With chief negotiators for 12 nations meeting in Hawaii this week to try and finalize the Trans-Pacific Partnership (TPP) agreement, trade experts and lawmakers are watching to see if the largest-ever U.S. free trade agreement will be concluded. But a more important question will remain—is TPP a good free trade agreement (FTA)?
Free trade agreements are supposed to eliminate (nearly) all trade barriers among their member countries. In fact, the World Trade Organization only allows FTAs when they eliminate tariffs and other restrictions on “substantially all” trade among the parties (GATT Article XXIV.8.b.).
With that in mind, and before any agreement is reached, here is a non-exhaustive list of trade barriers that a comprehensive free trade agreement, and certainly a “gold standard” FTA like the TPP, should eliminate or address:
- Tariffs – regular customs tariffs on all goods should be eliminated, with virtually no exceptions. (For TPP, this includes Japan’s import tariffs on beef and rice, and Canada’s tariffs on dairy and poultry products.)
- Localization barriers – an FTA should eliminate preferential treatment for domestic goods and services, as well as any requirements for local manufacture.
- Customs procedures – an FTA should speed the procedures for import and export of goods and services, reducing paperwork, fees and requirements that act as trade barriers.
- State-owned enterprises – TPP and future trade agreements will be judged by how they establish rules for government-owned companies when they compete with private ones, either for investment or the sale of goods and services around the world.
- Services – as global trade barriers on services are particularly pervasive, FTAs should facilitate trade in telecommunications, express delivery, and professional services (such as lawyers, consultants and accountants) – all of which are on the leading edge of greater market access for all sectors
- Standards – an FTA should allow for harmonization of standards and testing procedures, for goods and services as well as for foods and agricultural goods. Technical barriers to trade should be eliminated.
- Trade remedies – FTAs should not affect WTO rules for unfair trade such as dumping and subsidies, but should enhance how countries work together to enforce these rules, particularly on Customs enforcement and evasion
- Currency – FTAs should address currency manipulation, which subsidizes the exports of the manipulating country. Unfortunately, the United States has not shown real interest in addressing this issue in the TPP, despite the intent of Congress and the clear negative impact on U.S. exports.
- E-commerce and digital trade – FTAs must bring trade rules into the 21st century, and must prevent forced localization and other trade-limiting restrictions on how digital trade takes place around the globe.
- Intellectual property – FTAs must strengthen trade secret protection and find a balance between protecting IP rights and allowing the spread of knowledge to all countries.
While no trade agreement will be perfect, the United States should not accept a free trade agreement unless it is a good one. Whether it is the TPP, the Trade in Services Agreement, or the U.S.-EU Transatlantic Trade and Investment Partnership (TTIP), an agreement that does not pass these tests should not be accepted by U.S. trade negotiators or by Congress.