McCombs

Knowledge To Go

August 11, 2015

Trans-Pacific Partnership:

Potential Impacts

by Dr. Linda V. GerberSenior Lecturer, McCombs School of Business

Director, Center for International Business Education and Research (CIBER)

Game Plan

Overview of TPP

Timeline of negotiations

Context for assessment

Criticisms

Benefits

Prospects

What is TPP anyway?

Free Trade Agreement involving twelve

countries

40% of global GDP, 30% of exports and 25% of imports

Eliminates trade barriers (both tariff and non-

tariff) in most goods and services – some

immediately and others over time

Expands/improves existing treaties (i.e.,

NAFTA)

Includes new standards for labor, the

environment, and food safety (among others)

30 chapters in all – plus appendices on

specific exemptions for certain countries

Other key aspects of TPP Specific attention to certain industries

Textiles

Financial services

Telecommunications

Professional services

Small and Medium-Sized Enterprises (SMEs)

Specific attention to certain issues Competition and Market access

Electronic commerce

State-owned enterprises (SOE’s) and Government procurement

Food safety, Labor, Environment

Economic development

Transparency and Anti-corruption

Specific administrative and operational details Rules of Origin, Dispute Settlement, Customs, Business Travel

Separate details on U.S. - Japan trade

Non-binding elements

Many “work together” provisions vs.

actual stipulations

Agricultural export subsidies

Export credits

State trading enterprises

Independent pact on currency

manipulation

Timeline of TPP

Agreement in 2006 between Brunei, Chile, New

Zealand, and Singapore (P4)

In 2008, the U.S. seeks to join negotiations along with

Australia, Peru and Vietnam

Negotiations begin in 2010

2010-2013 Malaysia, Mexico, Canada, and Japan join

the negotiations

Negotiations concluded in October 2015

President Obama must submit documentation to

Congress and sign the agreement

Congress can then move the bill through a specified

process

Other nations must approve as well

Context Status of WTO Doha Round negotiations

Limited progress

No currency manipulation elements

Agricultural subsidy stalemate

Stronger on goods than services

Stronger on tariffs than non-tariffs

U.S. and world trade agreements

U.S.: 14 agreements/20 countries vs. 612 globally

Fast-track authority

also called Trade Promotion Authority (TPA)

Trade agreements have both economic and

political rationale

Context (continued)

Exclusion of China

Secrecy of negotiations and Wiki-leaks

Interesting political ecosystem:

Democratic President and Republican

Congress

(Can TTP bring them together?)

Key Criticisms

From Whom? Business skeptics

Isolationists

Special interests (environment, labor, IP freedom, information

freedom, human rights, etc.)

Anti-Obama forces

Issues Secrecy/Lack of transparency/Unequal access

Investor State Dispute Settlement (ISDS)

Labor losses (NAFTA experience)

IP protections

Pharmaceuticals/cost of medicines

Copyright

Data privacy

Enforcement

Benefits

Ends U.S. FTA “isolation”

Supports U.S. “pivot to Asia”

Heightens various standards from previous FTAs

Addresses areas of global economic friction absent or

more limited in WTO and other agreements

Agricultural subsidies

Non-tariff barriers

IP protection

Currency manipulation (Maybe…)

Provides incentives for countries to improve

economic policies (both for TPP countries and others who may wish to join)

Bottom line: Reestablishes U.S. leadership in global

commerce

Winners and Losers

Winners

U.S. Financial services

U.S. Shipping/express carriers

Pharmaceutical producers

Agriculture

Services/technology companies

U.S. consumers (?)

Losers

Manufacturing sector

U.S. consumers (?)

Environment

TPP passage and beyond Likely vote after November 2016 election

Between now and then: Expect considerable weigh-in from public interest and business

groups

(devil is in the details...)

Congressional deliberation over next several months

Potential side pacts on critical issues

Some treaty revision on key points

If approved, other countries may enter South Korea, Taiwan, the Philippines, Colombia, Thailand,

Laos, and Indonesia

A little bit about CIBERCenter for International Business Education

and Research

Mission: internationalize business education

Targets:

Students at all levels

Academic community – various levels and areas

Business community

Some current projects

Certificate in Global Management

Business language video library

Cross-cultural analysis

Exporting for entrepreneurs

http://www.utexas.edu/mccombs/Centers/CIBER

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Relative tariff rates – TPP countries

U.S. Goods and Services Trade Balance with TPP Countries

Analysis by CRS. Data from the ITC and the Bureau of Economic Analysis (BEA).

*Does not include Brunei, Peru, or Vietnam