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Trans-Pacific Partnership Signed, Provisions a Mixed Bag

U.S. Trade Representative Michael Froman signed the Trans-Pacific Partnership Agreement (TPP) in Auckland, New Zealand, yesterday, together with ministers from 11 other Pacific-rim countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam).

Since the signing took place on the earliest possible date under rules set in Trade Promotion Authority (TPA), it seems clear that the Obama administration wants to move quickly on TPP, knowing that this controversial trade pact could get bogged down in the presidential election cycle.

Now that the agreement is signed, a complex series of dates and rules mandated under TPA takes effect, principally involving the administration and the Senate Finance Committee and the House Ways and Means Committee before Congress can consider the pact.

Finance Committee Chairman Orrin Hatch (R-Utah) in a floor speech yesterday emphasized those steps and noted that the final vote on the trade agreement could be years in the making.

TPP, a deal that represents almost 40 percent of the world’s GDP, is a massive agreement, not only because of its breadth and its length of 599 pages, but also because it deals with a host of issues that aren’t integral to free trade. Including numerous extraneous issues creates much more contentious debate on trade agreements and almost makes trade itself an extraneous issue in trade agreements.

On the pro side, the trade pact eliminates or reduces thousands of tariffs. TPP also takes steps to deal with non-tariff barriers, notably in Chapter 7 on Sanitary and Phyto-Sanitary Standards. As trade barriers such as tariffs have been significantly reduced, non-tariff trade barriers have become more prominent. These protectionist policies can take many forms, from food safety standards that are not based on science to customs and border procedures that put obstacles in the path of free trade. In the area of agriculture particularly, the U.S. has seen some countries using consumer safety as a pretext for discriminating against U.S. products.

On the con side, TPP includes non-trade related issues that have their own international fora to deal with them, e.g., environment, labor, or can be dealt with through separate agreements, e.g., investment treaties. TPP enshrines the role of regulation in ensuring that environmental and labor goals are met, not recognizing that trade can spur economic growth that can lead to improvements in the environment and in working conditions. 

The pact also ignores market approaches and the role of institutions—especially property rights and the rule of law—that are key foundations for environmental improvements. In helping to build countries’ capacity to improve the environment, strengthening these fundamentals should be encouraged. Environmental goals should not be pursued via restrictions to trade expansion.

The trade pact endorses more forceful pressures (via trade sanctions) as suitable means of increasing the effectiveness of species protection. It fails to appreciate that more open trade can increase the wealth of developing nations which tends to increase national support for such protection. To encourage the richer TPP partners to exert their greater economic power to impose such restraints on poorer nations may well threaten—not protect—species. 

The agreement in its emphasis on sustainability also fails to recognize that property rights and technological advances to produce higher yields and greater resource efficiency in agriculture are critical components in building a more sustainable future. Low economic growth and subsistence agriculture in developing countries is the greatest threat to fragile ecosystems. Stagnant economic growth and fiscal problems can exacerbate environmental problems.

In a statement on the signing of TPP, Iain Murray, CEI’s Director of the Center for Economic Freedom, said: “The Trans-Pacific Partnership Agreement eliminates thousands of tariffs but also includes extraneous, non-trade issues with unneeded complexities and special interests. Namely, the agreement deals with issues that aren’t integral to free trade, such as labor rights, environmental provisions, intellectual property, and investor-state dispute.”