written by María Inés Valle Balsells
AmCham’s Trade Center Coordinator
The Illusion of the Trans-Pacific Partnership Agreement (TPP)
Details of the Trans-Pacific Partnership Agreement (TPP): The TPP is a free trade agreement comprised up of countries of the Pacific Basin, Canada, the U.S., Mexico, Chile, Japan, Malaysia, Singapore, Vietnam, Brunei, Australia, and New Zealand, representing a 40% of the Gross Domestic Product (GDP), worldwide, which is 1/3 of the international trade, with 800 million inhabitants, according to the World Bank (WB). The negotiation of this agreement began in the year 2010. Later, the Agreement was officially signed on February 2015, and gradually, the Congress of each country will be passing the agreement.
The goal of this agreement is to tear down the barriers and allow free trade among countries.
View of the U.S. before the agreement: This Agreement was pushed, mainly, by the U.S. under the Obama Administration. Today, president-elect Donald Trump has mentioned, since his electoral campaign until now, that his country is not going to take part on the TPP, so it can leave the table of negotiations before being passed by the Congress.
The position of president-elect Trump against the Agreement is based on the fact of negotiating bilateral trade agreements, in which the U.S. will be benefited in issues such as job generation and investments in its territory. We should keep in mind that president-elect Trump has always been against multilateral agreements, because he thinks that they harm the U.S. economy.
Implications for the Treaty after the new outlook of the U.S.: Certainly, after the new outlook of the U.S., the entry into force of this Agreement is more difficult, due to the fact that in order to get this TPP into force, it needs the approval of 6 countries, which represent no less than 85% of the GDP of the 20 countries which comprise it.
This Agreement will be a myth or an illusion while Japan or the U.S. do not endorse it…Why? Because these two countries represent an 80% of the GDP of this group of 20 nations in the Treaty.
Impact of the TPP for the Central America textile industry: At the beginning, the textiles issue under the TPP raised certain threat for the industry, due to the advantage for the region, because this Agreement would have a 0% tax for textiles and garments made in Vietnam and Malaysia towards the U.S.
Vietnam is the second country that supplies these products to the U.S. Under the norms of this Treaty, Vietnam as well as Malaysia will be benefited at the time the U.S. will purchase textiles with better prices.
Nevertheless, with the new outlook of the U.S. at the TPP, Central America took a more positive view, because the industry of the region will not be affected by the competence of Vietnam and Malaysia under the benefits of this Agreement.
According to the Guatemalan Ministry of Economy, during the year 2015 textile exports were US$1,575.04 million, which is a 15%of the Guatemalan GDP.