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July 11, 2015

Can The Largest Trade Agreement in 20 Years Deliver Its Economic Promises?

In late June, the US agreed to enter into the Trans-Pacific Partnership Agreement (TPP). The Agreement is the largest trade treaty entered into by the United States in more than two decades. It encompasses a dozen Pacific nations and could equate to billions of dollars for the US economy as well as a boost to the world's economic health.

Enormous Agreement

The Trans-Pacific Partnership Agreement incorporates 12 countries, and has terms very similar to the North American Free Trade Agreement (NAFTA) between Canada, Mexico, and the US. The TPP incorporates Canada, Mexico, and the US, and adds other nations such as Chile, Australia, New Zealand, and Japan.

However, although the TPP has received approval from the US, a number of thorny issues must be resolved before finalizing the agreement. Problems relating to monopolies of pharmaceutical companies and competition with state corporations are among the most problematic issues. If these issues cannot be resolved, the US approval of the agreement will be meaningless.

Analysts and economists expect the Trans-Pacific Partnership Agreement to have a huge impact on not only the US economy, but also the global economy as a whole. If finalized, the Agreement would include over 40 percent of the global economy and be worth over $300 billion per year. The adoption of the Agreement came at a critical time, just as the Chinese economy begins to lag and financial experts feared another downturn in the overall global economy.

Union Opposition

Unfortunately, while American political leaders generally support the Agreement, trade groups do not. "We will vigorously oppose TPP if it continues on its current course," said Richard Trumka, the head of AFL-CIO.

Labor groups have expressed concerns due to an executive fast track authority included in the enacting legislation approving the Agreement. The fast track authority would last for six years and allow the president to negotiate agreements with foreign nations that are members of the TPP. Congress would only be able to vote for or against those agreements with no power to modify them.

In an effort to offset labor dissatisfaction, Congress introduced a measure to aid workers displaced by foreign trade deals. This did little to assuage fears of labor groups, however, concerned that the fast tracking authority could lead to enormous shifts of labor to foreign markets.

Courtesy Economy Watch

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