The Trans-Pacific Partnership, the largest trade deal in decades, has received substantial publicity recently, but many of us are left wondering about its actual impact on the global economy. In theory, the TPP aims to deepen economic ties and foster tighter relationships between the 12 Pacific Rim countries, which currently account for over 40% of the world’s economic output. Proponents say the TPP will facilitate trade, boost growth, and cut tariffs, creating a low friction marketplace among member countries that is reminiscent of the European Union model; however, a perceived lack of transparency during its negotiation has made people uneasy about its ultimate objectives, and large constituencies in several member countries harbor fears over the potential economic disadvantages the deal could pose for them. In addition, although the deal has been signed, years of negotiations and ratifications introduce a great deal of uncertainty about the actual global reality that will be created by the TPP.
A major criticism of the TPP is its intensification of competition between member countries’ labor forces. This has become a hot button issue, particularly in the United States Presidential election, and has once again brought to the surface the historic debate over the threat globalization poses to blue collar workers in the United States. And there is some merit to the concern. With the TPP’s reduced or eliminated tariffs removing much of the incentive for producing goods in-country, many developed countries, including the U.S., logically predict that greater numbers of jobs will continue to migrate to lesser developed countries, who are attractive primarily because of lower wages generated by lax labor laws and weakened currencies. While supporters of the TPP point out that it would simultaneously require those lesser developed countries to abide by International Labour Organization (ILO) requirements, including implementing a minimum wage and adhering to certain workplace standards, many fear that these requirements would be poorly enforced and insufficient to close the massive international cost-of-labor gaps that currently exist.
Another critique of the TPP concerns its intellectual property rights stipulations, particularly as they relate to pharmaceutical companies. By extending intellectual property rights, the TPP would protect drugmakers from rival companies making copies of the drug, which would create a situation that allows patent holders to mark up drug prices in many more markets than was previously possible, leading to an overall increase in proprietary drug prices. On the other hand, the TPP would remove tariffs for basic lifesaving drugs such as penicillin and amoxicillin, increasing their availability across low income TPP countries. While there is debate over the TPP’s overall effect on worldwide access to appropriate healthcare and its impact on healthcare costs, there is no doubt that, should the TPP be ratified and implemented as currently proposed, the global prices for specific drugs will see substantial changes from their current levels.
Over 18,000 tariffs are slated to eventually be eliminated by the TPP. Which of these cuts actually come to fruition remains to be seen, but one thing is for certain: these cuts will directly affect the entire economic chain in virtually every industry. Changes in tariffs will certainly shift the landscape in textiles, vehicles, foodstuffs, pharmaceuticals, and retail. Even the energy and telecommunications sectors will be affected; solar panel and wind turbine tariffs will be slashed to promote environmentally friendly power, and cross border data flows will become more fluid.
These changes are where the TPP comes home to those of us in the eCommerce and logistics business. For us, it is not so much about judging whether the TPP will have a positive or negative impact on the global and U.S. economy — although we think it will be a net positive for all emerging member countries if it is implemented properly. Rather, it is about understanding that any economic disruption — and the TPP will definitely create some economic disruptions — presents unique opportunities and challenges for specific markets and players. Some players will find themselves positioned to take full advantage of the post TPP economic landscape while others will lose some advantages. They will open new markets, find new ways to optimize operational efficiency, and take market share from those players who are not well positioned. That’s why we’re carefully watching developments in the TPP ratification and implementation process and trying to maintain a great deal of flexibility in our global channels. We feel that even if the TPP is not fully ratified, elements of it will increasingly find their way into the global economy. And when they do, we aim to be prepared here at Vander Group.