Chances are you’ve at least heard of the Trans-Pacific Partnership (TPP). If signed and enacted, it would be the largest and most ambitious trade deal in history, linking countries that represent more than 40 percent of the world’s GDP. Despite the press and scrutiny it’s received in recent months, it remains somewhat mysterious to many observers. We recently sat down with Ralph Carter, managing director, Trade & International Affairs at FedEx Express, to help clear up some of that confusion.
1. Some observers have criticized the secrecy of the TPP negotiations. Is that fair?
It’s impossible to successfully negotiate a complex, significant agreement like this in the public. No negotiator would do that. It’s like playing poker and putting all your cards on the table for everybody to see. You won’t get very far, and you won’t get a very good agreement. And that’s not in the interests of the U.S. or the other parties.
That said, this has probably been the most transparent trade negotiation we have had. In addition, the new Trade Promotion Authority bill that was just passed will make future trade negotiations even more transparent. For example, any completed trade agreement, including TPP, will be posted online for everyone to see two months prior to any congressional vote.
2. Does the TPP only involve Asian nations and the U.S.?
It also involves Canada, Mexico, Peru and Chile. In other words, Asian nations, but also countries in the Western Hemisphere that border the Pacific Ocean. There’s also been talk of expanding the number of countries. For instance, Colombia, Korea, the Philippines and several other countries are interested.
3. Congress recently voted to grant President Obama what’s known as trade promotion authority (TPA). Is that something new — and how does that work?
It isn’t a new concept at all. Trade Promotion Authority has been around since Franklin Roosevelt in the 1930s.
TPA reflects the shared responsibility between the executive and legislative branches for negotiating international trade agreements. It is Congress’s grant of authority to the executive branch to negotiate the agreements, but it also sets out the objectives Congress wants the executive branch to achieve, along with rules on, for example, how often Congress must be briefed on the negotiations’ progress. And it strengthens the transparency of the process.
TPA requires Congress to have an up or down vote on a trade agreement like the TPP. That is absolutely essential. No country is going to negotiate and put its best offer on the table if there’s a possibility the agreement could be amended by the U.S. Congress. Now that we have TPA we can move forward to finish the TPP negotiations and continue to make progress in the negotiations with Europe as well.
4. How is the TPP different from other multinational trade agreements?
For starters, you have 12 countries involved. That alone makes it complicated. And those countries include highly developed economies such as Japan and developing countries such as Vietnam and Malaysia. This broad range of economic development creates real challenges. Finally, the TPP is trying to set rules for the next couple decades of trade — and a lot of those rules are going to help the high-value, high-tech products and services the U.S. produces. It also strengthens the treatment of labor and environment by making those provisions enforceable parts of the agreement.
5. The agreement is supposed to streamline customers procedures. How would that work?
It establishes commitments and performance standards that all countries must comply with. One of those will hold customs administrations to common standards that include everything from additional automation and prearrival processing to better risk management and minimum time commitments for goods clearance. As a result, FedEx will be able to clear our customers’ goods faster and more efficiently. It will also stimulate more trade within the TPP by making it easier to move goods across borders.
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Given the rapid growth of e-commerce — and in particular, cross-border e-commerce — that last point is critical. Facilitating the movement of goods across borders will help drive e-commerce growth. Doing so will also help small and medium-sized enterprises (SMEs) reach new customers around the world.
6. How else would the TPP affect SMEs?
They will have more opportunities to sell their goods. Here’s an example: The Vietnamese economy has a lot higher tariffs than the U.S. When those tariffs come down, U.S. suppliers will be able to sell into Vietnam more competitively. By the same token, Vietnamese SMEs will find it much easier to sell products such as textiles, leather, footwear and the like in the U.S. This also means lower prices for consumers.
The TPP will have a specific chapter devoted to helping SMEs take advantage of the agreement. All participating countries will be committed to providing their SMEs with TPP information, and explaining how they can comply with and benefit from the agreement.
We’re excited about the TPP. You’re going to have free trade covering 40 percent of the global economy. You’re going to have a trade agreement between the U.S. and Japan — something which we have not had before. And you’re going to see American manufacturers and farmers getting access to very large markets and new customers.
And just as importantly, it will set a framework of modern rules within the region. We expect more and more countries will gravitate toward its high standards, whether in their own agreements or by joining the TPP.
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