The Year of Trade Deals: A Sensible Debate

By Dimitar Georgiev

This is part one of a series that will evaluate the key provisions in two monumental international trade deals--the Transpacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP)--by examining their economic effects, with particular emphasis on American private enterprise.

Why trade and why now? Not since the establishment of the World Trade Organization in 1995 has international trade received as much public attention as we have observed over the past several months. The main driver, of course, was the signing of the TPP on February 4, 2016 in New Zealand between twelve nations accounting for nearly forty percent of the global economy. Equally important, though not as public, have been the negotiations of the TTIP, a trade agreement between the United States and the European Union.

The two treaties have much in common, most notably in that the United States is playing a pivotal role in their negotiations. Though the particular provisions in each treaty--elimination of tariffs, customs administration, labor issues, intellectual property rights, to name a few--are not necessarily groundbreaking, their inclusion, negotiation, and agreement in comprehensive cross-region-wide pacts is unprecedented. If successful, the two treaties will bind the overwhelming majority of the global economy in an ecosystem spanning five continents, with the United States at the center.

As similar as the two treaties are in scope, key differences exist that merit evaluation on their own. Most notably, TTIP is a pact negotiated between very similar societies--the United States and the European Union--that share a common cultural and economic heritage. On the other hand, TPP is a treaty that seeks to bind societies as diverse as the post-industrial Americans, communist Vietnamese, and economically emerging Peruvians. How the standards enshrined in the Pacific deal will be implemented, the tradeoffs made to secure support for its ratification among the parties, and the effects of these on business have yet to be analyzed and debated.

Unfortunately, much of the debate, at least in the United States, has been clouded by the partisan and unusually polarized U.S. presidential election, denying us of the benefit to examine the trade deals on their merits before taking a pro or con position. As it stands, candidates in both political parties have unequivocally declared their opposition to TPP, blasting it as "disastrous" and "insanity." A June 2015 NBC poll showed that as many as two-thirds of Americans oppose the trade deal and are in favor of broader protectionist policies.

A good example of the effects trade will have on business is the relationship between TPP and the U.S. auto industry. At $140 billion per year, the largest share of U.S. exports is that of automobiles and parts. Through TPP, a number of new markets previously closed to the U.S. auto industry--such as Vietnam and Malaysia--will begin to open. At the same time, concerns regarding non-tariff barriers--including currency manipulation, subsidies, and intellectual property rights--remain.

With their scope, TPP and TTIP have the potential to set the tone for a generation of international trade and exchange. It is natural to be skeptical of the unknown. It may very well be that some countries or industries benefit disproportionately from others. An objective conclusion, however, may be made only after an honest examination and debate of the facts.

Dimitar Georgiev is a global strategy and operations analyst at the Crumpton Group LLC, where he specializes in emerging markets in the Middle East and Africa, global trade, and technology. He is also a 2016 International Trade Fellow at Young Professionals in Foreign Policy.