After five years of negotiations, the Trans-Pacific Partnership (TPP) is nearing its end, and approaching ratification time. Therein lies the rub: The President and Congress need to come together to make this work, and as everyone knows, it has not been a smooth road for President Obama in dealing with Congress over the course of his leadership term.
Just why is the TPP so important?
It’s likely that many people have not even yet heard about the TPP, so how could it be so important? Like most trade agreements, this one has been negotiated largely in secret by all sides, although enough information about the details has leaked out by now. What makes this trade treaty so important is the massive size and scope of the agreement. In addition to the United States and Canada, other nations that are part of this negotiation include Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, South Korea, and Vietnam.
If the sheer scope isn’t impressive enough, consider this, the treaty’s partners account for $242 billion worth of trade, according to the Washington Post. That’s 26 percent of world trade and 40 percent of global gross domestic product (GDP). And consider who is not a part of this agreement (China), and it’s easy to see its advantage among developed and developing nations of the Pacific Rim.
Can it get passed through Congress?
With so much at stake, it seems like getting the TPP through Congress on a straight up or down vote should be a top priority for this nation’s leaders. However, Congress isn’t likely to want to pass fast-track authority along to the President, no matter how critical it may be to the United States’ economic growth.
If Congress begins picking the deal apart and selectively changing key elements, it’s likely to mean that the US will not be part of the TPP, but instead need to negotiate terms with individual countries (likely resulting in a far less advantageous economic value to the US).
What are the consequences of not passing the treaty?
It’s easy to imagine that failure to pass the treaty will result in economic disadvantages for US exporters. Some specific examples include US credit card companies and insurance companies, who will continue to be banned from doing business in parts of Asia; steep tariffs are likely to remain in place for US auto manufacturers in nations such as Malaysia; and Canada is likely to keep in place its current dairy tariffs against the US (which are now at 250 percent on US dairy imports).
Like so much other important business that President Obama and Congress can’t seem to agree about, it’s easy to predict that the TPP agreement will run into strong headwinds once it hits the Capitol. However, the long-term consequences for the US economy and the nation’s companies that depend on overseas trade cannot be overstated.