Monday, June 11, 2012
Brock R. Williams
Analyst in International Trade and Finance
The Trans-Pacific Partnership (TPP) is a proposed regional free trade agreement (FTA) currently under negotiation between Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States, and Vietnam. The negotiating partners have expressed an interest in allowing this proposed “living agreement” to cover new trade topics and to include new members that are willing to adopt the proposed agreement’s high standards. To that end, Canada, Japan, and Mexico have begun consultations with the partner countries about the possibility of joining the negotiations.
The TPP negotiations are of significant interest to Congress. Congressional involvement includes consultations with U.S. negotiators on and oversight of the details of the negotiations, and eventual consideration of legislation to implement the final trade agreement. In assessing the TPP negotiations, Members may be interested in understanding the potential economic impact and significance of TPP and the economic characteristics of the other TPP countries as they evaluate the potential impact of the proposed TPP on the U.S. economy and the commercial opportunities for expansion into TPP markets.
This report provides a comparative economic analysis of the TPP countries and their economic relations with the United States. It suggests that the TPP negotiating partners encompass great diversity in population, economic development, and trade and investment patterns with the United States. This economic diversity and inclusion of fast-growing emerging markets presents both opportunities and challenges for the United States in achieving a comprehensive and high standard regional FTA among TPP countries.
The proposed TPP and its potential expansion are important due to the economic significance of the Asia-Pacific region for both the United States and the world. The region is home to 40% of the world’s population, produces over 50% of global GDP, and includes some of the fastestgrowing economies in the world. While current TPP negotiating partners made up about 5% of U.S. trade in 2011, Asia-Pacific economies as a whole made up over 60%.
The United States is the largest TPP market in terms of both GDP and population. In 2011, non- U.S. TPP partners collectively had a GDP of $2.7 trillion, 18% of the U.S. level, and a population of 198 million, 64% of the U.S. level. Entry of Canada, Japan, and/or Mexico would increase the economic significance of the agreement on both these metrics. Among the TPP partners, the majority of overall U.S. trade and investment flows are with Australia and Singapore. In merchandise trade, however, the United States imports more from Malaysia than any other TPP country. Considering the TPP region collectively, 30% of all U.S. imports from and 34% of all U.S. exports to TPP countries are in machinery and electrical machinery, including computers and electronic components. At the bilateral level, top U.S. exports are largely in the same major product categories, but top U.S. imports vary considerably by country.
There are four U.S. bilateral FTAs in place with current TPP partners: Australia, Chile, Peru, and Singapore. All other TPP partners except Peru have agreements in place with five or more of the other TPP partners. The Association of Southeast Asian Nations (ASEAN), of which Brunei, Malaysia, Singapore, and Vietnam are members, accounts for much of this existing interconnectedness. Moreover, ASEAN agreements with larger regional economies (e.g., China, Japan, and Korea) present a second possible avenue for Asia-Pacific economic integration, albeit one that currently excludes the United States.
Date of Report: May 30, 2012
Number of Pages: 38
Order Number: R42344
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