TRANS-PACIFIC PARTNERSHIP Benefits to U.S. Agriculture

An article published on October 16th, 2015 by the United States Department of Agriculture, http://www.fas.usda.gov/sites/default/files/2015-10/tpp_details_alcohol_10-16-15.pdf, describes how the TPP will provide significant new market opportunities for United States exporters. The TPP will promote economic growth in the Asia-Pacific region, which will increase the demand for U.S. food and agriculture products. In specific, the TPP strengthens trade rules and provides new market access for US exports to Japan, Malaysia, Vietnam, New Zealand, and Brunei. Without the TPP, US alcohol exports to the TPP region face a competitive disadvantage and are subject to many duties and tariffs. The US exported $579 million of wine, $359 million of beer, and $539 million of distilled spirits to countries in the TPP region in 2014. Of that, the US exported $2.9 million in alcoholic beverages to Malaysia. Malaysia’s current import duties for wine range from $2.08-$25.58 per liter, for beer are $1.18 per liter, and for distilled spirits they range from $0.71-$22.04 per liter. Under the current agreement, all of the import duties for alcoholic beverages entering into Malaysia will be eliminated 16 years after the agreement is ratified. This could have a significant impact not only on the Malaysian and the United States economy, but also on all of the other countries that Malaysia imports their alcoholic beverages from.

What impact will this have on Malaysia’s economy? How will Malaysia’s domestic alcohol industry be affected by the TPP? Will the US and other countries have an opportunity to export significantly more alcohol to Malaysia?

TPP Trade Deal: Who Stands to Gain, Suffer in Asia-Pacific

According to the article, (http://www.bloomberg.com/news/articles/2015-10-06/tpp-trade-deal-who-stands-to-benefit-suffer-in-asia-pacific), the TPP deal sealed Monday in Atlanta will bring various gains and losses to the countries involved, as follows:

  • Japan: Japanese car and auto-parts makers may be the biggest winners, as they gain cheaper access to the US, the industry’s largest export market. During negotiations, Japan was forced to reduce some of the protections granted to its rice farmers, creating a non-tariff import quota of 1% total consumption, while livestock farmers may be hit harder, as tariffs on beef will be cut from 38.5% to 9%.
  • Australia: The TPP deal will remove approximately $9 billion of import taxes from Australian trade, and they will gain access to the US sugar market. Additionally, the cut in the beef tariff will help Australian ranchers, and seafood and most horticulture products will see tariffs dropped as well. Furthermore, Australia and New Zealand successfully pressured the US to compromise on the amount of time that pharmaceutical companies will get to monopolize new biotech drugs, which could lead to cheaper drug prices and more competition.
  • New Zealand: Tariffs are due to be eliminated on 93% of New Zealand’s trade with its TPP partners, representing annual savings of approximately $259 million New Zealand dollars, with the Dairy industry seeing savings of approximately $102 million New Zealand dollars per year. Additionally, tariffs on beef exports will be completely eliminated, with the exception of Japan, where they will drop from 38.5% to 9%.
  • Vietnam: Vietnam will be among the biggest winners, with GDP being boosted approximately 11% and exports growing 28% in the next ten years. Reduced imports in the US and Japan will benefit the country’s apparel manufacturers and the fishing industry will benefit from elimination of import tax on shrimp, squid, and tuna. Eliminating import taxes on pharmaceutical products, however, will lead to tougher competition between domestic Vietnamese companies and foreign companies. The TPP will also increase patent protection, restricting Vietnamese companies’ access to new products as well as inhibit their ability to produce new drugs.
  • Malaysia: State-owned enterprises in Malaysia may suffer from the TPP deal, which calls for equal access to government procurement, however electronics, chemical products, palm oil, and rubber exporters are among beneficiaries.
  • China: Since China failed to join the TPP, they are likely to be among the biggest losers, and are now indicating some interest in joining the TPP in the future. In the meantime, Chinese exporters may lose some market share in the US, Japan, and Vietnam. To combat these losses, China will try to reach more free-trade deals with other countries, especially in Asia.

Trans-Pacific Partnership Deal is Reached

According to the article, (http://www.nytimes.com/2015/10/06/business/trans-pacific-partnership-trade-deal-is-reached.html?_r=0), the 12 Pacific Rim countries involved in the TPP reached a final agreement on Monday, preparing President Obama for what could be the toughest fight of his final year of presidency: securing approval from Congress.

Now that negotiations of the TPP have come to an end, the deal will face months of scrutiny in Congress, where opposition is imminent. Regardless, for President Obama the deal could be a legacy-making achievement; the TPP draws together countries representing 40% of the global economy, and spins them into a web of common rules governing trans-Pacific commerce. The argument that the TPP will be key in limiting China’s power in the global economy is Key to the President’s hard sell of the act to Congress. Obama stated: “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”

Trans-Pacific Free Trade Deal Agreed Creating Vast Partnership

According to the article, http://www.bbc.com/news/business-34444799, the Trans-Pacific Partnership (TPP), the biggest trade deal in decades, was struck on Monday after five years of bitter and tense negotiations. The TPP cuts trade tariffs and sets common standards in trade for 12 Pacific Rim countries and covers about 40% of the world economy. However, although negotiations have been finalized, the deal is yet to be ratified by law makers in all 12 countries.

For President Obama, the TPP trade deal is a major victory. He stated: “This partnership levels the playing field for our farmers, ranchers, and manufacturers by eliminating more than 18,000 taxes that various countries put on our products.” In opposition, however, US Senator and US Democratic presidential candidate hopeful Bernie Sanders argues that Wall Street and big business have “won again,” stating that the TPP deal will cost US jobs and hurt consumers.

