EXPLAINER: What's the Deal with the TPP?

UPDATED July 29, 2016

If you watched any part of the Democratic National Convention this week, you probably noticed a small but visible group of attendees protesting something called the “TPP.” Some held signs and banners. Some even heckled during various speeches, including President Obama’s address Wednesday night.

The focus of discontent is a massive trade deal called the Trans-Pacific Partnership, a plan spearheaded by the Obama Administration that would set new trade rules between the United States and other eleven Pacific Rim nations. It has yet to be approved by Congress, and both major party nominees say they oppose the deal. The issue nevertheless has become a flashpoint in this year’s presidential campaign, particularly among some ardent supporters of former candidate Bernie Sanders, who remain suspicious of Hillary Clinton’s intentions.

So why all the drama?

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To help make some sense of it, we’ve put together a quick guide to the TPP. If you have questions that aren’t answered here, feel free to leave us a comment – we’ll do our best to get back to you.

What is the TPP?

The TPP is a trade agreement between the United States and 11 other Pacific-Rim nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The deal would reduce trade costs between these 12 countries, which are collectively responsible for about 40 percent of global GDP and roughly a third of global trade.

Congressional Research Bureau
Congressional Research Service

After five years of negotiations, the agreement was  agreed to and signed in February by representatives of all 12 member nations. But the deal can't go into effect until at least six of them individually ratify it -- and the U.S. and Japan must be included (because of the size of their economies).  In other words, if either Japanese or U.S. lawmakers fail to approve it, the TPP is dead in the water.

In Japan, lawmakers are divided about the merits of the deal, and unlikely to vote on it before 2017. And in the United States, Congress probably won't take it up until after the election. President Obama has said he's confident about the deal's chances, but a decent number of Democratic lawmakers continue to oppose it -- so ratification is far from assured.

Most notably absent from the deal is China, Asia’s largest economy, which already has free trade agreements with many of the TPP countries. It could, though, potentially sign on in the future.

What’s covered in the TPP?

The deal is literally thousands of pages long, and leisure reading it ain’t. So unless you’re game to scrutinize the whole thing, here are some key details:

Tariffs - The TPP would reduce or eliminate tariffs (taxes on imports and exports) among signatory countries, making it easier and cheaper for those countries to trade with each other.

Environmental and labor standards - The TPP also addresses a host of issues that are less obviously trade-related, from illegal fishing to climate change to labor rights. For instance, it includes efforts to reduce forced labor, illegally traded plants and animals, and overfishing.

Intellectual property rights. The United States has pushed for stricter international enforcement of intellectual property rights, like patents and trademarks. Right now, U.S. law provides for longer copyright terms (life + 70 years) than most of the other TPP countries. The TPP would require those other countries to lengthen their copyright terms to match the U.S. standard.

Investor-state dispute settlement. These measures would, under certain circumstances, allow a private company to take legal action against the government of another member state. Let’s say, for example, that the Canadian government bans a certain pesticide because of environmental concerns. A U.S, chemical company that manufactures that pesticide could potentially sue the Canadian government to recover financial losses.

Read a more detailed rundown of provisions here, or the full text here.

Who supports the deal?

The Obama Administration has pushed hard for the deal, arguing that it will strengthen the U.S. economy and help increase American exports to fast-growing Asian economies. If it takes effect, the TPP would be a powerful demonstration of the administration’s “pivot to Asia,” and a major foreign policy legacy for the president. Interestingly, many Republican leaders in Congress who don’t usually agree with the president on much of anything also support the TPP. There’s actually more support in Congress from Republicans than from Democrats on this issue.

A lot of business leaders are also pushing for the deal, including many of America’s largest corporations: Exxon Mobil, General Electric, Walmart, Boeing, Coca Cola, Disney, Pfizer, Microsoft, Facebook, and many others. Entertainment and drug companies – like Disney and Pfizer – like the deal’s stringent intellectual property protections, while retailers and manufacturers – like Walmart and Boeing – want to be able to more easily sell their products in Asian markets. The deal could yield $78 billion in annual income gains for the U.S. – and global income gains of $295 billion annually, according to an analysis by the Peterson Institute for International Economics.

