The Trans-Pacific Partnership (TPP) began as the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4) between just four nations – Brunei, Chile, New Zealand and Singapore – in 2006. The deal removed tariffs on most goods traded between the countries.
A decade later in 2016, the TPP has been signed by 12 countries – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam – and covers 40% of the world’s economy. The agreement will be slightly smaller than the other large regional trade agreement being negotiated, the Transatlantic Trade and Investment Partnership (TTIP), between the United States and the European Union.
The TPP will create a free-trade zone among 12 nations around the Pacific Ocean, making it the world’s largest trade agreement and a bright light for those of us investing in the shipping industry. The deal, which would potentially create a new single market like that of the European Union, is intended to deepen economic ties between the members, reduce/remove tariffs, and foster trade to boost economic growth. The TPP is similar to NAFTA in that it involves pledges to reduce or eliminate tariffs on a wide range of goods and services. It also sets out rules for resolving trade disputes.
Critics have also suggested that the TPP is a not-so-secret plan to keep China at bay. China was not invited to join the TPP negotiations and the deal is widely viewed as a challenge to the growing economic influence of China and India in the Asia Pacific region. You see, the TPP agreement is also a trade alliance that gives the United States an excuse to intervene in trade disputes in the oil-rich South China Sea, where China has been beefing up its military.
To take effect, the TPP must be ratified by February 2018 by at least six countries that account for 85% of the group’s economic output. Accomplishing this means that both Japan and the United States will need to be on board. This presents a challenge, given U.S. President Trump’s open adversity to the deal.
On November 11, 2016, it was reported that, due to Donald Trump’s election to President, the White House would not pursue passing the agreement. In fact, President Trump announced in a video message that the United States would quit the TPP on his first day in office. According to Japan’s Prime Minister Shinzo Abe, a TPP without the United States – and its market of 250 million consumers – would be “meaningless”.