Predicting Winners and Losers in a Post-TPP Economy

7 min

Written comments for the ITC's Economic Impact Investigation are due February 15, 2016

On Thursday, February 4, officials will meet in Auckland, New Zealand for a signing ceremony to kick off the ratification process in each country. The U.S. International Trade Commission (ITC) has already begun its economic analysis and U.S. stakeholders can weigh in until February 15, 2016.

The morning after President Obama asked Congress to approve the Trans-Pacific Partnership (TPP) in his last State of the Union address, the ITC held three days of public hearings from January 11-13 at the U.S. Trade Representative's (USTR) request on the likely economic impact of the 12-party deal.

The witnesses largely supported U.S. adoption of TPP while also noting areas for improvement, notwithstanding the USTR's firm stance that there is no opportunity to renegotiate.

The most significant changes introduced by the Agreement concern TPP member markets not yet covered by a Free Trade Agreement. The so-called "TPP-Five" are comprised of the following countries:

  • Japan;
  • Malaysia;
  • Brunei;
  • New Zealand; and
  • Vietnam.

Because the 18,000 proposed duty reductions and eliminations are product-specific, the benefits vary significantly by industry sector. A diverse stable of U.S. industry spokespersons and experts testified over the course of the ITC hearings as to specific impact on their respective sectors, weighing the persistent balance of new export opportunities against increased foreign competition for domestic producers. Some of the key considerations are provided below.

Apparel and Footwear

The American Apparel and Footwear Association highlighted new opportunities to source goods and materials from Vietnam and, to a lesser extent, Malaysia. Of the $2.4 billion paid in U.S. tariffs on imports from Vietnam in 2014, 94% was on apparel, footwear, and travel goods. As such, the apparel industry expects strong savings over the next decade, should TPP be approved. Likewise, the footwear industry predicts $6 to $7 billion in savings from U.S. import tariffs in the first decade following TPP approval.

Regarding new export opportunities, TPP may afford benefits in Japan. According to a representative from the U.S. Fashion Industry Association, Japan is the second largest retail market in the world. Currently, Japan's tariffs on apparel are protectionist at 16%, but TPP implementation would eliminate these peak duties.

The U.S. domestic industries for textiles, apparel, and footwear employ over 4 million U.S. workers and have over $290 billion in annual U.S. retail sales. It is projected that TPP's U.S. import savings could flow into U.S.-based jobs and industry, since one 2013 study has suggested that 70% of the retail value of U.S. fashion imports is the result of U.S. value-added activities.


Of the U.S. goods exported to the TPP-Five under TTP, the U.S. Commerce Department calculates that over 90% will be duty-free immediately (IDF) upon implementation of TPP, including:

  • 99.9% of transportation equipment;
  • 99.9% of healthcare goods;
  • 99.6% of high-tech instruments;
  • 99.6% of information and communication technologies;
  • 98.2% of automotive;
  • 97.2% of chemicals;
  • 96.8% of machinery; and
  • 92.6% of textiles and apparel.

U.S. manufacturers would have the opportunity for improved customer access in these countries, as the tariff changes reduce the landed cost of getting their goods to market. For goods that currently face prohibitive tariffs, such as textiles and apparel, the tariffs could be reduced by as much as 100%. The National Association of Manufacturers estimated that TPP would eliminate millions of dollars in annual tariffs currently paid on export to the TPP-Five.

Additionally, major U.S. exporters testified that TPP benefits will flow from non-tariff provisions as well. The inclusion of valuable procurement rules and a prohibition on parties from giving non-commercial assistance to State-Owned Enterprises that have "adverse effects" on another party's domestic industry are, however, such examples. The National Foreign Trade Council highlighted problems with data exclusivity for biologics, which now has a minimal term of only five years. Despite these intellectual property concerns, however, General Electric estimated a potential 4.4% annual revenue gain in TPP markets.

