April 17, 2018

Countering China and Creating Jobs: TPP 2.0


  • Eleven nations, led by Australia and Japan, signed a new trade pact on March 8 based on the Trans-Pacific Partnership, creating a $10 trillion free trade zone.
  • This new agreement dramatically reduces tariffs among participating nations and helps counter malicious Chinese trade practices.
  • The United States can still join the new TPP, which would create the world’s largest free trade agreement and add up to $131 billion to the U.S. economy per year once fully implemented.

The new Trans-Pacific Partnership trade agreement, signed by 11 nations but not the United States, will create a $10 trillion free trade zone covering 13.5 percent of the global economy. If the U.S. joins the new TPP, it would create the world’s largest free trade agreement as measured by GDP – more than a third larger than NAFTA. This size will help enable its signatory countries to counter Chinese trade practices without harming their domestic businesses. The amended version of TPP differs in a number of ways from the TPP from which the United States withdrew in January 2017. The original TPP could not be ratified without the United States.

The TPP Economy: A Counterweight to China

TPP Countering China

The New tpp agreement

On March 8, officials from Japan, Australia, New Zealand, Canada, Mexico, Malaysia, Vietnam, Chile, Peru, Singapore, and Brunei signed a new TPP agreement, officially titled the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Those 11 countries included every signatory to the original TPP except the United States.

Two-thirds of the chapters in the new TPP are identical to those in the original TPP. Tariff reduction is still a major advantage, with the same benefits that would have accrued under the original TPP. For example, Japan currently subjects all beef imports to a 38.5 percent tariff. After the new TPP goes into effect, Canadian ranchers will be able to sell beef to Japan with no tariff. Imported American beef, however, will continue to face the 38.5 percent tariff.

Another important component of the new TPP is a chapter on government-owned firms or industries, which is aimed at China. The rules identify and limit the unfair advantages these state-owned enterprises receive, such as anti-competitive government subsidies.

Negotiators from the 11 TPP countries altered or removed 22 provisions from the original TPP. Those provisions mostly pertained to intellectual property protections and dispute resolution mechanisms for mining and oil investments. The U.S. had insisted on those provisions, but after its withdrawal the remaining countries removed them.


The original TPP would have increased U.S. GDP by $131 billion annually by 2030, according to an estimate by the Peterson Institute. Other TPP signatories, most of which are U.S. allies, would also benefit, but the United States would be the largest single beneficiary.

U.S. participation in TPP would make U.S. exports more competitive. This is especially true for exports to Japan, the third largest economy in the world. The United States does not currently have a free trade agreement with Japan, and Japan has resisted entering a bilateral trade agreement while the TPP process is ongoing.


Aside from direct economic benefits, the new TPP will increase political pressure on China to reform and liberalize its economy. China’s massive economy has allowed it to dictate trade terms to its neighbors, which cannot afford individually to defy Chinese demands. By creating an alliance of market economies in the region, TPP weakens China’s ability to make unilateral demands on individual members. The members are less dependent on trade with China because of increased market access elsewhere, and they are committed to a set of liberal trade policies through TPP.

TPP has such economic promise that China has been pushing its own alternative, the Regional Comprehensive Economic Partnership. RCEP includes tariff reduction, but is also intended to promote infrastructure throughout the region. If successful, it would further China’s Belt and Road Initiative, which aims to create a China-centered transportation hub for Eurasian trade.


With the new TPP treaty text already signed by the 11 participating countries on March 8, the treaty moves to ratification by the individual members. The treaty will take effect 60 days after six of the 11 signatories have ratified it.

In addition to the United States, many additional countries have expressed some interest in joining TPP. In January, it was reported that the United Kingdom’s Department for International Trade is in talks to join TPP. The United Kingdom is not legally allowed to enter the agreement before formally leaving the European Union, but TPP could replace some of the market share the UK would lose through Brexit.

Other countries have expressed some interest in joining the old TPP and could eventually enter the new TPP, including: Colombia, the Philippines, Thailand, Taiwan, South Korea, Indonesia, and Sri Lanka.