TPP to change world trade ? By Edgar Ochoa

Countries have been in the process of making different partnerships, and trade agreements in order to increase their economic cooperation, economic growth, and social prosperity. One of the most important partnerships being discussed is the Trans-Pacific partnership. The Trans-Pacific Partnership is a trade agreement signed in 2005 by Chile, Brunei, New Zealand, and Singapore. This trade agreement has been in the news lately because of countries like Canada, USA, Australia and Japan are negotiating their potential addition to this partnership. This would make the TPP one of the biggest trade agreements in the world’s economy, and would probably define the future trade dynamics of the world’s economy.

Trade among already existing member has been exponentially increasing. Singapore has shown an increasing growth of its bilateral trade volume with Brunei, almost every year after the trade agreement was ratified in 2006. In 2011 its bilateral volume yearly growth was 68% . Singapore’s and Chile’s trade volume show the same pattern, and grew 93% in 2011. Trade volumes between Brunei, Chile and New Zealand have also shown remarkable growth. In 2006 trade volume between Brunei and New Zealand expanded 300 %. In 2012 bilateral trade volume was at 100% growth. Trade volume between New Zealand and Chile has also been growing. It did not show any important change in the first 3 years of the treaty, but in 2011 it expanded 88%.

Trade data have shown an obvious positive economic benefit from this treaty represented in trade, but maybe there are some downsides. For example US have shown concerns for what they call the lack of property right protection in the treaty. US is the only country that has shown this concern among the members, and negotiating countries. There are some concerns when it comes to resolving settlements. All the countries signatories of the TPP and the currently negotiating countries but Australia have agreed to use the Investor-state dispute settlement provision. They claim that there are other effective ways of settling disputes, and they refer to the Phillip Morris case(http://www.youtube.com/watch?v=zZU39a5DFbk). This is a potential problem as the partnership needs a dispute settlement mechanism that would have enforcing power, and that all their members agree to be liable to. Another important potential problem is pollution. US, and Australia are against expanding the current provision on pollution listed in the treaty. Other members have agreed to impose more regulation to control pollution. This is a delicate matter because as trade potentially will increase, there should be a mechanism to control pollution created by this new output being produced. One problem that might affect founding members is that potential bigger new members have industries that operate with economies of scale. This could affect founding members local markets, as bigger economies could export cheaper products than the ones produced at home The last key potential problem is agricultural export subsidies. All the countries negotiating to become part of the partnership have agreed to stop giving subsidies when it comes to agricultural exports. US is the only country that has been opposed to this point. This shows that even though it seems like joining this partnership might be very beneficial to its members, and potential members, there are many issues that need to be resolved in order to foresee a long term success for this partnership.

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It seems like this trade agreement has been of great benefits for its members, and has attracted other nations to the negotiating table. This means that they will have duty free access to bigger markets, but it also means that they might have to agree to some reforms to their original treaty, in order to satisfy the negotiating countries concerns and demands. This is an important step as US, and Japan are markets that most countries on earth want to have access to because of their size . Also for big economies like the US, it is important to join the treaty. Members and negotiating countries represent about 11% of US total trade in 2011. Another point that needs to be addressed is the inclusion of China and South Korea. Both countries have recently mentioned that they are interested in joining the TPP, but have not started negotiating. Any multinational partnership should include China, as it is a major determinant of the world’s economy. It seems like having more members like the US, Japan, South Korea, and China for this treaty would translate into more well-being and welfare for the partnership members and prosperity in the long run for the world’s economy.

Sources:

http://globalpublicsquare.blogs.cnn.com/2014/04/01/why-obama-and-abe-should-take-lead-on-tpp/

http://www.huffingtonpost.com/bob-burnett/trans-pacific-partnership_b_4479420.html

http://www.theguardian.com/world/2013/dec/10/trans-pacific-partnership-a-guide-to-the-most-contentious-issues

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