The more controversial question, however, is how the deal would impact U.S. jobs.

A majority of Americans have a generally positive view of free trade, according to several recent surveys. But the same polls also show real concern about the impact free trade can have on U.S. jobs. Along those lines, anti-trade rhetoric on the campaign trail often resonates strongly with those struggling to get by.

Who opposes it?

This is one of the few issues that Donald Trump supporters and liberal Democrats actually seem to agree on.

Donald Trump and Hillary Clinton both oppose the deal, but with very different levels of fervor. Trump has called it "terrible deal" that would be a "death blow for American manufacturing." For Clinton, the issue is more nuanced. After initially wavering, she announced last fall that the final version of the agreement did not meet her standards. However, as Secretary of State in the Obama Administration, she supported the initial workings of the deal. And that’s a big reason why some Bernie Sanders supporters don’t trust her on the issue.

A number of left-leaning Democratic leaders -- notably Sanders and Elizabeth Warren -- strongly oppose the TPP on economic grounds. One of the main points of contention is that the deal was negotiated secretly; few knew what was on the table until after it had been signed.

Labor and environmental groups are also generally skeptical.

The AFL-CIO argues that the TPP focuses more on increasing corporate profits than on protecting American jobs and wages, and a report from the left-leaning Center for Economic and Policy Research makes the case that the TPP could actually increase income inequality. Unions are worried that the deal will make it easier for U.S. companies to move jobs out of the country to places where labor and production costs are much lower.

Meanwhile, the Sierra Club and a number of other green groups say that the deal’s environmental regulations are too weak. And other activists have voiced concern that the deal’s stronger intellectual property laws could limit access to generic drugs in developing countries and restrict internet freedom.


How similar is the TPP to NAFTA?

The North American Free Trade Agreement is a trade deal between the U.S., Mexico and Canada that took effect in 1994, under President Bill Clinton. The agreement got rid of most tariffs on goods traded between the three countries. It’s similar to the TPP, but much smaller in scope.

Like the TPP, NAFTA was highly contested when it passed, and Americans have continued to disagree about its costs and benefits. Those who believe NAFTA has been good for the United States, argue that the TPP will expand those benefits; those who think NAFTA’s impact has been detrimental, argue it'll just make things that much worse.

For his part, President Obama has tried to make the case that the TPP is different and better than NAFTA.

It’s hard to tease out the exact impact that NAFTA's had on the U.S. economy.   After it took effect, trade among the three countries did increase, and some U.S. manufacturing moved to Mexico.

The nonpartisan Congressional Research Service comes to a muted conclusion: in the end, NAFTA “did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters.”

WTO protestors in Seattle, 1999.
WTO protestors in Seattle, 1999. (Photo by Al Crespo, courtesy University of Washington)

In the years since NAFTA was passed, trade deals have continued to stir up strong emotions. In 1999, some 40,000 protestors set up camp around the World Trade Organization meeting in Seattle. The activists there included many of the groups that opposed NAFTA and that now oppose the TPP – unions, environmental groups, and consumer protection organizations. The event became known as the “Battle in Seattle,” after a series of serious clashes between protestors and police.

And finally ... why should I care about any of this?

Let’s be honest: there’s nothing too sexy about international trade deals.

But like it or not, we live in a globalized world. And if you buy stuff on a regular basis, you're probably more affected by international trade agreements than you might realize.

The majority of products we purchase -- from cars to clothing, computers to smartphones, even lots of foods -- are manufactured (or grown) through a vast global production process.

Trade deals can make it easier or harder for companies to produce things -- impacting jobs, pay, working conditions, and the price tag of products once they hit the store … like that shiny new iPhone you’ve been eyeing.

And unlike those painfully dull 19th century trade deals you likely snoozed through in history class, modern-day trade agreements address all kinds of controversial political issues that hardly seem connected to trade at all, like climate change, collective bargaining rights, music piracy -- even rules about how your online data is stored.

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So stay tuned.

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