Story Of The Week

TRANS PACIFIC PARTNERSHIP-Largest trade agreement in history

The Trans Pacific Partnership enforcement is on the eye of many top economies like USA and Japan. With its signatories totaling more than 1/3rd of world trade being affected directly from its enforcement and other countries’ economies being affected indirectly, the question is are all countries in support of it and will it be enforced?

 WHAT IS TPP?                                                                                                                                      

The Trans-Pacific Partnership (TPP) is a trade agreement among twelve of the pacific rim countries — US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru notably not including China. It was done deliberately to balance the trade power of India and China in East Asia. Like most other trade agreements, it removes tariffs on goods and services and sets reciprocal trade quotas. Unlike various other trade agreements it removes non-tariff blocks to trade and harmonizes regulations and statutes.

The TPP covers a broad variety of goods and services, including financial services, telecommunications, and even food safety standards. Thus, it affects foreign policy and even laws within countries.

The pact focuses on deepening the ties between these nations, slashing tariffs and promoting trade to boost growth. Members had also hoped to foster a closer relationship on economic policies and regulation. The agreement was formulated to potentially create a new single market like that of the European Union (EU).



TPP is the largest trade deal in the history. The 12 countries have a collective population of about 800 million – almost double that of the European Union’s single market. The 12-nation that would form an alliance is already responsible for 40% of world trade. The deal was seen as a remarkable achievement given the very different policies of the member countries, including environmental protection, workers’ rights and regulatory coherence. It will help in solving problems like abolition of child labour, production of high quality goods and services, environment protection and protecting workers rights.


The TPP will boost exports and economic growth, creating more jobs and prosperity for the 12 countries involved. It could increase exports by $305 billion per year by 2025. Exports by U.S could increase by $123.5 billion, focusing on machinery, especially electrical, autos, plastics and agriculture industries.

It will be done by removing 18,000 tariffs placed on U.S. exports to the other countries. The United States has already withdrawn 80% of these tariffs on foreign imports. The TPP evens the playing field.

TPP is estimated to add $223 billion a year to incomes of workers in all the countries, with $77 billion of that going to U.S. workers. All countries agreed to cut down on wildlife trafficking, especially elephants, rhinoceroses, and marine species. It will prevent environmental abuses, such as unsustainable logging and fishing. Those that don’t will face trade penalties.

 Vietnam would be the largest beneficiary on the TPP track. Participation would increase Vietnam’s GDP by 13.6% compared with the “baseline scenario.” The reasons for that would be strong trade with the United States, high protection abroad against apparel and footwear which are Vietnam’s major exports, strong competitive positions in manufacturing industries where China’s comparative advantage is reducing, high initial domestic protection and powerful scale effects in Vietnam’s major production clusters. These boost Vietnamese exports and terms of trade under the TPP and these benefits are further amplified by last two by stimulating productivity gains. Higher incomes in turn would enable Vietnam to invest more and grow more rapidly.


Free trade area of Asia and pacific (FTAAP)


Some critics say TPP may cause the countries to engage in currency manipulations. The benefits from the agreement may go the top level of the pyramid mostly the big corporations and the people in the bottom of pyramid will be affected badly and it may increase unemployment.

The negotiation of TPP will be done with secrecy. It will affect the country and the people in the country but it won’t be specified to the people in the country. The litigation will happen in international tribunal not in country courts so a big corporation may sue the whole country. For e.g. a tobacco companies profit is being effected by the no smoking regulations of the country so the company may sue the government.

Evergreening may occur. It is a term used to explain pharmaceutical companies changing the medium of selling the medicine to increase the patent duration and earn high profits but it may affect the poor people as medicine to them will become unaffordable and important medicines for chronic diseases will become expensive.

 Competitive business pressures will reduce the incentives in Asia to protect the environment. Last but not least, the trade agreement could supersede financial regulations.


 The United States agreed to shorter patents duration, especially for bio drugs. Pharmaceutical companies can keep their formulas secret for 5 to 7 years instead of 12 years. All stated-owned enterprises must follow the global standards which protects the rights of workers and environments.  The United States had to overcome objections from Vietnam, Singapore, and Malaysia.  Those countries must now allow labour unions or face penalties because labours were manipulated in these countries mostly.

The United States, Japan, and Canada will lose some tariff protection for dairy, beef, poultry and automotive producers.



 “The TPP also exposes India to a couple of diplomatic challenges.”

For avoiding the adverse implications from TPP in form of cheaper exports and reduced tariffs and barriers to trade India should conclude the bilateral free trade agreements it is negotiating with TPP members like Australia and Canada.

India’s foreign policy, which has become distinctly proactive and conscious in foreign markets under the Modi Government, is aiming to position India as a major actor in the Asia-Pacific. India is intending to join APEC to expand its influence in the region and also forming good relations with major Pacific nations – the US, Japan, Australia, Canada and South Korea. India is negotiating the Regional Comprehensive Economic Partnership (RCEP) which includes the 10-member countries from the ASEAN, Australia, China, Japan, New Zealand and South Korea. India should speed up at the RCEP-negotiations, given that the agreement will offer its exports greater access to many Asia-Pacific markets, including China.


The text of the agreement has to be signed and then ratified by all 12 signatories. Details of how the deal will be implemented would be argued out in individual countries’ legislatures.

To be in effect the deal has to be ratified by at least six countries that account for 85% of the group’s economic output by February 2018. And this means that Japan and the US will need to be on board.

If the TPP comes into effect it will be the largest trade agreement in the history of trade agreements and will bring prosperity for all the 12 member countries as well as become a new milestone in globalization promoting world trade at an all new level.



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