From shipping to staffing, the Chamber and its partners have the tools to save your business money and the solutions to help you run it more efficiently. Join the U.S. Chamber of Commerce today to start saving.
Eighth in a series
Previously: Trade Agreements and Small Business
What are the benefits of America’s free trade agreement (FTAs)? With debate over the renewal of Trade Promotion Authority (TPA) now underway in Washington, the Chamber is publishing this series of blog posts examining the benefits of the trade agreements that TPA makes possible. Here is the full report on the benefits of America’s free trade agreements.
How can America seize more of the benefits of FTAs? The good news is that the United States is taking part in several major trade negotiations, including the Trans-Pacific Partnership (TPP) with 11 countries in Asia and the Americas.
The booming Asia-Pacific region is a logical focus for America’s trade negotiators. Over the last two decades, the region’s middle class grew by 2 billion people, and its spending power is greater than ever. That number is expected to rise by another 1.2 billion by 2020. According to the International Monetary Fund, the world economy will grow by more than $20 trillion over the next five years, and nearly half of that growth will be in Asia.
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 the think tank Third Way. In fact, excluding China, East Asia in 2014 purchased a smaller share of U.S. exports in 2014 than it did five years earlier, despite a 54% increase in total U.S. merchandise exports in that period
One reason U.S. companies have lost market share in the Asia-Pacific region is that some 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.
FTAs are crafted to overcome these barriers. However, Asia-Pacific nations are clinching trade deals among themselves that threaten to leave the United States on the outside looking in. The number of FTAs between Asian countries surged from three in 2000 to more than 50 today. Some 80 more are in the pipeline. Meanwhile, the United States has just three trade agreements in Asia (with Australia, Singapore and South Korea).
This challenge is growing: 16 countries are launching expedited negotiations for a trade deal called the Regional Comprehensive Economic Partnership (RCEP). It includes Australia, China, India, Japan, Korea and New Zealand -- as well as the 10 ASEAN countries — but not the United States.
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 and commercially meaningful trade and investment agreement with 11 other Asia-Pacific nations, including Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam. It also includes Canada, Mexico, Peru and Chile, thus offering a chance to integrate existing U.S. trade agreements in the Americas.
The TPP must be a comprehensive agreement. Whenever one party in a trade talk excludes a given commodity or sector from an agreement, others follow suit, limiting its reach. For the United States to achieve the goal of a true 21st century agreement — with state-of-the-art rules on digital trade, state-owned enterprises, investment and other key areas — its negotiators must hold fast to the goal of a comprehensive accord.
One top U.S. priority is to ensure the TPP protects intellectual property (IP), which plays a vital role in driving economic growth, jobs and competitiveness. According to the U.S. Department of Commerce, IP-intensive companies account for more than $5 trillion of U.S. GDP, drive 60% of U.S. exports and support 40 million American jobs. To build on these strengths, the TPP must include robust IP protection and enforcement provisions that build on the U.S-Korea Free Trade Agreement and provide 12 years of data protection for biologics consistent with U.S. law.
Completing the TPP would pay huge dividends for the United States. The agreement would significantly improve U.S. companies’ access to the Asia-Pacific region, which is projected to import nearly $10 trillion worth of goods in 2020. A study by the Peterson Institute for International Economics estimates the trade agreement could boost U.S. exports by $124 billion by 2025.
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.
The principal rationale for FTAs is to unleash new flows of mutually beneficial trade between Americans and the citizens of our partner nations — and do so in a way that is fundamentally fair. With regard to the TPP, the potential benefits are truly significant.