Analysis of International Trade Agreements: TTIP, NAFTA, and TPP

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INTERNATIONAL TRADE AND
FINANCE - TASK 2
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Table of Contents
Introduction......................................................................................................................................3
Question1. Mention benefit and drawback associated with proposed TTIP agreement?................4
Question2. Mentioned the reason why organized labor and some politicians dissent from the
North American free trade agreement?............................................................................................6
Question3. Define Trans-Pacific Partnership (TPP) and compare how there is less resistance for
TTIP as compare to TTP agreement?..............................................................................................8
Question4. Evaluate whether the decision of president trump regarding withdrawal from
negotiations of establishing TTIP is beneficial for American consumers?...................................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
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Introduction
This report defines various terms of international trade and how these will affect the economy of
the countries. Transatlantic Trade and Investment Partnership (TTIP) is an agreement between
two US and EU for a better opportunity of trade and protection of the environment. It also
evaluated possible benefits and drawback to the economy as a whole as well as to the individual
due to the agreement. Reasons are defined for the resistance of the North American Free Trade
Agreement with Mexico and Canada by the labour organizations and politicians. It also
mentioned the term Trans-Pacific Partnership (TPP) and the reasons why it faced political
resistance in America. The report also gives an overview on renegotiations of TTIP agreement
initiated by President Donald Trump on the very first day of his office as president. Evaluation is
done whether Transatlantic agreement is in favour of the US Business and its customers or not.
A brief discussion of trade figures is given due to NAFTA and it also explains the non-
involvement of China in the Pacific partnership agreement.
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Question1. Mention benefit and drawback associated with proposed TTIP agreement?
Transatlantic trade and investment partnership is a bilateral agreement for promoting trade and
economic growth between EU and US. It focuses on liberalization of various rules and
regulations like banking regulations, food safety law, environmental legislation etc. Both
individuals and companies affected by the agreement. Terms and conditions of TTIP agreement
are been processed secretively which make this agreement scarier. There are favourable aspects
as well as the unfavourable aspect of the agreement. Benefits of the agreement can be associated
with a better product, lower production cost, new opportunities, new employment and many
more.
Economical product for individuals
TTIP reduce barrier in import and export which leads to economic transactions between two
countries. Abolishment of duties and other regulations results in cheaper products available for
the individuals.
Better Employment opportunities
Export and import of goods and services of those companies who are engaged in international
trade will increase due to liberalization in international trade regulation. Companies start
investing more and more in the business which creates more employment opportunities.
Economic growth
Increasing trade and international transactions help an economy to grow in various ways. It helps
to make available goods and services at easy rates and reduce unemployment problem without
investing government funds on the same. Higher exports lead to higher foreign exchange and
better opportunity for investing money in foreign trade. This agreement results in improving the
purchasing power of the individual due availability of a cheaper product at good quality and also
increase the demand for goods and services in the economy. More demand leads to more
production and overall economy will boost with higher GDP.
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Lower cost for the companies
Studies of international trade show that international transactions between US and EU are worth
800 billion euros in a year. Abolishment of duties in trade between US and EU will reduce the
burden of tariff and duties on companies. Companies get the opportunity to invest that money in
expansion and for further growth objectives. There is always two side of one coin. Although
there are benefits of this agreement however there are also some drawbacks for the same.
Lower standards
TTIP agreement leads to lower standards on environment, labour conditions, privacy, and food
safety. US have far less restricted standards on food safety or on the environment as compare to
EU. As the study shows in US 70% of processed food contains modified ingredient however EU
standards not allowed such modification in food. This partnership gives a possibility of applying
such lower standard in Europe as well. Benefits of this agreement should not be linked with the
cost of the environment and people safety.
Loss of jobs for certain sectors
Increasing trade results in increasing competition in the international market which leads to flash
out of small entrepreneurs from the market. Overall this agreement focus on improving trade and
employment however there are certain sectors of the economy which bear the cost of this growth.
It should not have a negative effect on any job opportunities.
Privacy issues
As like Anti-Counterfeiting trade agreement this arrangement is also a major risk for the privacy
of the individual and companies of nations. It will moderate data privacy law which is a disaster
for the economy as a whole.
Deprivation of democracy
The biggest drawback of TTIP agreement is that it is smack on democracy. It gives power to
companies that they can sue the government if there is a loss to the company due to any policies
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and regulations of the government. It can be understood by saying that unelected corporation can
question the policies of a democratically elected government. This agreement gives way to
freedom to the companies hence they have less fear for rules and regulations made by the
democratic government.
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Impact on Low and Middle-income countries
It can bring a negative effect on some lower and middle-income countries as they will not able to
compete with a better quality product of other developed countries. However, it will give
benefits to those developing countries as well in term of in liberalization international trade rate.
Now those countries can also export to the US and EU and perform import transactions as well.
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Question2. Mentioned the reason why organized labour and some politicians dissent from
the North American free trade agreement?
North American free trade zone is the agreement between Canada, Mexico, and the United
States. It deals with liberalization in various trades among the above-mentioned countries such as
automobiles trade, agriculture, and textiles. NAFTA has a major focus on establishing labour and
environmental law, improving dispute resolution mechanism and protection of intellectual
property.
TTIP and NAFTA are totally different agreement. NAFTA is an agreement between three
countries for liberalization and eliminates tariff barriers to specific sectors where TTIP is an
agreement between the United Nation and European Union to boost the economic growth of
countries. Irrespective of benefits of the NAFTA it’s been criticized by some labour and
politicians due to various reasons. NAFTA can be considered a controversial agreement.
America’s labours have a fear of job losses to Mexico since Mexico has far lower labour rates.
