Trans Pacific Partnership : World's Largest Trade Agreement

Posted on the 7th October 2015 by Sumeeta, Communications Coordinator


After years of negotiation, trade ministers from 12 various countries managed to reach an accord regarding the Trans Pacific Partnership, which is seemingly, the largest trade agreement in history. As per New York Times reports, Michael Froman, the United States trade representative said that after years of negotiations and a series of sleepless nights, it was merely “an important first step”. The agreement has definitely taken a leap in terms of progress, as previous meetings in the last few months all proved futile with various obstacles; bringing it to a halt. Trans Pacific Partnership is probably one of the biggest initiatives by Barack Obama before he steps down as the President of the United States.

But first, what is TPP, and why has it taken so many years for the nations to finally reach an agreement?

The Trans-Pacific Partnership is an extensive free trade agreement involving 12 member countries- United States, Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and recently, Japan as well.

It is believed that with the finalisation of this trade agreement, it would be larger than the North American Free Trade Agreement (NAFTA), the world’s largest trade region at present. So, let’s put on our thinking caps for a second and wonder, how much larger could it possibly be?

The answer may surprise you- but this TPP involving 12 major economies (3 NAFTA members coupled with 9 other nations) would now be responsible for 40% of the world’s GDP and 26% of the world’s trade! The extent of these impacts on the world’s economy are definitely not direct in all possibilities as this may not only bring positive results, but also may pose negative effects on the other end of the balance.


The Trans Pacific Partnership is capable of promoting more job opportunities, boosting exports as well as acting as a catalyst to economic growth for the 12 countries involved. This is because, via this agreement, trade barriers will be eliminated and this would encourage transfer of skills, goods and services between the members. According to the US officials, this is said to be the world’s most progressive and forward looking agreement thus far; and it can be seen through the improvisation in the agreement by President Obama.

This is especially beneficial for American small business owners. America has approximately 98% small businesses that export, however only 1% of the 28 billion small businesses export their own products. This agreement may assist in placing their products on shelves all around the world as the agreement helps simplify export rules for small businesses.

Besides that, for the US, it’s said that approximately 95% of the consumers lie outside the US and this free trade agreement may just act as a ‘pivot to Asia’ and this will ensure a rapid growth in their home country compared to China, their fast-growing Asian competitor.


One may have the perception that trade agreements may not be of huge impact in an average individual’s life- but that’s where you are mistaken! In this era of globalisation with services, finance and trade moving towards integration, every single transaction that you make on a daily basis is affected.

For an average individual, TPP impacts can be seen via the dwindling of the minimum wage. This may be evident because as companies, in the effort of minimizing cost and still abiding by the minimum wage requirement begin to outsource the work. For example, companies would prefer to pay less to Vietnamese workers who obtain 52 cents per hour as their minimum wage. Hence, American workers would need to compete with such low wages as companies would prefer lower paid foreign labour.

Besides that, based on the TPP agreement, intellectual property laws would be strengthened. In other words, patents and copyrights will be even more protected. This may be an obstacle to the access of generic drugs, especially in poorer countries. Establishments such as Doctors Without Borders seem to be opposing to this aspect of the agreement as it would make medicine much more expensive.

WES Looking Ahead

Similar to our blog posts prior to this, we would love to gear our readers to see issues from a different point of view.

Hence, TPP could also be viewed based on its impact on ASEAN countries. This is definitely interesting as some ASEAN countries involved in the TPP are also in AFTA (ASEAN Free Trade Agreement) such as Brunei Darussalam, Malaysia, Singapore, and Vietnam. Therefore, how would this affect these countries and their current trade position? Besides these countries, how would it affect the rest of the ASEAN countries that are not included in the TPP such as Indonesia and Thailand?

It is clearly not the case of ‘one size fits all’. Trade diversion and trade creation may occur and is inevitable.

If you’re particularly interested in impacts on particular ASEAN regions and their major trading partners such as China, we would like to encourage you to click on the link below for a comprehensive literature on this topic.

Trade Implications of the Trans-Pacific Partnership for ASEAN

By Sumeeta Ganesan, WES 2016 Communications Coordinator


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