The Trans-Pacific Partnership: A Global Victory

T. F. Higgins (MBA '17)

"The short term   benefits of protecting inefficient industries will be far outweighed in the long term by increased technical sophistication and   overall competitiveness across the economy."

"The short term benefits of protecting inefficient industries will be far outweighed in the long term by increased technical sophistication and overall competitiveness across the economy."

   

If it ever graduates from rhetoric to ratification, the Trans-Pacific Partnership (“TPP”) would become the United States’ largest

free trade agreement, connecting economies in Asia and the Americas representing 36% of global GDP. While significant here in

the U.S, it has the potential to change the economic landscape in the Asia-Pacific for decades to come - both for those who sign

on, and those who don’t. For countries on the inside, the TPP will sharply knock down tax barriers across foreign markets,

providing consumers greater choices at lower prices. Those passing on the deal argue that while they miss out on cheaper

export costs, they more than make up the difference with protectionist benefits to domestic industries, and centralized control

of important macroeconomic levers. But this perspective is too myopic. At the country level, states that opt not to sign on to

the TPP will forego easier access to foreign investment, increased buying power across the population, and a chance for their

firms to evolve through competition. At the regional level, and particularly for Southeast Asia, this could exacerbate a two-

tiered hierarchy of rich and poor states.  

 

Debate over the TPP’s impact in the Asia-Pacific hinges on the risk to local industry of unchecked foreign competition. Once a

government like Thailand’s loses control of import tariffs, they open local companies up to the full effect of the free market.

Products produced in other countries using more efficient systems could undercut more expensively produced and sold

domestic versions. Some industries such as agriculture have been sheltered specifically because of their archaic, high-

employing methods. Not only could many livelihoods be lost when an industry like rice farming comes under pressure from

foreign competition, but what of the cost to the state in this painful process? While there are likely to be job market shakeups

across the region, these are transient costs for much more valuable present and future gains. For the average consumer, access

to more competitively-priced imports will mean their Rupiah buys them more for less, and with more variety. Labor costs will

remain low and will continue to attract manufacturing, refining, and extracting firms. But now, with the intellectual property

safeguards built into the TPP, companies can be more confident bringing cutting-edge technology along with factories. Rather

than killing jobs, this improved efficiency in the market will create opportunities in new industries and attract previously

suspicious foreign capital.

 

For the Asia-Pacific countries already participating in TPP negotiations, this deal provides a chance for their industries to

compete at the highest level and evolve to their fullest potential. Companies fighting it out against American and Japanese

competition in the open arena of the TPP will push each other harder, outperforming those on the outside. The short term

benefits of protecting inefficient industries will be far outweighed in the long term by increased technical sophistication and

overall competitiveness across the economy. While still only hypothetical, the TPP holds immediate and future benefit to Asia-

Pacific countries, but it also runs the risk of exacerbating regional sub-groups of “haves” and “have-nots.” The GDP/capita of

the six Asia-Pacific states currently involved in negotiations averages $49,950. Compare this to the shockingly low $7,500 for

six Southeast Asian1 non-participants, and the socioeconomic gap is clear. Those leaders on the outside might wonder if the

people at the negotiating table know something they don’t about managing a competitive national economy.