export advantage purposes.

The prospect for successfully ratifying the TPP in the United States improved this summer when the Senate and House of Representatives passed the Trade Promotion Authority (TPA) fast-track legislation, which authorizes President Obama to submit trade deals to both chambers for an expedited vote without the right to move amendments. More than 50,000 manufacturing plants and 20 million jobs have been lost in the United States alone over several decades, mostly to China.

Legislators in Washington, Ottawa, and elsewhere are concerned about Beijing’s export subsidies, sweatshops, forced labor, largely absent environmental controls, and flouting of trade agreements it has signed. Many are relieved that China is not a party to the TPP talks.

A major controversy arose in Hawaii in July when the U.S. trade representative—ignoring the provisions of NAFTA— brokered a side deal with Japan that lowered the threshold for how much of a vehicle “would have to come from Trans-Pacific signatory countries” in order to avoid large tariffs on entering Canada, Mexico, or the United States. The share dropped from 62.5 percent under NAFTA to somewhere between 30 and 55 percent under the side deal.

Canadians and Mexicans are rightly annoyed at this disregard for NAFTA by the Obama administration and the implications for our important auto sectors. Even the Japanese were reportedly surprised at the lack of prior American consultation with its NAFTA partners, which is now belatedly underway.

Another dispute is the proposed agreement’s leaked blanket intellectual property provisions, which Internet freedom advocates said would overrule national policies by imposing severe restrictions on Internet content.

The Internet Frontier Foundation has offered a number of specific concerns, including these: “The TPP is likely to export some of the worst features of U.S. copyright law … privatization of enforcement for copyright infringement, ruinous statutory damages with no proof of actual harm, and government seizures of computers and equipment involved in alleged infringement …”

Many are relieved that China is not a party to the TPP talks.

Supply management for Canada’s dairy, chicken, turkey, and egg producers is a very controversial issue, although Canadian Agri-Food, representing export-driven products, including grain, beef, and pork, is anxious to access Japan as the world’s third largest market under the TPP. It says it would be “devastating” if Canada does not join or joins late.

Almost a fifth of Canada’s $55 billion in farm cash receipts comes from our supply-managed sectors. More than 8 percent of its 200,000 farms are in the sector. Our model bars foreign competition in a network of quotas and external tariffs. To its credit, the Harper government has signed free trade agreements with nine countries and has preserved supply side management in all of them. The U.S. Congress for its part pays huge subsidies yearly to its dairy and other farmers.

Despite such problems, because it might prove more hazardous to be excluded from the TPP than to be included, both the United States and Canada are highly likely to join.

David Kilgour

David Kilgour, a lawyer by profession, served in Canada’s House of Commons for almost 27 years. In Jean Chretien’s Cabinet, he was secretary of state (Africa and Latin America) and secretary of state (Asia-Pacific). He is the author of several books and co-author with David Matas of “Bloody Harvest: The Killing of Falun Gong for Their Organs.”