The Case for the TPP: Pacific Promise | U.S. Chamber of Commerce
Sep 15, 2016 - 9:00am

The Case for the TPP: Pacific Promise


Senior Vice President for International Policy

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World trade works: Better access to customers abroad equals more growth and jobs at home.
World trade works: Better access to customers abroad equals more growth and jobs at home.

What is the Trans-Pacific Partnership (TPP) all about? With debate over this 12-nation trade agreement now underway, the U.S. Chamber is publishing this series making the case for the TPP’s approval. This installment looks at opportunities and challenges facing America in the Asia-Pacific region.

The booming Asia-Pacific region is a logical focus for America’s trade negotiators. According to a report by the Organization for Economic Cooperation and Development, the global middle class will expand from 1.8 billion in 2009 to 3.2 billion by 2020 and 4.9 billion by 2030. Most of this growth is in Asia: In fact, Asia’s middle-class consumers will represent 66% of the global middle-class population and 59% of middle-class consumption by 2030, doubling these shares since 2009.

U.S. workers, farmers, and businesses need access to those lucrative markets if they are to share in this dramatic growth. However, U.S. companies are falling behind in the Asia-Pacific. While U.S. exports to the Asia-Pacific market steadily increased from 2000 to 2010, America’s share of the region’s imports declined by about 43%, according to a report by the think tank Third Way. In fact, excluding China, East Asia purchased a smaller share of U.S. goods exports in 2014 than it did five years earlier, despite a 54% increase in total U.S. merchandise exports in that period.

66%

Share of the global middle-class population living in Asia by 2030.

One reason U.S. companies have lost market share in the Asia-Pacific region is that a number of countries maintain steep barriers against U.S. exports. A typical Southeast Asian country imposes tariffs that are five times higher than the U.S. average while its duties on agricultural products often soar into the triple digits. In addition, a web of nontariff and regulatory barriers block market access in many countries.

Trade agreements are crafted to overcome these barriers. However, Asia-Pacific nations are clinching preferential trade deals among themselves that threaten to leave the United States on the outside, looking in.

According to the Asia Regional Integration Center of the Asian Development Bank, Asian countries have signed 140 bilateral or regional trade agreements, and 75 more are under negotiation or concluded and awaiting entry into force. Two decades ago, just a handful of such agreements were in effect in the region. Meanwhile, the United States has just 3 trade agreements in Asia (with Australia, Singapore, and South Korea).

This challenge is growing: 16 countries are negotiating a trade agreement called the Regional Comprehensive Economic Partnership (RCEP). It includes China, India, Japan, and Korea as well as the 10 ASEAN countries—but not the United States.

Against this backdrop, the TPP is America’s best chance to secure a level playing field for trade in the Asia-Pacific region. Its objective is to achieve a comprehensive, high-standard trade and investment agreement that eliminates tariffs but also introduces new rules to cut through the non-tariff barriers that at times loom even larger than tariffs and quotas. While American commentators often describe it as focusing on Asia, it also includes Canada, Mexico, Peru and Chile, thus offering a chance to integrate existing U.S. trade agreements in the Americas.

$131 billion

Increase in U.S. real income by 2030 under the Trans-Pacific Partnership.

The United States announced its intent to join the Trans-Pacific Partnership (TPP) in September 2008 and formally joined the negotiations in March 2010. In late 2015, the agreement was concluded among 12 countries—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam—that produce nearly 40% of global GDP.

The TPP would pay huge dividends for the United States. The agreement would significantly improve U.S. companies’ access to the Asia-Pacific market, which is projected to import nearly $10 trillion worth of goods in 2020, according to Third Way. The U.S. would see its exports increase by $357 billion and its annual real income increase by $131 billion by 2030 under the accord, according to a recent analysis conducted by the nonpartisan Peterson Institute for International Economics.

The TPP has the potential to strengthen our nation’s commercial, strategic, and geopolitical ties across one of the fastest-growing and most influential parts of the world. It would be an economic shot in the arm, boosting growth and jobs across the country.

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.