Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Quantifying the Benefits of TPP-11

Posted June 14, 2017

America’s decision to withdraw from the Trans-Pacific Partnership will be Canada’s gain – and indeed also that of all the trade pact’s remaining members, according to a new report by the Canada West Foundation.  By contrast, the United States is poised to be the biggest economic loser if the 11 other TPP countries eventually proceed with a revised trade deal for the Asia-Pacific region, says the Calgary-based think tank.

Once thought to be dead in the water after newly inaugurated President Trump announced that he would be pulling the U.S. out of his predecessor’s signature trade initiative, the study’s authors note that as with Mark Twain’s famous epigram, “the reports of its death have been greatly exaggerated.” Undeterred by the setback, several of the remaining TPP signatories have nevertheless forged on with ratification of the deal in their own countries, in no small part motivated by the alarming “America First” rhetoric coming from the new administration in Washington.

The case to move ahead on a TPP-11 has largely been a political response to the Trump administration’s intent to replace inclusive multilateral agreements with one-on-one negotiations on terms essentially dictated by, not negotiated with, Washington, D.C. Opposition to this protectionist U.S. agenda makes a compelling political argument. However, a quantifiable case for the remaining 11 countries to inform discussions on whether to press on with the TPP minus the U.S. has been noticeably absent from the discussion.

This report begins to fill that gap. Our modelling and analysis shows how Canada and other TPP signatories would fare under a TPP-11; what the U.S. stands to lose; and, how the agreement would affect different sectors of the economy, including how changes in one sector will impact other sectors. The findings provide quantitative evidence to each country as it decides whether to forge ahead on the pact without the U.S.

Based on economic modelling done by Curiak Consultants, the authors found that the United States was the only country where anticipated export gains from the TPP would be turned into losses if the other countries proceed with the deal minus U.S. participation. The report’s models suggest that previously expected U.S. export gains of $12.8 billion by 2035 under TPP would eventually transform into a $3 billion loss in that same time period under a TPP-11 deal. Other countries like Japan and Vietnam would see a significant reduction in expected gains, but not an actual loss.

“A TPP-11 would actually be better than the original agreement for Canadian agriculture and agri-food, because this sector would no longer compete with the U.S. in TPP-11 markets,” the report says. “Beef, in particular, would benefit from access to the Japanese market without having to share with the Americans.”

The study provides some of the first objective data giving countries a compelling reason to move forward without the United States. That said, the report also acknowledges what is plainly obvious – that a TPP-11 deal would not carry the same value without America’s economic clout behind it.  In fact, a TPP deal minus the U.S. would increase exports 2.43% among participants, which is less than half of the export increase that would have occurred with all 12 countries participating.

Related: Canada, Mexico Would See Most Gains from TPP-Minus-One Deal, While U.S. Would Lose Exports