After five years of tortuous negotiations, the U.S., Japan and 10 other Pacific Rim countries have reached an agreement on the Trans-Pacific Partnership, one of the most ambitious trade pacts ever attempted. Not everybody is suitably impressed.
Besides several U.S. presidential candidates in both parties, the opposition includes many members of the Congress and other national legislatures, which must ratify the pact. So now the national leaders who worked so hard to get this deal signed have to be equally persistent in selling it to their respective electorates.
Getting TPP up and running would be more than a momentary political win for President Barack Obama and his partners in the talks. Once in place, it will significantly advance living standards across the region and beyond.
TPP includes plenty of traditional trade-liberalizing measures — lower tariffs and non-tariff barriers — but it also applies them to new areas. Trade in agriculture and services will be opened up. New rules acknowledge the digital economy. There’ll be stronger protection for intellectual property. Restrictions on international investment will be pared back. Labor and environmental standards will be tightened, but in ways that don’t discriminate against trade.
In all these ways, the scope of the agreement goes well beyond what’s been achieved in previous rounds of global trade liberalization. It’s a shame that such a far-reaching deal couldn’t be done for the world economy as a whole, and that the World Trade Organization’s Doha Round of global talks is struggling to get anywhere. The good news, though, is that TPP is capable of being scaled up.
At present, China isn’t a member; in future, it should be. Beyond the Pacific Rim, the deal can provide a template for liberalization in other regions. Eventually, merging TPP with the proposed trade pact between the U.S. and the European Union isn’t out of the question.
Is all this effort to spur trade really such a good thing? It is. More trade means more competition, which means higher productivity, hence better products and lower prices — in other words, higher living standards. Undeniably, the process is disruptive and not everybody will win. In this respect, trade is akin to technological progress: It’s just as challenging and just as indispensable.
In making the case for expanding trade, governments would be wise to stop apologizing for economic progress. They should also stop claiming that greater trade “creates jobs,” as though no jobs will be lost as industries shift and restructure. Instead, they should turn their attention to improving opportunities for the minority of workers who’ll bear the brunt.
It remains to be seen exactly how particular points of controversy were resolved in the final hours of discussion. Numerous compromises had to be struck on questions such as the scope of a new dispute-settlement mechanism, which many have argued would make it too easy for companies to evade national regulation. (The deal exempts the tobacco industry from these protections; producers had been abusing trade rules to undercut restrictions on smoking.) Environmental provisions will allow trade penalties to be imposed on countries failing to protect endangered species. Stronger rules on intellectual property will warrant close examination.
In weighing the pact, lawmakers ought to recognize that all such deals involve compromise, and look at the big picture. The TPP will spur growth across roughly 40 percent of the world economy. If the U.S. and its 11 partners are looking for a way to counter the growing pessimism about the world’s economic prospects, they can start by putting TPP into effect as soon as possible.