Published On: Sat, Feb 13th, 2016

Is the Trans-Pacific Partnership Cost-Beneficial?

On February 4th 2016 the Trans-Pacific Partnership (TPP) agreement was finally signed by 12 countries after around seven years of negotiations. Yet still there are people in many of the countries involved in the partnership that aren’t fully happy with the deal and feel a cost-benefit analysis should have been conducted first.

TPP

The TPP still needs to go to each country’s legislature for approval before it can be put fully in place, but being signed is an encouraging step forward. There are both arguments for and against the partnership, and protesters were even present at the signing.

Aims of the Partnership

The aim of the TPP is to create a free-trade zone between the 12 nations to boost prosperity for all of their economies. The 12 countries involved are US, Australia, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, Vietnam and Brunei which produce 40% of the world’s total GDP.

If the TPP goes ahead and is a success there are six further countries such as South Korea and Colombia waiting on the side lines. China is the largest country and economy in the Pacific Rim that is not involved, and has increased its own trade incentives elsewhere.

Positive Impacts

This would create the largest trade zone in the world, eclipsing the North American Free Trade Agreement. For all the countries involved the TPP will eliminate the majority of import tariffs, improving business for imports into and exports out of each country. Each country will be hoping this will therefore increase their economic output.

It should also have a positive impact for global trading services such as Ebury Partners, as they will be more in demand for importing and exporting goods. Governments are hoping the trade-off for reducing or eliminating such tariffs will improve national businesses’ international reach.

Negative Impacts

Research and cost-benefit analysis from the World Bank has predicted that certain countries such as Australia will barely benefit at all from the TPP. They have stated by 2030 Australia’s output will increase by 0.7% by 2030. To many this does not seem worth the effort and such a small margin could easily swing the other way.

Calls for a cost-benefit analysis have therefore been strong, from citizens of other nations as well. There are worries that eliminating import and export tariffs will instead weaken home businesses as cheaper imports from abroad prove far more competitive. So far governments have ignored this advice, though increased pressure could see the TPP be blocked in the coming months.