The Trans-Pacific Partnership (TPP) trade agreement is a big deal for U.S. agriculture.
“The TPP negotiation is the largest regional free trade agreement struck in the past 20 years. Now it has to be ratified by all of the participants,” said Ian Sheldon, Ohio State University ag economist. “TPP is significant because the countries account for 40% of global GDP. I have my doubts, though, as to whether we are going to see this ratified in the U.S until after the next election.”
The partnership includes 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States. The agreement is anticipated to reduce more than 18,000 tariffs, including some agricultural trade barriers.
Although the full agreement has yet to be published publicly, several institutions are forecasting impressive economic growth under TPP. The U.S. Department of Agriculture’s Economic Research Service estimates that TPP will result in a 6.6% increase in agricultural trade by 2025. This increase will account for an additional $8.5 billion in the agricultural marketplace, assuming the complete elimination of existing agricultural tariffs by 2025, Sheldon said. Additionally, the ERS anticipates that the agreement will result in a 33% overall increase in U.S. exports and a 10% increase in imports by 2025.
Like any trade deals, there are winners and losers with the TPP, and Sheldon said that U.S. agriculture is a big winner, largely at the expense of Japanese agriculture.
“U.S. ag exports with TPP will increase by $2.8 billon — a 33% increase in market share. The U.S. will be the big winner and most of the gains will be coming from Japan. Japan will account for a 68% increase in agricultural imports. Beef and dairy products will account for 25% and 19% respectively of increased value with TPP trade,” Sheldon said.
In addition, the Peterson Institute for International Economics, a private, nonprofit and nonpartisan research institute, estimates that under TPP, $225 billion will be added to global gross domestic product by 2025, including $77 billion to U.S. GDP. The institute forecasts that U.S. manufacturing industry exports will grow by about 4.5% by 2025 due to TPP.
However, Sheldon said, some of the biggest winners look to be smaller countries involved in the partnership, such as Vietnam.
“We will see a much bigger impact on some of the emerging economies included in the negotiations,” Sheldon said. “For example, Vietnam is anticipated to receive a 10.5% increase in GDP thanks to TPP. My sense is that Vietnam is a winner because China is not in the agreement.”
Vietnam, which is a low labor cost economy, will expand as a manufacturing hub in industries such as textiles, and will have preferential access to these other 11 economies included in the agreement, he said.
“However, at the same time, it looks like the agreement partners are trying to tighten up things like state-owned enterprises, which would impact Vietnam since it is a communist country,” Sheldon said. “These stipulations could also impact China, should it choose to participate in the future.”
Sheldon said the long-term objective of TPP is to align Asian economies and serve as a template for future free trade agreements that might include China. Additionally, Sheldon said that the agreement is anticipated to have an important impact on trade in services, rules on intellectual property rights, as well as environmental and labor regulations.
Sheldon’s talk was part of yesterday’s kickoff of the 2015-2016 Agricultural Policy and Outlook series from Ohio State University’s College of Food, Agricultural, and Environmental Sciences Department of Agricultural, Environmental, and Development Economics (AEDE). The event initiates a series of local meetings to be held statewide.
The meetings will feature presentations by AEDE experts on matters the agricultural community should expect in 2016, including policy changes, key issues and market behavior with respect to farm, food and energy resources, and the environment.
In addition to Sheldon, speakers for the series include:
- Matt Roberts, a grain economist, who will discuss his outlook for the 2016 grain market.
- Brent Sohngen, an environmental economist, who will present an analysis of President Barack Obama’s Clean Power Plan and its possible impact on Ohio.
- Ani Katchova, leader of Ohio State’s Farm Income Enhancement program, who will discuss farm transitions in U.S. agriculture.
- Barry Ward, leader of OSU Extension’s Production Business Management program, who will present an analysis of land values, cash rents, crop input costs and potential crop profitability in 2016.
The county meetings, which are open to the public, will be held on the following dates:
- Dec. 16, 4 p.m., at the Attica Fairgrounds Social Hall, 15131 E. Township Road 12 in Attica. RSVP: Jon Ewald, firstname.lastname@example.org or 800-422-3641, or register online at www.suttonbank.com by Dec. 9. Cost: free with reservation by Dec. 9; $20 without a reservation.
- Jan. 20, 8:30 a.m., at Der Dutchman, 445 S. Jefferson Ave., in Plain City. RSVP: Union County Extension, 937-644-8117 by Jan. 13. Cost: $10.
- Jan. 20, 4 p.m., at the Bellevue VFW Hall, 6104 U.S. Route 20 in Bellevue. RSVP: Valerie Bumb, BumbV@fnblifetime.com or 419-483-7340 by Jan. 13. Cost: free with reservation; $22 without a reservation.
- Jan. 22, 9:30 a.m., at the Fisher Auditorium at the Ohio Agricultural Research and Development Center, 1680 Madison Ave. in Wooster. RSVP: Wayne County Extension, email@example.com or 330-264-8722 by Jan. 15. Cost: $15.
- Feb. 15, 7:30 a.m., at the Trinity Lutheran Church, Noecker Hall, 135 East Mound St. in Circleville. RSVP: Pickaway County Extension, 740-474-7534 by Feb. 8. Cost: $10.
- Feb. 19, noon, at Romer’s Party Room, 118 East Main St. in Greenville. RSVP: Darke County Extension, firstname.lastname@example.org or 937-548-5215 by Feb. 12. Cost: $20.
- Feb. 24, 6 p.m., at the Jewell Community Center, 7900 Independence Road in Defiance. RSVP: Defiance County Extension, email@example.com or 419-782-4771 by Feb. 19. Cost: $15 in advance or $30 at the door.
A meal is provided at each meeting and is included in the registration cost. Questions can be directed to the local hosts noted above.
Additionally, a new offering this year is a webinar to enable participants to join remotely from their own home or office. The webinar will be held on Feb. 1 at 6:30 p.m. RSVP at regonline.com/AgOutlook2016 by Jan. 25. Cost: $10.