Status of the Trans-Pacific Partnership (TPP)

Tuesday, July 30, 2013

Once international imports were found to negatively impact domestic markets and producers, policy regulators responded by introducing trade-distorting policies and impediments, thus building artificial comparative advantages. This facilitated a hyperbolic advantage for domestic producers preventing international producers from infiltrating domestic markets with ease. Without these barriers in place, companies will only produce products that they can efficiently produce at a lower cost than others using naturally occurring and abundant comparative advantages such as affordable labor costs, distance from target markets, progressive product lines or efficient processes.

Free trade agreements (FTAs) reduce barriers to trade thus encouraging economies of scale where countries will produce products according to their strengths. This decreases input costs and increases yields, thus providing a win-win for global efficiency which will be vital as the world’s food and other products produced from finite resources become strained as demand grows.

According to the World Trade Organisation, as of 10 January 2013 there were 354 regional trade agreements in force. Free trade agreements increase trade between partners but are problematic for competing economies that previously held a share in that market. Tariffs will be placed on some nations but not on others through a process of trade diversion where trade is diverted from a more efficient exporter towards a less efficient one which is propped up by the trade agreement.

A partnership intended as a pathway to liberalize trade was the Trans-Pacific Partnership (TPP) which was designed in 2003 with enough scope to reach above bilateral FTAs. Initially signing up to the partnership was Singapore, New Zealand and Chile. Brunei and the United States were next to join the collaboration. Nations currently in negotiation to join the partnership include Australia, Peru, Vietnam and Japan whose domestic industries are at the forefront of importance to the respective national trade negotiators. This growing network will provide regulatory coherence amongst the growing number of bilateral FTAs in the Asia-Pacific region and abroad.

The agreement is wide-ranging, covering some 20 areas, including competition, customs, e-commerce, intellectual property (IP), investment, industrial relations, and trade. Major concerns raised from the TPP include the strengthening of IP safety and the possible repercussions surrounding public health. This means that waiting times for generic drugs will be elongated and access to low cost generic medicines for patients in developing nations will be restricted thus causing nations with major public health priorities to question the benefits of joining the partnership.