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What a Failed TPP Would Mean for the U.S. Economy

January 6, 2016, 9:22 PM UTC
President Barack Obama Meets With National Security Leaders To Discuss The Trans-Pacific Partnership
U.S. President Barack Obama, right, speaks while meeting with current and former diplomatic and national security officials including James Baker, former U.S. Secretary of State, to discuss the Trans-Pacific Partnership (TPP) in the Roosevelt Room of the White House in Washington, D.C., U.S., on Friday, Nov. 13, 2015. Obama, hoping to kick off a new phase of selling the TPP at home while enhancing its prospects overseas, has enlisted some of the nations top national security leaders to give testimonials. Photographer: Andrew Harrer/Bloomberg via Getty Images
Photograph by Andrew Harrer — Bloomberg via Getty Images

The most important foreign economic policy decision of 2016 in the U.S. will be made after President Obama signs and submits the Trans-Pacific Partnership (TPP) Agreement to Congress for approval this spring. Congress will then have no more than 60 legislative days in both the House and Senate to vote it up or down with no amendment. There are a lot of upsides to approval, and enormous costs to its rejection.

The TPP is the first 21st-century trade agreement in more than name, as it blazes new paths to creating opportunities for American commerce. It’s the first trade agreement to be designed for the new digital economy, and if implemented, small and medium-sized American businesses will have assured access to nearly half of the world’s economies for the first time. Even a one-person business that comes up with a new smartphone app—or any other product—will be able to serve markets abroad. For trade in goods, not only are taxes on trade cut around the Pacific Rim—in most cases sinking to zero (the negotiators point to 18,000 examples of this on all manufactured products and nearly all U.S. agricultural exports)—but conflicting regulations that needlessly impede trade will be also be reduced. Services in a wide variety of sectors will be able to cross borders more freely, and competition from state-owned enterprises will be made fairer.

This is an agreement designed for our times and for our talents. There are no sufficient alternatives.


The lack of a global consensus on trade was regrettably demonstrated by the failure of 162 World Trade Organization members to even agree on whether their 15-year-old negotiating agenda was still alive last month. Currently, trade agreements can only be entered into by coalitions of the willing, and the bulk of these agreements are regional.

If Congress cannot work out remaining issues with the Administration and vote to implement the TPP, then:

  • Other countries will continue to negotiate preferential trade agreements that discriminate against American commerce.
  • The future for international trade would be of a world more divided, with lower standards than the U.S. wants and that the American economy needs.
  • The terms of agreements in Asia would be dictated by China’s perceived needs, falling far short of the TPP.
  • The U.S. would not be in a position to replace this agreement with either individual bilateral agreements nor broader agreements in the WTO. What countries would chance reaching an agreement with the U.S. were the TPP not approved?


In short, the damage to the American economy of the TPP failing to come into effect due to U.S. rejection or inaction would be enormous—and it’s calculable.

With the TPP agreed and approved, a path forward will emerge. The TPP has an open architecture—other countries can negotiate accession. There is strong interest in Korea, Indonesia, the Philippines, Thailand, Taiwan, and Colombia to join. The TPP—along with the other trans-oceanic agreement under current negotiation, the Transatlantic Trade and Investment Partnership (TTIP)—may be looked back upon as the modern equivalent for trade of the 1944 Bretton Woods Agreement, which gave rise to a rules-based global financial system that has provided a foundation first for economic recovery and subsequent global economic growth.

The bottom line: The TPP requires a majority vote in both houses of Congress, and the fact that it’s an election year doesn’t make the process any easier. The year of 2016 will see a major test for continued American world leadership.

Alan Wm. Wolff is Chairman of the National Foreign Trade Council and is a Senior Counsel with the global law firm Dentons. He is a former U.S. Deputy Trade Negotiator.