Devil’s in the Details: Would the TPP trade agreement benefit Utah?

Negotiations have wrapped up for the 12-nation Trans-Pacific Partnership trade agreement, but inquiring Utah minds want to know if the deal will be good for businesses in the Beehive State.

The Trans-Pacific Partnership (TPP) is one of two major trade agreements currently in the works. The second is the Trans-Atlantic Trade and Investment Partnership (TTIP). The TPP is a trade deal between the United States and 11 Pacific nations from Chile to Malaysia to Japan, while the TTIP is a trade and investment agreement being negotiated between the United States and the European Union.

Utah plays in the global economy every day, so trade deals like the TPP are impactful for local businesses. “We are not a small Wasatch Front market anymore,” says Todd Bingham, president of the Utah Manufacturers Association. “Companies buy and sell products all over the globe, so trade deals like TPP are critical to the Utah economy.”

Expanding markets

Bottom line, Bingham thinks the deal could be good for Utah manufacturers. “Not everything we would like to see in the agreement is there, but it is a step in the right direction,” he says. “Manufacturers in Utah require a robust trade and investment program. If the TPP allows them to increase access and competitiveness and help grow production manufacturing here, that would be great. We are a $23 billion industry. Any time you can grow that industry through other markets it is just good business for Utah.”

World Trade Center Utah President and CEO Derek Miller agrees. “There will always be workforce adjustments with trade agreements,” he says. “But if you believe in a free market, you have to adjust to those changes.”

Utah is heavy in certain manufacturing areas and, broadly speaking, a variety of companies could benefit from TPP. All of the 11 countries included in the TPP are important trading partners with the Beehive State.

“These 11 countries account for about 70 percent of everything Utah exports to Asia,” Miller says. “TPP does not include China, so to have those countries make up 70 percent says a lot about the opportunities for Utah with TPP.”

In dollar terms, about $4 billion in Utah exports go to TPP countries, according to World Trade Center Utah data. The TPP countries are also some of the most important emerging markets in the world right now, making them not only important today, but very important for the future. Data from the U.S. Commerce Department shows that 2,007 Utah companies exported goods to TPP countries in 2013. Of the Utah exporters, 85 percent were small and medium-sized companies.

All four of Utah’s top value-added exports are covered by TPP, according to Miller. First is information technology, where the TPP deal would remove tariffs from 99 percent of IT products. Thus, a Utah company exporting IT goods and services could do so under TPP 99 percent of the time without a tariff or duty being included. Second is chemical products. More than 97 percent of chemical products exported by Utah companies to TPP countries would be duty-free.

Third is food and agriculture. Miller says much has been negotiated in TPP to open up the trading countries to U.S. agricultural products, especially products involving dairy, pork, poultry, beef, fruit and wheat. All of those products would see tariff reductions. Fourth is transportation equipment, and Miller says more than 98 percent of Utah automotive products could be exported duty-free into TPP countries.

Sticking points

Bingham and Miller are among the local leaders who hope the U.S. Senate will have the resolve to work through differences to produce a deal that will benefit U.S. companies. As with all agreements, the devil is in the details and Susan Johnson, president and CEO of Futura Industries in Clearfield, is worried about those details.

“I think in theory it is a good idea,” she says. “I believe that small and medium-sized manufacturers in the U.S. need it, but the final product has many holes in it.”

Among her concerns, Johnson says some countries with poor labor conditions won’t be compelled to comply with the rules of the TPP, which could negatively affect domestic manufacturing.

“U.S. workers and companies need a system that ensures unfair trade practices are dealt with forcefully, and that doesn’t appear to be covered in the TPP,” she says.

Moreover, Johnson says the TPP allows other nations beyond the original 11 to sign onto the deal, potentially amplifying some of the negative aspects if they aren’t ironed out. Other possible entrants include Indonesia, Thailand, the Philippines, China and South Korea.

On the other hand, Miller says the TPP does a lot to eliminate tariffs and duties, plus it adds other general benefits such as better supply chains, increased efficiencies and more opportunities for Utah companies to find new trading partners in the TPP countries.

One of the most controversial sticking points in TPP is the number of years it gives to pharmaceutical companies to protect their intellectual property. The current period in the United States is 12 years, while in some of the TPP countries it is zero years, explains Miller. The negotiated time period in TPP is eight years. That could be a deal breaker for Utah Sen. Orrin Hatch, who may torpedo the trade agreement for its lack of strong IP protections related to a new class of drugs called biologics.

“As with any change, there are reasons for people to love it and hate it,” says Miller. “We just hope, ultimately, our lawmakers will believe it is a benefit to our country and a benefit to our state.”

Political intrigue aside, the trade deal has the potential to enhance the competitiveness of Utah companies in all of the state’s top export areas. “Our competitiveness is why an inland state, without a seaport, in the middle of the Rocky Mountains, is as successful as we are,” Miller says. “So to be even more competitive with TPP, with a level playing field, will be even more beneficial for Utah companies.”

Johnson would like to see more time dedicated to meaningful involvement from the very groups the TPP claims to represent before the deal is voted on. She says the time to get the holes in the agreement addressed is now.