Question

1. Evaluate the PROs and CONs arguments surrounding Trans-Pacific Partnership (TPP) by applying six of the eight themes that are relevant below: Write your answers below each theme.

EVOLUTION AND CONSEQUENCES OF GOVERNMENT INTERVENTION

HOW FIRMS CAN RESPOND TO GOVERNMENT INTERVENTION

REGIONAL INTEGRATION AND ECONOMIC BLOCS

THE LEADING ECONOMIC BLOCS

ADVANTAGES AND SUCCESS FACTORS OF REGIONAL INTEGRATION

CHALLENGES AND MANAGERIAL IMPLICATIONS OF REGIONAL INTEGRATION

2. Do you agree with arguments made by the critics? Why or why not?

3. Would it be a benefit international trade?

Answer 1

The TPP involves 12 Pacific Rim nations - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam - which account for 40 % of the World GDP and 26 % of world trade.

Like most other trade agreements (NAFTA, SCO, ASEAN), it sets reciprocal trade quotas and removes tariffs on goods and services. It also harmonizes regulations and statutes. Trade agreements are based on the principle of comparative advantage. They increase the prosperity of all the nations involved.

TPP Pros

Boosts exports and economic growth.

Create more jobs and prosperity for the 12 countries involved.

Increase exports by $305 billion per year by 2025.

It increases exports by removing 18,000 tariffs placed on U.S. exports to the other countries. USA has already withdrawn 80 %of these tariffs on imports.

This agreement is proposed to add $223 billion a year to incomes of workers in all the countries, with $77 billion going to U.S. workers.

All countries agreed to cut down on wildlife trafficking. That helps elephants, rhinoceroses, and marine species the most. It prevents environmental abuses, such as unsustainable logging and fishing.

TPP Cons

Gains in income would go to workers making more than $88,000 a year.

FTAs lead to income inequality in high-wage countries.

Promote cheaper goods from low-wage countries.

TPP because it protects patents and copyrights. Higher-paid owners of intellectual property would receive more of the income gains. This agreement regarding patents will reduce the availability of cheap generics. That will raise the cost of many drugs. Competitive business pressures will reduce the incentives in Asia to protect the environment.

Countries to benefit most from the deal?

A country with a more protected economy will benefit more from liberalization. That's not what the "man in the street" thinks, but that's what economists think. So, relative to their economic size, Vietnam and Japan will benefit the most. Vietnam will benefit in almost every sector thank to the jolt from external competition. Japan will receive a jolt in the agricultural and service sectors (retailing, education, insurance, etc.).

Countries to benefit the least?

Free market economies are likely to have the smallest gains relative to the country's GDP. Therefore, Singapore, Australia and New Zealand will likely experience smaller gains in relation to GDP. Nevertheless, the most competitive firms in these countries will gain from greater access to export markets. The same is true of competitive firms in Vietnam (apparel and some foodstuffs, like shrimp) and Japan (a wide range of manufacturing firms).