Navigating the Trans-Pacific Partnership
The U.S. recently concluded a free trade agreement with countries along the Pacific Rim. It’s the largest and most ambitious free trade agreement of its kind and is estimated to generate thousands of new jobs in America.
The Trans-Pacific Partnership, or TPP, is a multilateral trade agreement with 11 other nations: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. These nations collectively have a market size of nearly 800 million consumers and account for nearly 40 percent of the world’s gross domestic product.
The U.S. and its TPP partners completed the high-level comprehensive agreement in October. “After more than five years of intensive negotiations, we have an agreement that will support jobs, drive sustainable growth, foster inclusive development and promote innovation across the Asia-Pacific region,” said U.S. Trade Representative Michael Froman at a press conference in Atlanta.
Exports of U.S. goods to TPP nations totaled $726 billion in 2014, or about 45 percent of total U.S. exports that year. A 2012 analysis by the Peterson Institute estimated that a TPP agreement could generate nearly $124 billion in new U.S. exports to those nations.
In addition to exports, there also will be new investment opportunities that could lead to new American jobs. The Organization for International Investment, known as OFII, released a report in 2015 that estimated the TPP will generate 68,000 direct jobs, through the establishment of foreign company operations in the U.S. Once the trade agreement is finalized, OFII estimates that indirect and induced employment also will increase by about 165,000 jobs in order to support new foreign company operations in the U.S., increasing total employment by about 233,000 jobs.
Exports to and investment from TPP countries can be an important component of a state’s economy. For example, Idaho exported $5.1 billion in goods in 2014, and $2.8 billion of those goods went to TPP nations, according to the International Trade Administration. Those exports supported nearly 74,600 jobs in the state last year.
Now that the TPP negotiations have concluded, attorneys are in the process of finalizing the language of the agreement. After the agreement text is finalized and presented to the public, Congress will have a few months to vote on the agreement.
If ratified, the TPP will present a unique opportunity for American businesses by lowering trade barriers that will allow U.S. companies to reach part of the 80 percent of consumers living beyond America’s borders.
For more information about the TPP and the opportunities it presents to state economies, be sure to attend “Navigating the Trans-Pacific Partnership,” Thursday, Dec. 10, at the 2015 CSG National Conference.