PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The TPP Agreement: Lower Trade Barriers, Strong IP Protections and Market Assistance Benefits Small Business

By at 15 November, 2015, 9:47 am

tpp-made-in-america-logo

by Raymond J. Keating-

The text of the Trans-Pacific Partnership (TPP) trade agreement between the U.S. and 11 other Pacific nations – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam – is now being reviewed and assessed.

Elimination of Tariffs

The big plus under the agreement is the elimination more than 18,000 tariffs on U.S. exports, including in manufacturing, agriculture, automotive, and information and computer technology sectors. As noted by the Office of the U.S. Trade Representative, the Asia-Pacific market is a massive market for U.S. entrepreneurs, businesses and workers:

“As a group, the TPP countries are the largest goods and services export market of the United States. U.S. goods exports to TPP countries totaled $698 billion in 2013, representing 44 percent of total U.S. goods exports.  U.S. exports of agricultural products to TPP countries totaled $63 billion in 2013, 42 percent of total U.S. agricultural exports. U.S. private services exports totaled $172 billion in 2012 (latest data available), 27 percent of total U.S. private services exports to the world. America’s small- and medium-sized enterprises alone exported $247 billion to the Asia-Pacific in 2011 (latest data available).”

It also is important to understand, as SBE Council has pointed out before, that, as with other free trade agreements, the U.S. already has low trade barriers, and the primary benefits come from other nations reducing their trade barriers to U.S. products.

Eliminating or reducing governmental barriers that inhibit the ability of businesses and individuals to trade across borders is what trade agreements should be about primarily.

Intellectual Property

The TPP is meant to strengthen intellectual property (IP) protections. As noted by Forbes columnist Nish Acharya, “Intellectual property is the area where TPP has received the most scrutiny. It requires every member nation to crack down on counterfeit products – a boon to IP-dependent companies in technology, life sciences, manufacturing and energy.  In addition, patents will, theoretically, proceed in multiple jurisdictions simultaneously – thus reducing the cost, time and uncertainty around patenting and IP recognition.  These steps will greatly benefit startups based in the United States who are worried about IP protection and the costs of the patent process.”

Also regarding IP, writing in The Wall Street Journal, Christian Whiton added, “this agreement focuses more than any before on services and intellectual property—of particular importance to America and other increasingly knowledge-based economies.”

It is noted in the executive summary of the TPP’s chapter on intellectual property:

“The chapter combines strong and balanced protections with effective enforcement of those protections, consistent with existing U.S. law. This will promote high standards of protection, safeguard U.S. exports and consumers against IP infringement, and provide fair access to legal systems in the region to enforce those rights. Drawing from and building on other bilateral and regional trade agreements, it includes commitments to combat counterfeiting, piracy and other infringement, including trade secret theft; obligations to facilitate legitimate digital trade, including in creative content; and provisions to promote development of, and access to, innovative and generic medicines.”

However, there are some concerns. Whiton also noted, “the administration made unexpected last-minute concessions on the deal, including a five-year limit on patents for biologic pharmaceuticals. This means the cost of global-health advancements will fall heavily on the wallets of sick Americans, who would have to pay a drug-price premium far longer than foreigners.”

In a statement on the issue, PhRMA pointed out: “PhRMA believes that strong intellectual property protection is necessary for the discovery and development of new treatments and therapies for the world’s patients. We are disappointed that the Ministers failed to secure 12 years of data protection for biologic medicines, which represent the next wave of innovation in our industry.  This term was not a random number, but the result of a long debate in Congress, which determined that this period of time captured the appropriate balance that stimulated research but gave access to biosimilars in a timely manner.”

It is important to keep in mind that this agreement, as with all other political efforts, inevitably falls short of perfection. And as the saying goes, it’s unwise to let the perfect become the enemy of the good. At the same time, any opportunities to remedy problematic matters should be taken advantage of before the TPP goes up for a vote.

Trade Agreements: Positive for the U.S. Economy

Finally, it must be noted that free trade agreements are positives for the U.S. economy and for U.S. workers. That seems to be getting lost in some of the political rhetoric swirling around the presidential race. NAFTA, for example, has once again come under attack in the world of politics. But NAFTA has been a big plus for Americans, as noted in this SBE Council report and this analysis.

A recent report on the benefits of free trade from the Heritage Foundation also noted the following regarding the issue of trade and jobs: “No credible economic study has ever documented net U.S. job losses resulting from imports. Trade—like technology—destroys some jobs but creates others. According to Heritage Foundation research, over half a million American jobs—in fields such as transportation, wholesale, retail, construction, and finance—are supported by imports of clothes and toys from China alone. The dollars that Americans save by importing products are spent and invested elsewhere in the U.S. economy, creating new jobs; the dollars that foreign businesses earn from selling their goods to Americans are spent on U.S. exports or invested in the U.S. economy, also creating new American jobs.”

Small Business Focus

As noted by SBE Council president & CEO Karen Kerrigan in a media release about the TPP, the agreement includes an entire chapter devoted to small and mid-size businesses. As she noted in her statement: “I am pleased to see that TPP countries will be required to provide web-based tools, information and technical assistance to lessen the unknowns and ease the steps it takes for small businesses to access their markets.”

The TPP agreement is the first deal to include a section focused on small businesses, which is Chapter 24. Kerrigan also noted that other chapters such as those addressing regulatory cohesion, customs administration and trade facilitation, intellectual property, technical barriers to trade, investment, and of course the big segment on tariffs all matter to entrepreneurs and small businesses.

Lowering barriers to trade, strengthening IP protections internationally and reducing complexity and burden would be clear positives for U.S. entrepreneurs, businesses and workers.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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