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TPP To Slash Taxes For US Exporters

by Mike Godfrey, Tax-News.com, Washington

20 May 2016


On May 18, the US International Trade Commission (USITC) released its report assessing the likely impact in the United States of the provisions, including tariff cuts, in the Trans-Pacific Partnership (TPP) trade treaty.

The USITC's report provides an assessment of the likely impact of the TPP on the US economy as a whole, on specific industry sectors, and on the interests of US consumers, as requested by the US Trade Representative and required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015.

It is pointed out that TPP would affect the trade and investment relationship between the United States and the Asia-Pacific region in many sectors. TPP is a comprehensive trade and investment agreement that would remove most tariffs, some tariff-rate quotas, and many non-tariff barriers to goods and services trade and investment between its member countries.

TPP also includes a wide range of regulatory provisions that would define rules for trade between the parties. These involve investment, intellectual property, government procurement, rules of origin for trade in certain goods, customs facilitation, sanitary and phytosanitary measures, technical barriers to trade, competition policy, and labor and environmental standards.

The United States already has free trade agreements (FTAs) with Australia, Canada, Chile, Mexico, Peru, and Singapore, and the overall US impact of TPP is therefore seen by USITC to be stronger with respect to the other TPP countries with which the United States does not already have an FTA in force: Brunei, Japan, Malaysia, New Zealand, and Vietnam.

Virtually all tariffs affecting US exports or imports would be eliminated by the time TPP is fully implemented at year 30; most would be eliminated as soon as the agreement enters into force. By year 15 of the agreement, TPP would eliminate more than 99 percent of the US tariffs now imposed on imports from the five new FTA partners. Also by year 15, TPP would eliminate, on average, more than 98 percent of the tariffs facing US exports to these countries.

Under the model used by USITC, it is estimated that TPP would have positive effects, albeit small as a percentage of the overall size of the US economy. By year 15 (2032), relative to baseline projections. US real GDP would be USD42.7bn (0.15 percent) higher, and employment would be 0.07 percent higher (128,000 full-time jobs).

US exports and US imports would be USD27.2bn (one percent) and USD48.9bn (1.1 percent) higher, respectively, relative to baseline projections. US exports to new FTA partners would grow by USD34.6bn (18.7 percent); and US imports from those countries would grow by USD23.4bn (10.4 percent).

Among broad sectors of the US economy, agriculture and food would see the greatest percentage gain relative to the baseline projections. The services sector would also benefit, but output in manufacturing, natural resources, and energy would be marginally lower with TPP than it would be compared with baseline estimates without the agreement.

TAGS: environment | tax | investment | Brunei | Chile | law | tariffs | trade treaty | Australia | Mexico | Singapore | food | agreements | manufacturing | Canada | Malaysia | New Zealand | Peru | United States | import duty | standards | trade | Japan | Vietnam | services | Asia-Pacific

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