Additionally, China was not involved in the TPP agreement, however the Obama administration is hoping that it will be forced to accept the majority of the standards outlined by the TPP. He was quoted: “When more than 95% of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”

Furthermore, the final round of TPP negotiations were delayed over how long pharmaceutical companies should be permitted to maintain a monopoly on their drugs. The US wanted twelve years of protection, while Australia and New Zealand argued for five. A compromise was reached, however the definitive protection period has yet to be confirmed.

Finally, the auto industry as well as the agriculture industry were also areas of intense negotiations. In regards to the auto industry, countries agonized over how much of a vehicle must be manufactured within a TPP country in order to qualify for duty-free status. Agriculture was another sticking point, as countries such as New Zealand wanted more access to markets in Canada, Mexico, Japan, and the US; Canada wanted to keep access to its dairy and poultry markets strictly limited, however.

TPP – An Opportunity for Texas

The case study at the following link (http://tradebenefitsamerica.org/sites/default/files/studies/BRT_TPP_TX.pdf) talks about the impact of TPP and the potential benefits for Texas with the Trans-Pacific Partnership.

Texas has important trade and investment ties with TPP countries. In 2011, trade-exports and imports of goods and services with TPP countries supported an estimated 1,160,100 jobs in the state. The TPP will help build on these trade and investment relationships and support the Texas jobs that depend on them.

Texas’s goods exports in 2013 totaled $279.7 billion.  Texas exported $141 billion annually in goods to all TPP markets. Texas’s goods exports to all TPP markets increased by 15 percent from 2011 to 2013. During this period, 53 percent of Texas’s total goods exports went to the TPP region.  The top three product categories exported to TPP-member economies in 2013 were computer and electronic products, petroleum and coal products, and chemical manufactures.

A total of 40,737 companies exported goods from Texas locations in 2012.  Of those, 37,921 (93.1 percent) were small- and medium-sized enterprises with fewer than 500 employees.

Small- and medium-sized firms generated nearly one-third or 30.6 percent of Texas’s total exports of merchandise in 2012.  Small- and medium-sized firms benefit from the tariff-elimination provisions of free trade agreements, as well as many of the other commitments in the agreement.  Trade facilitation, for example, is vital to small- and medium-sized firms, as is enforcement of their intellectual property rights, streamlining of regulatory issues, and other commitments.

Jobs supported by Texas’s goods exports were about 786,000 in 2011 according to the U.S. Department of Commerce data.  In 2011, over one-quarter (26.1 percent) of all manufacturing workers in Texas depended on exports for their jobs.

The TPP will also help Texas companies buy the inputs they need to produce competitive products. The TPP will help strengthen investment ties between Texas and all 11 TPP countries. By removing barriers and strengthening partnerships, the TPP will encourage companies based in TPP countries to increase their business investment in Texas, supporting economic growth and jobs throughout the state.

Five Questions about the Big TPP Negotiations

According to the article (http://www.ctvnews.ca/business/five-questions-about-the-big-tpp-negotiations-1.2587022), there are five key questions regarding what is at stake with the TPP agreement, as follows:

  1. Would the TPP agreement eliminate NAFTA? No. NAFTA would continue to exist, but certain parts would be superseded by the new agreement.
  2. What will happen to Canada’s auto sector? It depends on who you ask. Some auto-parts companies are solidly in support of the new deal, while some are adamantly against it.
  3. Will there be more imports of foreign dairy? Almost certainly. According to some sources, the U.S. has requested and opening of the Canadian dairy market greater than the 2% share that they granted to Europe in the Canada-EU deal.
  4. Will drug prices go up? Possibly. The U.S. is demanding greater protection for pharmaceutical companies as well as longer exclusivity for cutting-edge medical treatments, which could increase prices.
  5. Could this affect Canada’s election? Absolutely. The race is a nail-biter, and depending on how successful the industries affected by the TPP are, the election could go either way.

TPP at a Glance

The article publishes by the Wall Street Journal on 30th April 2015 (http://blogs.wsj.com/briefly/2015/04/30/trans-pacific-partnership-at-a-glance/) summarizes the TPP deal and all its pros and cons.

It talks about the ten major things about the TPP. They are as follows:

  1. Japan and US are the main economies of this deal: The other nations are included to represent 40 % of the GDP
  2. China is not included : The US wants to write its own rules for trade domestically so that China will not impose its own system.
  3. Tariffs and Quotas would be reduced: US is hoping Japan will open up its highly restricted agricultural markets in exchange for the U.S. cutting tariffs on cars and auto parts.
  4. Lots of Rules and some controversial : Officials are looking to goose trade and foreign investment in other ways, including through strong intellectual property protections on everything.
  5. Cannot shake the US economy: U.S. exports, especially agriculture, will become more competitive, and other key industries such as high-tech services and finance could get a boost.
  6. Could boost US output by 0.4% : Prediction has estimated a lift to GDP of 0.4% by 2025.
  7. Fast track needed to get it passed
  8. Auto Industry is upset:  Some worry about U.S. tariffs on Japanese cars and parts disappearing, but most are insisting that the agreement include a mechanism to prevent Japan and other countries from manipulating their currencies.
  9. Unions are upset: Unions say the deal will give companies opportunity to outsource jobs and production to countries such as Vietnam that have lower wages and standards.
  10. No one knows when it will be completed.

For more information, Go through the link for the article provided.