The signing earlier this week of the largest regional trade accord in history, the Trans-Pacific Partnership has set new terms for trade and business investment across Asia and the Pacific and the US.
It encompasses roughly 40% of global GDP and one-third of world trade. It will give a boost to partners within the trade bloc, but will also inevitably pull trade away from Irish exporters and the European trade bloc.
The agreement will remove most of the remaining import tariffs between the US, Japan, and the other nine countries in the new trade bloc.
Hence, for example, the US will drop its import tariffs on shoes and sugar, while Japan will drop its steep surcharge on agricultural products including rice, beef and dairy.
The latter will inevitably affect Ireland’s agri-food producers, who have been struggling to get a foothold in the lucrative agri-food market, facing the traditional steep surcharge in getting into Japan.
Now, US agri-food producers will sell free of tariffs. This is one example of how this extensive agreement will benefit US exporters and inevitably disadvantage Irish and other European exporters.
Services trade is also a significant part of the Trans-Pacific pact offering many opportunities for service industries.
The sector also accounts for a key part of international trade for Ireland, with many multinational and indigenous exporters targeting the emerging Pacific markets.
The competitive advantage that Irish companies have in the US and in some Pacific countries across a range of services, including finance, engineering, software, education, legal and information technology will now be under treat.
The establishment of many US social media and data corporations in Ireland have been under pressure due to EU investigations into data flow controls.
The Pacific trade pact addresses a number of these issues. One is that countries agree not to block cross-border transfers of data over the internet. Servers need not be located in the country to conduct business in that country.
Again, the playing field is leaning towards those within the Pacific pact or investing within the pact countries to take advantage of the new trade terms.
There are some aspects of the Pacific pact which will be to the benefit of Irish and other European exporters, especially in environmental, labour and intellectual property standards fields.
It would be advisable for policymakers in Ireland and across Europe to look in some detail at the Trans-Pacific agreement, as it is likely to be the template for the EU-US Transatlantic Trade and Investment Partnership, which has floundered in recent months.
The US has been very active in extending its free trade activity across the globe, leaving the EU negotiators very much on the back foot in extending the potential to level the playing field for Irish and European exporters.
Evidence of the difference in approach can be seen in manoeuvring of the US negotiating officials.
They make clear that they see the Pacific pact as part of an effort to counter China’s influence in the Pacific region, but are also hopeful the pact’s “open architecture” will eventually prompt China to join, along with other important economic powers such as South Korea.
EU economies could do with a major new free-trade deal such as the Transatlantic Trade and Investment Partnership, to help get the recovery into top gear.
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