As U.S. companies scour the globe for consumers, the booming Asia-Pacific region stands out. Over the last two decades, the region's middle class grew by 2 billion people, and their spending power is greater than ever. That number is expected to rise by another 1.2 billion by 2020. According to the IMF, the world economy will grow by $21.6 trillion over the next five years, and nearly half of that growth will be in Asia.
U.S. businesses and workers need better access to those lucrative markets if they're going to share in this dramatic growth. But 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 many 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 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 trade deals among themselves that threaten to leave the United States on the outside looking in. The number of trade accords 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 Trans-Pacific Partnership (TPP) is America's best chance to ensure the United States isn't stuck on the outside--looking in--as Asia-Pacific nations pursue new trade accords among themselves. 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. In trade talks, whenever one party 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.
The TPP also needs to reflect how goods are produced in the 21st century using global value chains. Today, the goods we buy are usually labeled "Imported" or "Made in the USA"--with no middle ground. However, companies often rely on global value chains that span the Pacific to hone their competitiveness.
The United States is a principal beneficiary of these supply chains. One recent study found that 70% of the final retail price of apparel assembled in Asia is created by American innovators, designers, and retailers. Making customs and border procedures more efficient and enacting other trade facilitation reforms will remove sand from the gears of global value chains and enhance U.S. competitiveness.
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.
Working closely with the Office of the U.S. Trade Representative (USTR), the Chamber has led the business community's advocacy for the inclusion of strong disciplines in the TPP trade agreement on intellectual property, regulatory coherence, due process in antitrust enforcement, and state-owned enterprises.
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 for America. And it would send a message to the region and to the world that the United States is not going to sit on the sidelines. We're going to be in on the action.
- As nations across the Pacific clinch their own trade agreements that exclude the United States, the TPP represents a vital opportunity to ensure that American exporters have access to the world's most dynamic economies.
- To reach the vision of a "21st century trade agreement," the TPP negotiators must conclude a high-standard agreement that is comprehensive and ambitious.
- The TPP negotiations represent an opportunity to establish strong rules to protect intellectual property, cultivate the digital economy, and combat trade and investment protectionism.