International Trade

TPP: A Historic Agreement in a Pivotal Region

On June 13, ALEC welcomed Ambassador Michael Froman, the United States Trade Representative, on a conference call to discuss the Trans-Pacific-Partnership (TPP) with ALEC members and friends. Ambassador Froman works to bolster American business in the global market and, as the lead American negotiator, was able to provide an insider’s glimpse into this historic trade framework.

Froman began by highlighting aspects of the agreement that were consistent with ALEC free market principles. With TPP, 18,000 tariffs on U.S. exports will be eliminated, internet freedom and cross border data flows will be enhanced, subsidies will be cut, and state-owned enterprises (SOEs) will face restrictions – this is the first major trade agreement to address SOEs. Portions of the agreement directly tackle challenges that are particularly acute for small and medium-sized enterprises (SMEs) such as customs procedures and burdensome regulations. Studies from the Peterson Institute for International Economics, the U.S. International Trade Commission (ITC) and others suggest that, if ratified, TPP will produce positive economic outcomes for the U.S. America’s GDP should rise, exports should increase, and TPP has the potential to be an American job creator.

Regulation of intellectual property rights (IPR) plays a critical role in TPP – Froman acknowledged TPP’s IP provisions were among the most important aspects of the agreement. Upholding IPR is a key matter in the area of international trade because nearly 40 million Americans owe their jobs to IP-intensive industries, and overall TPP succeeds in strengthening IPR. Copyright protections are closer to the U.S. level, and pharmaceutical patent protections are not equal to America’s but significantly enhanced compared to global standards. IPR enforcement provisions, including criminal penalties for theft of trade secrets through cyber intrusion, are also part of TPP. Under the TPP trade agreement, the U.S. will work with countries to help improve their cyber security, benefitting American businesses by preventing data breaches.

The ambassador conceded no agreement is perfect – especially one with 11 other negotiating partners with interests that might not align with America’s. One area of disappointment for ALEC is that TPP is the first trade agreement to exempt tobacco control measures specifically from challenges under investor-state dispute settlement (ISDS) mechanisms. This has serious intellectual property (IP) implications for manufacturers of tobacco products.

Froman reminded call participants that TPP has strategic as well as economic significance and enables the U.S. to play “a leading role in defining the rules of the road at a time when other countries are negotiating” free trade agreements (FTAs). China is currently negotiating a parallel agreement, the Regional Comprehensive Economic Partnership (RCEP), involving many of the same trading partners but excluding the United States. Unlike TPP, RCEP does not guarantee internet freedom or the free flow of information across borders. Additionally, it does nothing to define and restrict SOEs and does not protect IPR.

One call participant asked the trade representative why there is such a high level of scrutiny surrounding the agreement. Froman answered that widespread economic insecurity causes people to see only the collateral damage when discussing trade agreements. The benefits from trade agreements are not as readily identifiable, however overall, trade frameworks create long-term benefits. Froman explained that if a factory closes, it is easy to blame it to a single FTA – whether accurate or not. In contrast, jobs created by an export boom are usually dispersed and not easily attributable to increased trade spurred by any one agreement.

It is unlikely that a vote will be held on this trade agreement before the November elections, leaving the American public ample time to study TPP’s benefits and deficiencies. Ambassador Froman emphasized that state legislators are important and influential in the process, as federal lawmakers look to their state counterparts for insights and guidance. The ALEC Center to Restore the Balance of Government fosters dialogue between state and federal law makers on issues over which the federal government has jurisdiction but where decisions have a profound impact on the states, making the ambassador’s observation good news indeed!

In Depth: International Trade

International trade creates and supports millions of American jobs that offer higher than average wages and drive economic growth. As a testament to the strength of American entrepreneurship, the vast majority of U.S. exporters are not large corporations but small to medium-sized enterprises. Those that doubt the power of global…

+ International Trade In Depth