The U.S.-led “mega-regional” trade agreements, the Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (TTIP), are capturing news headlines as the usual trade politicking around these deals gains steam. We at TradeUp loudly cheerlead these deals. Most of the more than 300 regional trade agreements (RTAs) countries around the world have reached with various partners or small groups of countries are empirically far more liberalizing and comprehensive than multilateral trade agreements reached together by the 160 members of the World Trade Organization (WTO). In addition, both TPP and TTIP are pushing the envelope in new areas of international trade law, pioneering in such newer trade topics as e-commerce, copyrights, and treatment of state-owned enterprises.
Regional deals have emerged as the center of gravity in world trade, and they will also help open new export opportunities for U.S.-based companies. Look for three major gains:
What’s more, as e-commerce, 3D printing, nanotech, and other DIY technologies expand, Americans of all walks of life can become one (wo)man-multinationals – graduate from being global consumers to designers, assemblers, and sellers of goods and services exported around the planet. This export opportunity will explode between now and 2025, as 5 billion to-be Internet users log-on across the developing world. Millions of new American jobs can be created, and thousands of new businesses launched. These emerging Mainstreet exporters will however be stifled without smart trade rules that open markets and level playing fields globally. The mega-regionals should help kickstart this process.
Gains from the digital economy. The old U.S. trade agenda prioritized corporate supply chains – moving barriers to trade in parts, components, and final products, opening foreign markets for U.S. investors, and speeding up customs procedures. These rules still matter. But physical supply chains will be less critical as 3D printing and nanotech expand: parts and components can simply be made and/or printed off the Web right where they are assembled. With e-commerce, e-invoicing, online payments, and the industrial internet taking hold, the global economy will increasingly run not on ships but on the cloud. Companies in the US. Are well-placed to profit, and again it is the TPP and TTIP that offer the best of chance yet to start devising key rules to enable trade empowered by these new technologies, such as IP, copyrights, patents, and dispute settlement.
Growth and jobs. U.S. economy is recovering, and serious tail risks are being averted. However, the trillion dollar question remains – where is global growth coming from in the coming decade? Trade is a key place to look: TTIP is expected to generate $130 billion in economic gains to U.S. and $162 billion to Europe annually, and TPP will boost U.S. annual gains by $77 billion and Japan’s by $104 billion. As such, TTIP will boost U.S. household incomes by $865 annually and create 750,000 new U.S. jobs, while TPP would generate about $1,230 per household by 2025 – a great boost without a dime of deficit spending, and a strong bonus on the $10,000 annual income gains American households have already scored due to post-war trade opening. And by locking in first-rate rules and open markets, the trade deals help give U.S. companies the confidence needed to unlock their $5 trillion cash holdings – with which to buy American inputs and hire U.S. workers.
In addition to these gains, the coming trade deals can help transform the global trading system. Gatekeepers to markets with two-thirds of global spending power, TPP and TTIP can be giant magnetic docking stations to outsiders. Most remarkably, China, the world’s largest trader and TPP skeptic, is seriously interested in joining the deal, now seen by various domestic interests as a means to counteract economic slowdown and drive domestic reforms, especially to state-owned enterprises. The world’s 7th largest economy, Brazil has completely missed the global wave of trade integration, but now the country’s industrial lobby, long quite protectionist but now worried about left out of global supply chains, has pushed the government to get serious about the dormant Mercosur-EU talks and eyes at the TTIP.
It is not far-fetched to think that TPP and TTIP could ultimately merge. Many tough political steps lies ahead, but such a superdeal is possible: the United States and EU already have bilateral FTAs with several common TPP partners – Korea, Peru, Australia, Singapore, Canada, and Mexico to name a few. With China and Brazil on board, the superdeal would cover 80 percent of world’s output and approximate a multilateral agreement – and have cutting-edge rules that could never be agreed in one Big Bang at the WTO. As the liberalizing coalition expands and powers on, it is the U.S. exporters that stand to gain. TradeUp looks to help more and more U.S.-based companies benefit from these terrific mega-trends, a true renaissance, in world trade.