Background
The Trans-Pacific Partnership (TPP) is a multilateral free trade agreement initially among 12 Pacific Rim countries, designed to bolster economic ties and open markets by removing or reducing tariffs and other trade barriers.
Historical Context
Negotiations for the TPP began in 2008, involving countries such as Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The agreement was signed on February 4, 2016, and was aimed at fostering deeper trade and investment relationships among member states by providing mutual benefits.
However, in January 2017, the United States announced its withdrawal from the agreement, which significantly impacted its original framework. In response, the remaining countries re-negotiated the terms and created the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into force on December 30, 2018.
Definitions and Concepts
- Trans-Pacific Partnership (TPP): A proposed trade agreement between 12 Pacific Rim countries to reduce tariffs and liberalize trade in services seeking to enhance economic integration.
- Tariffs: Taxes imposed on imported goods meant to protect domestic industries or generate government revenue.
- Free Trade Agreement (FTA): A pact between nations to reduce or eliminate trade barriers and facilitate the cross-border movement of goods and services.
Major Analytical Frameworks
Classical Economics
Classical economists emphasize absolute and comparative advantage principles, suggesting that nations benefit from specializing in the production of goods where they have a greater efficiency relative to their trading partners.
Neoclassical Economics
Neoclassical theories support free trade agreements like the TPP, arguing that reduced tariffs and trade deregulation maximize social welfare by improving resource allocation and economies of scale.
Keynesian Economics
Keynesian perspectives might stress the importance of trade balance and potential economic stability issues arising from extensive trade agreements. They might also highlight the role of government intervention in cushioning against economic disruptions due to trade liberalization.
Marxian Economics
From a Marxian viewpoint, trade agreements such as TPP could be seen as mechanisms that entrench capitalist interests globally and exacerbating inequalities by benefiting multinational corporations over local economies and labor.
Institutional Economics
Institutional economists would examine the TPP through the lens of negotiating power between countries, domestic regulatory impacts, and the role of institutions in shaping market dynamics under free trade scenarios.
Behavioral Economics
Behavioral economists could provide insights into how cognitive biases and market psychology affect public and political acceptance of trade agreements like the TPP.
Post-Keynesian Economics
Post-Keynesians would analyze the distributional consequences of the TPP, highlighting its effects on employment, income inequality, and the economic sovereignty of member states.
Austrian Economics
From an Austrian perspective, the emphasis would be on the principle of free markets and minimizing government interference, arguing that trade agreements should focus on reducing barriers to exchange spontaneity and entrepreneurial activity.
Development Economics
Development economists would stress the impact of the TPP on developing member states, assessing whether the agreement aids poverty reduction and supports sustainable economic growth.
Monetarism
Monetarists might evaluate the TPP based on its effects on trade balances and inflation rates, analyzing how trade liberalization influences money supply and price stability.
Comparative Analysis
Comparing the TPP to other trade agreements such as NAFTA or the EU single market, we can gauge its unique structural impacts, scope, and economic implications. Similarities can be drawn in terms of reducing trade barriers, but the TPP’s comprehensive nature and coverage of diverse economies mark a distinct approach to global trade relations.
Case Studies
Japan
Japan, as one of the significant economies in the TPP, aimed to boost its exports and agricultural reforms through the agreement.
Vietnam
As a developing economy, Vietnam stood to gain from enhanced market access to the broader Pacific region, potentially increasing its economic growth and industrial diversification.
USA
Before withdrawal, the United States envisioned the TPP as a strategic tool to strengthen its trade relationships in Asia and counterbalance China’s growing economic influence.
Suggested Books for Further Studies
- “The Trans-Pacific Partnership and Asia-Pacific Integration” by Peter A. Petri and Michael G. Plummer
- “TPP: The Trans-Pacific Partnership – Next or the End of Japan’s Trade Policy?” edited by Mireya Solís, Saori N. Katada, and Shujiro Urata
- “Grading Obama’s Trade Policy – C” by Reihan Salam
Related Terms with Definitions
- CPTPP: The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the successor to the TPP without the involvement of the USA
