Respond to:

The Trans-Pacific Partnership (TPP) was a proposed mass trade agreement regulating the trade of the Asia-Pacific regions, North America, South America, Asia, and Oceania, from those nations that agree to ratify it (Akpa, 2023). The trade agreement, as it currently stands, involves 11 nations, including some developed nations such as Japan and Australia. The TPP could provide several benefits for the United States (US).

PROS

First, ratifying the TPP would provide greater access to foreign markets with greatly reduced or eliminated tariffs. These reduced tariffs could provide overall economic benefits to the US and increase the national gross domestic product (GDP), similar in fashion to the positive economic results from the North American Free Trade Agreement (NAFTA) (Ahumada & Churata, 2019). In addition to increasing GDP, as the new trade theory implies, free trade should allow the US and its industries to gain first-mover advantages in developing countries such as Peru, Chile, Singapore, and Vietnam. First-mover advantages would allow US industries to achieve economies of scale over competitors and deter competitors from entering the market (Hill & Hult, 2022). Aside from the opportunity of missing out on the economic benefits of the TPP by the US joining the agreement, it will allow the US to help determine the development of the TPP, including import and export regulations, rules concerning internet usage, and other electronic means of conducting international business. By helping drive policy, the US can ensure that the TPP aligns with US economic interests.

CONS

Along with the pros, there are some cons to ratifying the TPP. First, the TPP, as it is currently designed, would limit access to countries that are not part of the TPP. So, countries would be obligated to have increased tariffs on non-member countries, which would have a negative economic effect. Another con is that the TPA has additional protectionist policies with the rule of origin (Mendoza, 2016). With the rule of origin, member nations that import materials from non-member nations can have tariffs placed on their exports depending on how much of a product was produced with non-member nation materials (Mendoza, 2016). This policy further disincentivizes member nations from doing business with non-member nations and can create higher costs for much-needed materials. A third issue with ratifying the TPP is the negative impact that free trade with developing nations can have on US wage growth, employment, and government costs to compensate citizens for these negative impacts (Hill & Hult, 2022).

Analysis

The TPP mirrors some of the aspects of new trade theory, notably that trade implication that trade is "generated from government intervention and strategic trade policy" (Hill & Hult, 2022). However, the TPP does not entirely comply with the new trade theory. First, since it disincentivizes imports from non-member nations, it does not take full advantage of location (Hill & Hult, 2022). Some non-member states may be the most productive with a product, and member nations will not be able to reap the full economic benefits. Second, and related to the first critique, the TPP would exclude members who can achieve economies of scale sufficient to increase the variety of goods to consumers and reduce the average costs of goods (Hill & Hult, 2022).

Recommendation

Considering both the potential benefits and costs of the TPP, I would recommend that America join the TPP. The main reason I make this recommendation is that the US has much economic clout and can use this power to help shape the TPP or other trade agreements to minimize the damage it can have to US interests. The US has to worry about missing any possible economic benefits of the TPP and ceding control of important trade agreements to other nations, including our rivals. By standing by, the US could allow rival nations to gain economically on the US and fill a power vacuum left by a lack of US leadership on international trade.