Manufacturers shift their production to Mexico due to the difference in labour rates between two
countries which lead in the trade deficit for the US economy. Various industry including textile,
motor vehicle and electrical leave from the US. Suppression of wages is also one of the reasons
for resistance from NAFTA. With the migration of labour, they lost their unity and it results in
reducing their barging power for wages and companies use this situation to suppress the wages
rate.
It also affects the farmers of Mexico as it allows the US to sell their agriculture product with
subsidized prices. Mexican farmers not able to compete with the prices of the product. Study of
economic policy institute shows that 1.3 million farmers lost their job due to this arrangement of
liberalization. It will also cause of environmental issue of other countries as the US has not rigid
regulations regarding use of fertilizers and chemicals.
Some politicians are also not in favour of this arrangement due to various reasons. NAFTA has
significant controversial issues such as trade deficit, government perspective of job losses in the
US, agriculture and environment safety. This arrangement was considered as a reactive move of
US economy in regards to major changes affecting global affairs. Some politicians have a view
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that NAFTA will increase the illegal migration of labours and also results in an adverse effect on
the economy. It negatively impacts on GDP of the economy and gives a negative message to
other countries.
There is no such opposition is seeming for TTIP as this agreement is beneficial for all the parties
and economy at large as well. NAFTA’s drawbacks are notable. Environmental damage,
mistreatment with labours are some of the drawbacks which is never occur due to TTIP
agreement. Cons for NAFTA are much more than TTIP which leads to lower resistance for the
TTIP as compare to other by politicians and labour organizations.
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Question3. Define Trans-Pacific Partnership (TPP) and compare how there is less
resistance for TTIP as compare to TTP agreement?
A trans-pacific partnership is an agreement between 12 countries to lower the industrial tariff on
the export and import of goods and services between those agreement parties. It represents
almost40% of the economic output of the world. Political resistance for TPP is because of the
same reasons of the NAFTA. One of the major reasons of resistance is non-involvement of China
in the agreement of the partnership since the USA is one of the biggest consumers of Chinese
goods and services. Non-involvement of China in agreement leads to a huge negative impact on
USA's economy. TTP is beneficial for the US as it enables its economy to increase international
trade with the Asian members but at the same time, it will increase the cost of the goods and
services import from China. The statistic shows that 40% of the overall trade deficit is due to
lessor trade transactions between China. The increasing trade deficit with China results in loss of
2.7 million jobs in the U.S. and leads to an imbalance of trade with China. Majority of the
products imported by partnership countries by China. After assembling those goods or product in
their country they export it in the U.S. under the head of domestic product. How can the U.S.
economy compete with China if most of the product of China is been indirectly imported by the
U.S?
Figure: (Trade between member countries in the year 2015)
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Source: (NYT, 2019)
The agreement is more beneficial for the developing countries and as majority members of the
agreement are developing countries it will not that beneficial for the US economy. As per
politicians, this agreement is a reticent deal which helps for improved trade and business of other
countries on the cost of US economy and threat to job opportunities in the US. President of USA
Donald Trump takes the issue of the abolishment of TPP agreement as its key agenda in the
election campaign as he believes that this is the back step deal for US labour force. Trade
liberalization affects the jobs and cost of affected workers is very huge. In the year 2011 U.S.
employment reduce by 5.8 million jobs. Due to improved technology and automation, millions of
low skilled labours become useless. It will encourage export of jobs to other countries and also
encourage charging higher prices for pharmaceutical products and other products. Mostly benefit
would occur to the rich section of society. This will contribute to unequal income distribution in
countries with high wages rates. Pacific partnership agreement promotes patent laws which
reduce the availability of economical generics causes an increase in the price of various drugs.
Pacific partnership agreement is a lot to take for U.S. economy as cons overweight pros of the
agreement. Increasing environmental disasters, loss of workforce and increase in imbalance trade
is the product of the agreement. Where TTIP agreement only reduces the regulatory requirements
of trade between EU and U.S. This will not result in any future negative impact on the economy.
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Question4. Evaluate whether the decision of president trump regarding withdrawal from
negotiations of establishing TTIP is beneficial for American consumers?
TTIP is introduced for benefit of U.S. economy as well as EU economy. It was started with the
efforts of President Obama in the year 2013 and it was expected to complete by the year 2019.
However, in the year 2016, Donald Trump was elected as president of America and this
agreement step backed. US president Donald Trump was not in favour of this policy. He believes
that this agreement has an adverse effect on America's workers. TPP is abolished by him and he
also agrees on renegotiating the North American Trade Agreement. Even one of the Donald
trump critic also said that “If President Trump is serious about a new policy to help American
workers then I would be delighted to work with him."
U.S. and EU are a powerful and developed economy. Both of them have a higher level of
consumer protection. TTIP provides transparency and compatibility between various trade
transactions. Renegotiation of TTIP results in above-mentioned pros of this arrangement.
Negotiation of TTIP has positive as well as negative impact on the American consumers. There
will be a loss of access to new customer markets. This will affect the opportunity of
enhancement of export to potential markets and loss of innovation and expansion. It will reduce
access to the European market for American goods and services. Improvement in patent
protection regulations leads to a diminishing of competition in pharmaceutical companies and
drug-making companies.
It will prevent in shifting of manufacturing jobs of America to overseas with low wages rates and
less labour protection. Farmers of America will also get benefited with that negotiation as there
is the removal of restrictions on selling certain products overseas.
There are more than $700 million of goods is exported every day from America to Europe which
includes the export of textile and apparels. Reduction in those trades leads to huge losses to the
American business. Service market of the U.S. economy will also be affected by the negotiation
of the agreement.
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