The biggest trade agreement you’ve never heard of

Negotiators for the Trans-Pacific Partnership reach a draft agreement; countries head home to what, for many, will be a tough sell. 

What is the TPP, why the controversy over a treade deal, how big, who’s impacted, and what’s the deal for the advanced bioeconomy. The Digest investigates.

The biggest expansion of free trade in a generation, the Trans-Pacific Partnership could reshape world trade in food and agriculture. Here’s the need to know:

What it is: The Trans-Pacific Partnership (TPP) is a new trade agreement that eliminates over 18,000 tariffs and seeks to establish a shared approach to intellectual property, labor and environmental law. The partnership’s goal is to “enhance trade and investment among the TPP partner countries, to promote innovation, economic growth and development, and to support the creation and retention of jobs.”

It’s a parallel to the US-EU’s Transatlantic Trade and Investment Partnership. Negotiations began in 2012 as an expansion of the Trans-Pacific Strategic Economic Partnership Agreement launched by Brunei, Chile, Singapore, and New Zealand in 2006.

Who’s in:  Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam.

Who’s not: China, Indonesia, Philippines, South Korea, Taiwan, Thailand are among those outside the pact, which represents trade in agricultural products among the TPP countries represents US$ 311 billion. The deal is expected to boost agricultural trade among countries within the TPP area.

Why it’s bigger than tariff reduction: ICTSD notes., “If the proposed TPP and TTIP achieve the level of ambition that leaders have tasked their trade negotiators with, studies project noticeable increases in agricultural trade flows among countries in each prospective trade group. One analysis suggests that removing the trade-restrictive features of certain non-tariff measures (e.g., those in place to meet food safety standards) that apply to agricultural commodities and food products would contribute much more to increasing such trade than simply eliminating tariffs and quotas over time.

What does it mean for the advanced bioeconomy? Moving agricultural goods will be less costly, and face less regulatory differentiation from country to country. Expect US corn producers to have more attractive opportunities in export, for example, than selling to US mills for ethanol production. Specifically, it’s good news for ethanol, which faces tariffs entering into Japan and Vietnam.

How big are the The Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP) and the Regional Co-operation in Asia and the Pacific (RCEP)? The countries involved in these three RTAs account for 21% of global agricultural trade.  Together, the TPP, TTIP and RCEP represent over three-quarters of global GDP and two-thirds of world trade.

How big is the TPP, specifically? In financial terms, the TPP covers about ten times more agricultural trade than the separate TTIP negotiations currently underway between the US and EU. Countries party to the new deal represent as much as 10.4 percent of all world agricultural trade, according to Remy Jurenas, an independent expert on agriculture.

Why it’s disruptive: Countries outside the bloc, however, could face difficulties if new trade norms and market access concessions affect their trade with TPP countries, the ICTSD study finds.  And a USDA study estimates that third-country exports of agricultural products to the TPP region would be US$2.6 billion lower under the TPP. The EP analysis projects that third-country farm product exports would be 1.5% lower for the EU and 1.7% lower for the US.

Impact? ICTSD writes:  A study by the US Department of Agriculture (USDA) estimates that such trade in 2025 among the 12 TPP partners would be 6% higher (+ US$8.5 billion) than it would otherwise be without an agreement. An analysis commissioned by the European Parliament (EP) projects that bilateral EU-US agricultural trade under TTIP would be 86% higher (+ US$40 billion) in 2025. It found that addressing the restrictive trade aspects of existing SPS and TBT measures on both sides would account for more than two-thirds of this increase. “This perspective confirms the widespread view that more significant growth in agricultural trade can only be achieved by strengthening in a systemic way what countries do to work through their differences on SPS and TBT issues.”

Who’s opposed? US Liberal voices, for one. Senator Elizabeth Warren of Massachusetts: “ISDS would allow foreign companies to challenge U.S. laws — and potentially to pick up huge payouts from taxpayers — without ever stepping foot in a U.S. court. Here’s how it would work. Imagine that the United States bans a toxic chemical that is often added to gasoline because of its health and environmental consequences. If a foreign company that makes the toxic chemical opposes the law, it would normally have to challenge it in a U.S. court. But with ISDS, the company could skip the U.S. courts and go before an international panel of arbitrators.”

Is it a tough sell? Opponents are vocal supporters have been muted. US Agriculture Secretary Tom Vilsack noted in February that “I spoke to a Congressman that said he had 1,200 comments opposed to TPP and just two in favor.”

The Obama Administration is pushing hard with a “Get the Facts” website that is long on argument, short on balanced data.

Who’s nervous? Writers at The Atlantic and the New York Times also cite the courts issue. Who has sovereignty over what? Is it constitutional at all, asks The Atlantic:  “It is not a far-fetched scenario. The TPP reportedly includes such provisions, as a means of solving a thorny problem.”

Who’s watching from afar? China. “China hopes the TPP pact and other free trade arrangements in the region can boost each other and contribute to the Asia-Pacific’s trade, investment and economic growth,” China’s Ministry of Commerce said. But China gave no indication of desire to join the pact.

Reaction from key stakeholders: US Agricultural Secretary Tom Vilsack is pushing hard:

“The agreement would eliminate or significantly reduce tariffs on our products and deter non-science based sanitary and phytosanitary barriers that have put American agriculture at a disadvantage in TPP countries in the past. Despite these past barriers, countries in the Trans-Pacific Partnership currently account for up to 42 percent of all U.S. agricultural exports, totaling $63 billion. Thanks to this agreement and its removal of unfair trade barriers, American agricultural exports to the region will expand even further, particularly exports of meat, poultry, dairy, fruits, vegetables, grains, oilseeds, cotton and processed products.

“Failing to grasp this opportunity would be a mistake: worse than just losing out on potential gains, our producers would fall behind other countries that are negotiating their own preferential arrangements in TPP countries.”