Rebranded Trade Deal Gives Member Countries An Edge Over The U.S.

Jan 22, 2019
Originally published on January 22, 2019 6:56 am
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Days after President Trump took office, he formally withdrew the United States from the Trans-Pacific Partnership. The TPP would have brought together the economies of 12 countries, allowing for free trade of everything from agriculture to pharmaceuticals. Despite the United States abandoning this pact, the deal has now gone into effect, and it's giving the 11 member-countries a competitive edge. Here's NPR's Jackie Northam.

JACKIE NORTHAM, BYLINE: On the campaign trail, then Republican candidate Donald Trump regularly railed against the TPP trade deal. Here he is in 2016.

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PRESIDENT DONALD TRUMP: The Trans-Pacific Partnership is another disaster done and pushed by special interests.

NORTHAM: Trump made good on his campaign promise and pulled out of the trade deal as soon as he took office. That left the remaining 11 partners in the TPP wondering what to do.

JEFFREY SCHOTT: The initial reaction was the U.S. was the dominant economy. So if the U.S. was out, the benefit was marginal.

NORTHAM: Jeffrey Schott, a specialist on international trade policy at the Peterson Institute for International Economics, says many analysts felt the TPP couldn't survive without the U.S. But Schott says the remaining 11 countries, from Australia, to Vietnam, to Chile, realized it was worth trying to finalize the trade deal.

SCHOTT: It was still a very good deal without the United States because of what it required in terms of instituting economic reforms at home and opening up new opportunities for exports and investments.

NORTHAM: Now a rebranded TPP has entered into force just as the U.S. is engaged in a major trade war with China. Under the agreement, known simply as TPP-11, tariffs have been slashed on nearly all goods amongst its members. Speaking at a recent conference, Michael Froman, a former U.S. trade representative who negotiated the original TPP, said American exporters will be hurt by losing preferential access to the TPP markets.

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MICHAEL FROMAN: We'll find ourselves at a competitive disadvantage with a windfall going to our competitors at our expense. And that will be hard to reverse over time if we lose those market-access opportunities.

NORTHAM: Take beef, for example. In Japan, beef exporters traditionally face a tariff of about 38 percent. That rate will fall to about 10 percent for members of the TPP-11, but not the U.S.

Australia, New Zealand and Canada are expected to absorb the U.S. share of the beef market and other agricultural products. A report by the Canadian government finds that country's economic gains will be significantly higher than if the U.S. had stayed in the TPP.

CHRIS SANDS: Many of the things that Canada produces are similar to things that the U.S. produces. But Canada is now in and the U.S. is out.

NORTHAM: Chris Sands, the director of the Center for Canadian Studies at Johns Hopkins University, says many of Canada's gains will be found in the agricultural sector.

SANDS: Whether it's wheat or soybeans or rice, or even beef and pork or chicken, all of those products are available from Canadian suppliers.

NORTHAM: The Peterson Institute predicts the U.S. stands to lose over $130 billion over the next decade by not being part of the pact. The new trade deal is written in such a way to make it easy for other countries to join in the future. But for now, the Trump administration is looking to do bilateral deals, including some in Asia. Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.