After seven years and two presidential administrations, negotiators finished the Trans-Pacific Partnership (TPP) agreement in October 2015. All told, the 12 TPP countries (Japan, Canada, Mexico, Australia, New Zealand, Chile, Singapore, Vietnam, Peru, Brunei, Malaysia and the U.S.) account for 40% of the world’s gross domestic product. There’s a chance Indonesia, China and South Korea will join the partnership, which will be done under the established terms.
Between 2008 and 2012, the TPP partner countries imported an average $160 billion in ag products. However, half was by countries with which the U.S. has existing free-trade agreements (FTAs), such as Canada and Mexico through the North American Free Trade Agreement and with Australia, Chile, Singapore and Peru through bilateral FTAs.
Based on an analysis by USDA’s Economic Research Service prior to the full text release of the agreement, the value of U.S. ag exports is projected to be $2.8 billion higher by 2025, assuming all remaining tariffs and tariff-rate quotas on ag products between TPP members are eliminated. While the actual deal fell short of completely eliminating such barriers, it does include considerable gains in market access for key U.S. ag exports.
Most U.S. farm groups greeted the completion of TPP with enthusiasm, although they all withheld expressing their support until they had a chance to see the detailed language. Since then, most U.S. farm and commodity groups have individually or collectively (such as through the U.S. Grains Council) expressed support for the agreement. The groups representing dairy and rice producers have yet to take a public position on TPP. The American Sugar Alliance noted in a statement that U.S. negotiators had delivered on their pledge to not undermine U.S. sugar policy, but did not take a formal position on congressional approval of TPP. Only the National Farmers Union has come out in public opposition thus far, expressing concern about currency manipulation and some of the snapback provisions.
Examples of improved market access under the TPP include:
- U.S. beef will face zero tariffs in Vietnam within the next eight years, down from 34%, and lower tariffs in Japan, a major market. Japan will retain a snapback provision, but it’s less severe than the previous version.
- Tariffs on soybeans and soybean products will be reduced to zero by all TPP trading partners within 11 years or sooner. U.S. soybean producers will also benefit from improved U.S. meat and livestock product access, increasing demand for U.S. livestock feed.
- Tariffs on citrus fruits and juices will be eliminated within eight years.
- Wheat tariff-rate quotas in Japan will be expanded, and Japanese tariffs on processed wheat products will be eliminated within six years. Tariffs on wheat in all other TPP countries will end within four years.
On Nov. 20, 2015, an open letter signed by seven former U.S. Secretaries of Agriculture was released to the public, commending both the economic gains from increased access for U.S. ag exports and the non-economic benefits of solidifying U.S. relationships in the Pacific Rim region of the world. The letter asserted: “For American agriculture there is no downside to TPP, and there’s substantial upside.”
Congress must vote on the TPP under fast-track rules for it to go into effect for the U.S. The debate will likely be heated, considering how close the Trade Promotion Authority votes were in the spring and the
opposition expressed by several presidential candidates. When the debate does unfold, farm and commodity groups will make sure their members of Congress know of their support.