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Trans Pacific Partnership (TPP)


It involves 12 countries: US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. The background of this agreement was started a decade ago when 4 nations -Brunei, Chile, New Zealand and Singapore - signed a trade agreement. 

The agreement, one of the most ambitious Free Trade Agreements ever signed, aims at slashing tariffs on most goods traded between these countries, and the creation, over time, of a unified market like in Europe. The scale would be much bigger - the 12 countries are together home to nearly 800 million people - close to double the EU's single market - and already account for 40% of world trade.

Further nearly 5 million American manufacturing jobs - one out of every 4 - have been lost since implementation of the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO). Since NAFTA, over 60,000 American manufacturing facilities have closed. The TPP would replicate and expand on the NAFTA model.

Also, the US administration under President Barack Obama seems to have prioritized the TPP as the economic component of its “rebalancing” to Asia strategy.

Key Features

• Comprehensive market access. The TPP eliminates or reduces tariff and non-tariff barriers across substantially all trade in goods and services and covers the full spectrum of trade, including goods and services trade and investment, so as to create new opportunities and benefits for our businesses, workers, and consumers.

• Regional approach to commitments. The TPP facilitates the development of production and supply chains, and seamless trade, enhancing efficiency and supporting our goal of creating and supporting jobs, raising living standards, enhancing conservation efforts, and facilitating cross-border integration, as well as opening domestic markets. 

• Addressing new trade challenges. The TPP promotes innovation, productivity, and competitiveness by addressing new issues, including the development of the digital economy, and the role of state-owned enterprises in the global economy.

• Inclusive trade: The TPP includes new elements that seek to ensure that economies at all levels of development and businesses of all sizes can benefit from trade. It includes commitments to help small- and medium-sized businesses understand the Agreement, take advantage of its opportunities, and bring their unique challenges to the attention of the TPP governments.  It also includes specific commitments on development and trade capacity building, to ensure that all Parties are able to meet the commitments in the Agreement and take full advantage of its benefits. 

• Platform for regional integration. The TPP is intended as a platform for regional economic integration and designed to include additional economies across the Asia-Pacific region. 

• Intellectual property rights. The TPP goes somewhat beyond the WTO's TRIPS agreement. It requires penalties for the unlawful commercial exploitation of copyrighted work, prescribes measures to reduce the illegal online distribution of copyrighted material and strengthen copyright terms.

Impact: India and World

• Vietnam is expected to gain at the expense of India in the garments business in the US market, as it will have zero-duty access to the US for textiles as against the 14-30% duties that Indian exporters will have to pay.

• A yarn forward provision in the TPP, which requires clothing to be made from yarn and fabric manufactured in one of the free trade partners to qualify for duty-free treatment under the trade pact, could impact yarn and fabric exports from India to countries such as Vietnam.

• The Peterson Institute for International Economics (PIIE) in a report released in September said that if China and the rest of the APEC forum join a 2nd stage of the TPP that continues to exclude India, India's annual export losses would approach $ 50 billion.

• WTO negotiations have been plagued by missed deadlines and a lack of consensus. As a forum, the WTO is clearly crumbling, considering there are 2 other large regional trade agreements currently under negotiation - the Transatlantic Trade and Investment Partnership (TTIP) between the US and the European Union, and the Regional Comprehensive Economic Partnership (RCEP) between the Association of Southeast Asian Nations (ASEAN) and its 4 free-trade partners, including China and India.

• Under World Bank Publication Global Economic Prospects 2016, it has been noted that GDP gain for TPP countries would be in limited range by 2030. However gain for small and open countries like Malaysia & Vietnam is on higher side (10 and 8% respectively). But for NAFTA countries (as all are members under TPP) GDP gain is around 0.6% because trade represents a modest share of GDP and because existing barriers to their trade which is already mostly among them) are already low for the most traded commodities.



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