Wednesday, February 20, 2013
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, Canada, Chile, Malaysia, Mexico, 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. Canada and Mexico are the most recent countries to join the negotiations and Japan has participated in consultations with the partner countries about the possibility of joining.
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. With the addition of Canada and Mexico, TPP negotiating partners made up 31% of U.S. goods and services trade in 2011, and the Asia-Pacific economies as a whole made up over 56%. The TPP would be the largest U.S. FTA to date by trade value.
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 $5.7 trillion, 37% of the U.S. level, and a population of 346 million, slightly larger than the U.S. population. Japan’s entry would increase the economic significance of the agreement on both of these metrics.
Unlike most previous U.S. FTA negotiations, the TPP involves countries with which the United States already has an FTA. The U.S. has FTAs in place with Australia, Canada, Chile, Mexico, Peru, and Singapore, which together account for nearly 85% of U.S. goods trade with TPP countries. Malaysia and Vietnam are the largest U.S. trade partners among TPP members without an existing U.S. FTA.
Other TPP partners also have extensive existing FTA networks. The Association of Southeast Asian Nations (ASEAN), of which Brunei, Malaysia, Singapore, and Vietnam are members, and its collective FTAs with other countries, accounts for the bulk of this 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: January 29, 2013
Number of Pages: 41
Order Number: R42344
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