Opinion Columns & Blogs

TPP would make it easier to export US products

Spoiler alert: You can still sleep well with the Trans-Pacific Partnership.

The proposed Trans-Pacific Partnership is a regional trade agreement with 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

All of these countries are current members of the World Trade Organization, which compels them to uniform trading rules and lowering of tariff barriers. The U.S. already has established free trade agreements with six of these 11 trading partners (Australia, Canada, Chile, Mexico, Peru, and Singapore).

In 2014, our total bilateral trade with the 11 proposed TPP members was a tad over $1.6 trillion, split between exports of $727 billion and imports of $882 billion. Of this, the bilateral trade with the six existing partners was $1.32 trillion, or 82 percent. So the five additional countries the partnership would cover (Brunei, Japan, Malaysia, New Zealand and Vietnam) only amount to 18 percent of the U.S. trade within the TPP, or about $290 billion, split between exports of $91 billion and imports of $199 billion.

Interestingly, this $108 billion trade deficit represents the bulk of the deficit with the 11 TPP partners.

The ratio between exports and imports is quite healthy with the six countries with which we already have free trade agreements. If we combine the merchandise and services trade, our 2014 trade deficit with our largest trading partner, Canada, was only $7 billion, or 2 percent.

We had substantial merchandise trade surpluses with Australia, Chile, Peru and Singapore, leaving Mexico as the one partner country with a notable deficit (about 19 percent). Mexico serves a very useful function as a reliable and inexpensive supplier of agricultural products, crude oil, automobiles and appliances, and it is hard to find fault with that.

The question then is whether lowering barriers with the five remaining members of the Trans-Pacific Partnership will ruin the American economy.

Although Malaysia and Vietnam are growing trading partners, the large player here is Japan, with which we exported $115 billion to and imported $168 billion from in 2014. It is inconceivable that the trade deficit with Japan will get worse with TPP, and it is very likely that it will be reduced, thus benefiting the American economy.

Japan is a high-cost country with minimal exports of farm products and raw materials, so we won’t be buying more of that from them. Tariffs on their industrial and consumer products are already low, so the primary effect of TPP will be that it will be easier for us to export products and services to them. Japan will be forced to reduce its average tariff on agricultural imports from 22.2 percent, and ease restrictions on auto trade and the insurance business.

A problem with exporting to Japan has been non-tariff barriers, such as unique and discriminatory standards, experience requirements, licensing and buy-Japanese rules, in addition to a mixture of tradition, nationalism, keiretsus and cartels. The Trans-Pacific Partnership would help alleviate many of these impediments.

The growing imports of consumer products and raw materials from Malaysia and Vietnam would not break our backs, rather, these are excellent and valuable trading partners for specialized products that will never again be sourced in the U.S. The TPP will help ease American exports to these two important trading partners.

TPP boils down to helping us grow our exports to Japan, Malaysia and Vietnam. Making this trade pact sound like the end of the world seems a bit disingenuous and ill-informed.

Andreas Udbye is an assistant professor in the School of Business and Leadership of the University of Puget Sound.