CSCMP's Supply Chain Quarterly
January 21, 2019

Revisiting the TPP

The Trans-Pacific Partnership may not take effect until well into 2017—if ever. What effects it will have on global business and economies remains in dispute.

The Trans-Pacific Partnership, the massive trade pact among 12 nations representing some 40 percent of the world's gross domestic product (GDP), took a another big step forward in February, when the trade ministers of the member nations gathered in New Zealand to sign the agreement.

Now, those nations—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam—have two years to ratify or reject the pact. That time will almost certainly be needed.

It seems unlikely that the U.S. Congress will even take up the question in 2016. In December, Senate Majority Leader Mitch McConnell said that the TPP would be defeated if it came to Congress this year, adding that he himself was unsure how he might vote on it. It now appears that a vote will not take place until after a new Congress takes office and President Obama leaves the White House next January.

So who are the likely winners and losers should the TPP become reality? That's a source of deep dispute in many of the member nations. Supporters, including President Obama, contend that the trade deal will yield broad economic benefits—and not incidentally provide a counterbalance to China's economic clout. But critics fear that it would primarily benefit large corporations at the cost of significant job losses, especially in industrialized countries like the U.S. and Japan.

A summary developed by the BBC sees big gains for Japanese and U.S. automakers and for farmers, who will see a reduction in taxes and tariffs. Major industrial nations would see employment losses while low-wage nations like Vietnam would likely gain jobs; those developing countries, however, would also have to abide by international labor laws. Pharmaceutical manufacturers get eight years of protection for new biotech drugs, which some argue could drive up drug prices by slowing the introduction of generics. Big tech companies win expanded rights to sell in foreign markets, but agreements to lower roaming charges through regulation could create greater telecom competition.

The authors of a working paper issued in January by the Global Development and Environment Institute at Tufts University in Massachusetts, U.S.A., dispute the estimates of GDP growth touted by the TPP's advocates. Their analysis shows net losses in GDP in the U.S. and Japan over 10 years and negligible gains in other participating countries. They forecast more than 771,000 jobs lost among all 12 countries, with the U.S. being hardest hit. They also expect job losses and pressure on wages will further exacerbate rising income inequality, and that the TPP will lead to job losses elsewhere in the world, especially in Europe, India, and China.

Doubtless, all of the claims regarding gains and losses are subject to challenge. The debate over the fate of the TPP—a debate one hopes (perhaps foolishly) will bring some clarity to the question of what the trade pact will really accomplish—is likely to be a ferocious one.

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