Tech, banking, farming among US winners in TPP agreement
November 05 2015 11:12 PM
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A fruit farmer stands near grape vines at a fruit farm in Fuefuki, Japan. The impact of the Trans-Pacific Partnership pact will be greatest in Japan, Malaysia and Vietnam because the US already has free-trade agreements with most of the countries and the others have such small economies that more trade isn’t likely to boost the bottom lines of US companies.

Bloomberg
Washington


US technology companies, banks and farmers are among the biggest beneficiaries of falling tariffs that are part of the trade deal designed to liberate commerce among 12 Pacific Rim nations, according to a text of the agreement released yesterday.
The Trans-Pacific Partnership, which will affect almost 40% of the global economy, maintains protection for a handful of politically sensitive US industries by keeping existing tariffs in place for as long as 30 years for pickup trucks and 13 years for some types of footwear.
The text released yesterday, after negotiations wrapped up last month, includes thousands of tariffs that affect a broad variety of US-made products from Harley Davidson motorcycles sold in Malaysia, to toilet seats shipped to Vietnam to General Electric Co turbines.
“We do see pretty widespread benefits across the economy,” US Trade Representative Michael Froman said in an interview.
Release of the TPP text starts the clock ticking for ratification by the 12 Pacific Rim nations involved. In the US, that means a 90-day notice to Congress and at least a 60- day public review period before a vote by lawmakers, which probably will come no sooner than March. With the publication, supporters and critics now have fodder for their arguments.
The Trans-Pacific pact is the biggest trade deal the US has negotiated since the North American Free Trade Agreement and stands as a significant achievement for President Barack Obama, who has been working to reassert US influence in the Pacific region. Although China is not among the signatories, the accord reflects one of the main points of friction between the world’s two biggest economies by requiring the participating countries to outlaw theft of trade secrets, explicitly including thefts through computer hacking. After massive breaches of commercial and government databases in recent years, US trade officials say they hope the rules will not only deter hacking from within the 12 TPP countries, but also set an international precedent that becomes a norm in agreements with other nations countries, eventually including China.
The trade deal is a central part of Obama’s strategy for balancing China’s expanding economic influence and will bolster his diplomatic position when he travels to Asia less than two weeks for meetings with regional leaders. Along with Canada, Mexico and Chile, the other countries joining with the US are Australia, New Zealand Brunei, Japan, Malaysia, Singapore and Vietnam.
Froman and the rest of the administration now must try to win over Democrats who are wary of the impact on US jobs and Republicans who are reluctant to back a Democratic White House in an election year.
Obama’s toughest task may be lobbying members of his party.
Only 28 of 188 Democrats in the House voted to give the president fast-track negotiating authority to push the trade talks along. Former Secretary of State Hillary Clinton, the Democrat frontrunner to succeed Obama, has announced her objections to the TPP after having called it central to the US pivot toward Asia while she served in the administration.
Froman plans to sell the deal to Congress and trade sceptics by arguing that if the US doesn’t ratify the agreement, it will lose out on more trade in the future because Asian countries, including China, are negotiating free-trade pacts with each other that could put the US at a disadvantage.
“If we don’t get TPP, then we’re just going to see a smaller and smaller market share,” he said. “It’s not like we’re going to maintain a status quo. We’re going to lose out in these markets.” The TPP will eventually lower all tariffs among its member countries on all goods to zero. Eighty per cent of imports the US from the 11 other countries are already brought in without tariffs, and goods subject to tariffs are hit with a levy that averages 1.4%. The deal also addresses regulations and practices known as non-tariff trade barriers, which are ways countries protect industries.
Trade officials said the administration hasn’t completed an analysis of the economic impact. They pointed to research by the non-partisan Peter G Peterson Institute for International Economics, a pro-trade research organisation, that estimates the TPP would add $77bn to the US economy annually by 2025. That’s second to the $105bn Japan would gain, according to the analysis.
Critics, such as the consumer group Public Citizen, said the agreement will make it easier to send jobs overseas and increase income inequality in the US by driving down wages of low-skilled employees who will face more competition from those paid far less in Vietnam and Malaysia.
At agricultural machinery maker Deere & Co, spokesman Ken Golden said the trade agreement would open new markets to domestic agricultural producers who buy Deere equipment and reduce tariffs imposed on products it manufactures at facilities in the US, Mexico and New Zealand.
Thirty-eight per cent of Deere’s 2014 revenue of $36bn came from sales outside the US and Canada, Golden said. The company doesn’t break down exports further, he said.
General Electric and Caterpillar Inc are likely to be big winners as trade barriers drop for sales of heavy machinery such as construction equipment, power generation equipment and large vehicles, particularly in countries such as Vietnam and Malaysia that don’t already have free-trade agreements with the US, according to Caroline Freund, a senior fellow at the Peterson Institute.
“A lot of countries have big infrastructure projects going on right now and the US is well equipped to take advantage of these preferences,” Freund said. Each country has thousands of tariffs with duties ranging from zero to the double digits depending on whether there are domestic producers to protect and how much a country depends on imports of certain products. The impact of the pact will be greatest in Japan, Malaysia and Vietnam because the US already has free-trade agreements with most of the countries and the others have such small economies that more trade isn’t likely to boost the bottom lines of US companies.
Tariffs won’t fade away all at once. Vietnam imposes a 70% tariff on cars it imports from the US That would stay in place for three years and then begin dropping to zero over the following decade. In Malaysia, tariffs of 25% on road rollers, 20% on pile drivers and 10% on bulldozers will fall to zero over several years.
The thousands of pages of TPP text also address barriers to trade that are less obvious than tariffs.
Countries protect markets through regulation, with US trade officials pointing to Asian nations that keep US cosmetics at bay by requiring eye shadow to be inspected as if it were a pharmaceutical.
The agreement standardizes rules of origin for products made in any TPP country, as the North American Free Trade Agreement did for the US, Canada and Mexico, meaning that a product made in any of the member countries is treated as a domestic product for trade purposes.

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