The next case for TPP

   If policy is the science of crafting beneficial legislation, and politics is the art of winning elections no matter what, then it’s not difficult to see why the two can easily diverge when it comes to the Trans-Pacific Partnership.
   In one sense, the case for TPP, the historic trade agreement between 12 Pacific Rim nations, no longer needs to be made. Negotiations between counterparties have been agreed to and are over. But in another sense, it does, at least to one important stakeholder here in the United States: Congress. 
   TPP’s counterparties reached an agreement in early October after seven years of work. The U.S. lawmaking body, however, has yet to pass legislation that recognizes it. 
   This—the time between when a presidential administration in the United States finalizes a trade agreement with other countries and when the legislature turns that agreement into new policy—can become a suspended state of uncertainty if it coincides with political volatility. This happens to be the current state of play with candidates, as well as office-holders.
   Opposition to TPP is the only real issue that the Democratic and Republican presidential nominees who sit atop the polls agree on. Because it sharply divides both parties, legislation that recognizes it will almost certainly require bipartisan support, which has been elusive from day one of the Obama administration. There are enough anti-trade Democrats and anti-Obama Republicans to make its passage uncertain enough to contemplate.
   Furthermore, legislation designed to simplify the process of making policy out of trade agreements negotiated in good faith does give opposition a great deal of time to try to chip away at support for them. 
   Case in point: Congress renewed the trade promotion authority this summer, which had the practical effect of preventing lawmakers from amending or filibustering TPP legislation. Under this TPA renewal, however, it could take until next August to pass it, assuming the votes in favor of it are there. 
   Which is all to say that the political climate of today is detracting from the real economic benefits of free trade in general, and the projected economic benefits of TPP in particular. What should be an easy sell simply isn’t. 
   An analysis by the Peterson Institute projects that TPP would generate a global income benefit of $223 billion per year and $305 billion in additional global exports per year. The United States’ share of this economic production is estimated at $77 billion in income and $123.5 billion in exports. 
   Of great importance to trade practitioners, the agreement supports harmonizing a single rule of origin and accumulation rule, which would reduce the complexity of the existing bilateral trade agreements that some of TPP’s 12 counterparties already have among themselves.
   This particular provision is a sound example of how the endgame of TPP isn’t to create jobs or reduce tariffs—two issues at the forefront of electoral politics all of the time. It’s to enable general economic growth that will lead to job growth, and other positive outcomes, decades down the road by weakening or eliminating non-tariff barriers. A recent survey from Thomson Reuters and KPMG found that just 30 percent of respondents think their organization fully utilizes all of the free trade agreements available to them. Respondents widely attributed this failure to the process of identifying FTA-specific rules of origin because it’s a time-consuming process that trade specialists often perform manually. 
   In other words: Differing rules of origin need tighter integration for FTAs to work as designed. TPP does this.
   TPP’s opponents on both sides of the political spectrum tend to ignore the fact that TPP is also a tool to proliferate America’s values globally through the environmental and labor norms included in the agreement. Should its detractors stymie TPP, Congress would enable other countries to define the terms of international commerce in the Asia-Pacific area and weaken America’s perceived leadership role in the world economy. 
   The fact is that TPP would trigger substantial reconfiguration of supply chains. Manufacturers would shift to intra-TPP suppliers or seek to place their manufacturing operations within the TPP zone. Irrespective of the uncertainties TPP faces in Congress, companies need to build these scenarios given the likely magnitude and length of time taken to make these changes.
   While the full text of TPP hasn’t yet been released, it’s safe to say that this kind of nuance won’t trickle down to the electorate. Multinationals, however, must prepare to seize the opportunity. 
   Ruda heads Thomson Reuters’ global trade management business, ONESOURCE Global Trade. He can be reached by email at taneli.ruda@thomsonreuters.com.

   This column was published in the December 2015 issue of American Shipper.