Tariffs would also be eliminated on all manufactured goods imported into the United States from the eligible countries. These tariff reductions are subject to a range of phrase-out periods, with certain manufactured goods subject to phase-outs as long as 30 years.


The U.S. services industry continues to grow, and in 2011 38% of all U.S. services exports were to the Asia-Pacific region. Testimony from a senior fellow at Georgetown predicted the biggest gains for:

  • Accounting;
  • Architecture and engineering;
  • Audiovisual services;
  • Electronic payments;
  • Energy services;
  • Express delivery; and
  • Financial services.

Insurance. The World Bank estimates TPP will increase certain parties' GDPs by as much as 10% over the next decade or so, expanding the middle class consumer base. U.S. property and casualty insurers stand to gain, particularly as services trade is liberalized upon implementation. However, the American Insurance Association raised concerns over certain parties' non-conforming measures, such as Malaysia's financial services investment screening program "for the best interests of Malaysia."

Small Businesses. Small business remain watchful and intend to assess the impact on their business, especially in culling potential new business opportunities. For example, one small business, a systems integrator that sells technology primarily to domestic customers, testified that it could increase its international sales upon implementation of TPP's tariff reductions, harmonization of Customs regulations, and intellectual property safeguards.


As over 40% of U.S. food and agriculture exports are to TPP countries, agriculture stands to gain less. Indeed, the National Farmers Union estimates negative or less than 1% growth in GDP by 2030 as a result of TPP.

Like the apparel industry, however, certain agricultural goods stand to gain from tariff changes:

  • Corn tariffs, which are as prohibitively high as 20% in Vietnam, would be phased out under TPP;
  • Other tariffs, like those on soybeans, will be immediately eliminated; and
  • U.S. beef products, which accounted for $1.6 billion in exports to Japan in 2014 despite tariffs as high as 38%, should get a level playing field with Australian beef, currently advantaged by 7–10% lower tariffs.

The Agreement further establishes a working group on agriculture biotechnology trade, which for the first time will address information sharing on domestic standards for low-level presence (LLP) of biotech-derived plant material in food or feed. The working group aims to minimize trade disruptions by harmonizing countries' tolerances for LLP.


Like the agricultural witnesses, labor representatives predicted continued or increased trade deficits will result from TPP. The AFL-CIO representative also criticized USTR's failure to improve labor rules.

Notable TPP opponent Senator Sherrod Brown testified that TPP will likely expand to include other countries, like China or Indonesia, but will likely also be the basis for future Free Trade Agreements.

What's Next?

At the ITC. The Commission anticipates their Investigation Report will be transmitted to Congress and the President by May 18, 2016. Interested parties should submit written comments by February 15, 2016. All written submissions must comply with the ITC's Rules of Practice and Procedure, codified at 19 C.F.R. §201.8. Parties may request confidential treatment for sensitive business information, as submission summaries may be published as appendices to the ITC's report. For assistance in preparing focused comments, contact Venable's International Trade Group.

In Congress. Congress will hold an "up or down" vote on TPP pursuant to Trade Promotion Authority granted last June. To coordinate advocacy before your representatives, contact Venable's Legislative and Government Affairs Group.

At Your Business. If entered into force, certain TPP measures will take effect immediately, while others will be implemented over specified periods, including tariffs to be "phased out." As these changes may impact price quotes to foreign customers as well as supply chain planning for intermediate goods and raw materials, it is critical that all companies evaluate the potential impact to their business, as well as potential opportunities in new markets. Venable's International Trade Group can analyze your import data to identify potential cost savings, and assess which products may qualify for duty preference under TPP's rules.

TPP sets forth complex rules of origin, which determine whether a product qualifies for preferential treatment. These rules include "tariff shifts" applicable to non-originating materials, as well as Regional Value Content rules. We recommend careful analysis of your current supply chain, as well as potential changes, to determine whether your merchandise may qualify for duty preference. To analyze your business operations and TPP eligibility, contact Venable's International Trade Group.