Commerce Report Illustrates Benefits of TPPMay 1, 2016
On April 22, the U.S. Department of Commerce released a new report highlighting the potential benefits U.S. companies can expect to experience when exporting to the 11 Trans-Pacific Partnership (TPP) countries. The report details each market’s top export sector and explains how existing tariffs will be impacted once the agreement enters into force.
The countries that make up the TPP represent 40 percent of the world’s Gross Domestic Product (GDP) and, combined, would form the largest free trade area ever created. In early February, trade ministers from the dozen countries gathered in New Zealand to sign the massive trade pact, which covers approximately one-third of global trade. Now it is up to the legislatures of the member countries to decide whether to ratify the agreement.
Parsing exactly what the treaty will or will not do is a difficult task given how much it covers – there are 30 chapters spanning thousands of pages, covering labor, the environment, e-commerce, sanitary and phytosanitary measures, and for the first time in a trade deal includes a small business chapter.
According to the report, by eliminating more than 18,000 tariffs on “Made-in-America” products sold overseas, the TPP will enable U.S. businesses to compete on a level playing field, while defining the highest standards on labor, the environment, and the digital economy ever to be included in a trade agreement. The report states that in 2013, nearly 176,000 U.S. companies exported goods to TPP countries. The report also illustrates that in 2014, U.S. goods exports to TPP markets totaled $726.5 billion and supported nearly 3.1 million jobs.
A recent Peterson Institute for International Economics report estimates the implementation of the 12-nation pact would increase real income in the U.S. by $131 billion, or 0.5 percent of GDP, by 2030, when most of the tariff cuts and other commitments are phased in. While it may seem like a small gain, it is equal to the benefit received from about $1.45 trillion worth of investment in the U.S., which is the largest income gain of any country in the landmark agreement. The Peterson analysis finds that the bulk of this income gain goes to American workers and that this income growth will result in higher wages for American workers.
Although, the TPP is President Obama’s biggest economic priority of his final year in office, TPP may not see floor debate until the lame-duck session of Congress, or potentially even put off until the next administration, depending on the outcome of the November elections. While House Speaker Paul Ryan (R-Wis.) is a trade proponent, he has deferred to his colleagues on the potential timeline for action. Both Senate Majority Leader Mitch McConnell (R-Ky.) and Senate Finance Committee Chairman Orrin Hatch (R-Utah) have no plans—at this time—to move TPP through the upper chamber.
The Department of Commerce is focused on educating U.S. businesses and workers on the importance of the TPP. To view the full report, please click here. To learn more about the TPP, please click here. To help determine the tariff reductions for various products to TPP countries once the agreement enters into force, visit the newly updated Tariff Tool.