Since I last wrote on the topic of Free Trade Agreements last year, much has changed. Chiefly – substantive free trade initiatives by the White House to two major regions of economic power, one across the Atlantic joining the US and the EU, the two largest economic forces on Earth, and the other across the Pacific, joining the US to 11 Asian nations of the Pacific Rim.
By themselves, these two initiatives will be, if and when approved by all involved governing bodies, global trade game changers.
US-EU Free Trade Agreement: One recent Wall Street Journal article estimated impact of the US-EU trade agreement could add a full % point to our nation’s GDP. A single % doesn’t sound like a lot, but it’s massive…the equivalent of moving the current GDP growth rate from about 2% to 3%, or by roughly $160 billion. Equally massive would be the impact on American jobs and export opportunities. These two economic giants account for about 50% of world GDP. Last year the EU and the US traded some $646 billion in goods alone, not to mention agricultural trade or services.
For Indiana’s agricultural community the possibilities abound with the potential for tariff and non-tariff regulations being significantly reduced, as the EU spends nearly $52 Billion on farm subsidies to the US’ $11 billion, nearly 5 times the amount. An FTA would level the subsidy playing field, and make Hoosier farmers very much more price-competitive.
This of course will be a lengthy battle, but one we all should be aware of as negotiations commence, and we have the opportunity to let those that represent us in Washington know of our respective trade positions and interests.
Trans Pacific Partnership Agreement.
The other massive trade agreement, spanning the Pacific, recently has gained a major participant – Japan. As of an hour ago of writing this blog post, Japan began drafting proposals for lowering or eliminating tariffs for the next Brunei round (the group’s 19th) of the TPP which begins in a couple of weeks – August 22.
The intent of the TTP countries is to use the Brunei round to finalize the framework of an agreement by year’s end. This of course would be the first salvo – requiring all participant governments to ratify said agreement – an effort equally difficult to the negotiations themselves. For example, the US stance on fishing subsidies is that there should be none, while Japan’s fishing lobby maintains its fierce support. Hopefully the end-result will NOT be the US agreeing to offer its fishing industry subsidies to match those offered in some of the other Pacific Rim nations, as that would run counter to the overall intent of FTA’s – increasing the standard of living for all involved consumers by lowering duties, tariffs, subsidies of the impacted nations.
As with the US-EU trade initiative, please stay tuned to this blog for further developments with the TPP Agreement.
Andy Reinke is the President of Foreign Targets, Inc. (FTI) an export management company creating and managing proactive export programs for small and medium sized manufacturing firms. This is achieved by utilizing a proven methodology: FTI’s Core-8 Steps to Export Management. Read more about export in the ISBDC’s Exporting Your Products and Services FAQ Page.