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International Trade

The Trans-Pacific Partnership Trade Agreement - TPP101

Even if you haven’t been paying attention to current events in international trade, you’ve probably still heard about the Trans-Pacific Partnership (TPP). From conspiracy theories to complicated economics musings, there’s a lot of information floating around about the TPP. That’s why we decided to do a series all about this exciting new partnership – to clear up the confusion and highlight the countries in the TPP. 

What is the TPP?

The Trans-Pacific Partnership is an agreement between 12 countries along the Pacific Rim. These countries are: the US, Canada, Mexico, Chile, Peru, Australia, New Zealand, Japan, Brunei, Malaysia, Singapore, and Vietnam. It was finally signed in February, after seven years of negotiations. The TPP establishes a free-trade zone – one of the biggest in the world since the 12 countries encompassed by the TPP account for 40% of the globe’s trade. The partnership also allows for easier international trade, as the participants will all adhere to the same standards and processes. The TPP will tie the countries together economically, with increased trade and investment, along with lower tariffs for importing and exporting goods to and from partner countries.


Why Canada Is a Model Partner in the TPP?

Canada, our neighbor to the north, is an asset to the TPP. The country is ripe with natural resources, human resources, and has a healthy, pro-business climate. Canada’s population is one of the most educated in the world: more than 50% of Canadians have college degrees. And even further, a large portion of that 50% have advanced degrees. This highly educated environment attracts global talent, and helps the country’s residents to excel in providing advanced services such as engineering, research and development, transportation, and architecture. Trade in these types of services made up nearly 17% of the country’s total trade in 2014.

Natural resources are a huge part of Canada’s economy. The country covers so much land, and it’s only natural that they should take advantage of this. Canada’s exports to the rest of the globe numbered $474,408 million. Hydro-electricity, gold lumber, crude oil, gas, and minerals are just a few of the country’s resources – and of course, they attract business from the US in the form of investors as well as companies that work with these sought after resources. Wood products are forestry exports are also a huge part (to the tune of $24.9 billion) of Canada’s GDP. Wood panels, wood pulp, newsprint, and softwood lumber are a few of the exported products that come from this natural Canadian resource.

Canada also supplies a large amount of food to other TPP countries. Processed potatoes, baked goods, beef, canola oil, and wheat were among the country’s top agricultural/food exports. From 2012 to 2014, these exports were worth an average of $31.2 billion. In this same time period, the country also exported $3.4 billion worth of fish and seafood products. Canadian food exports help keep the world fed.

Another Canadian asset is the country’s pro-business attitude. Canada’s banks, unlike those in the United States, are incredibly stable and well-monitored. Because of this, Canada’s financial system remained steadfast even when her neighbor’s financial institutions succumbed to the economic crisis. On top of all the vital products Canada produces and exports, Canada’s robust business climate makes the country a huge asset and important partner in the TPP.


Mexico – An Important Player in the TPP

Our southern neighbor, Mexico, is a growing economy and will only blossom further as part of the Trans-Pacific Partnership. Mexican business is on the rise, as can be seen in the 6% increase of Mexican automotive sales, the 6% rise in retail, as well as more and more investors being attracted to Mexican e-commerce. Hyundai is even planning to build the newest Accent in Mexico.

The country produces the lion’s share of the world’s flat-screen TVs, is a major player in automotive manufacturing, and is even developing an aerospace industry. Mexico exports many of the products that keep us on the move, such as crude oil, large vehicles for transporting products, automobiles, computers, and car parts. These exports total $397,128 million. The country also imports $399,997 worth of products from the world each year, mainly petroleum, electronic circuits, cell phones, and car parts.

Mexico is Latin America’s second-largest economy, following Brazil, and is already in a cohesive trade relationship with the US and Canada due to the country’s membership in NAFTA (North American Free Trade Agreement).  In fact, Mexico is already a well-connected country – the country has a high number of international free trade treaties that allow it wide access to the world’s economy.

For Mexico, the Trans-Pacific Partnership offers many benefits, despite the fact that they are already so well-connected. Trade with TPP countries could add $40 billion worth of commerce and $14 billion in foreign direct investment, which will be a significant boon to the Mexican economy. The TPP will help Mexico, the world’s leading exporter of car parts, compete with China, the country that is right behind Mexico in the production of car parts. The partnership also provides a trade route to a new part of the world with an ever-growing amount of consumers: Brunei, Malaysia, Singapore, and Vietnam. Before the TPP, Mexico only had a trade agreement with Asian country, Japan. The TPP may even help balance the trade deficit between Mexico and Asia. Once the TPP is in full effect, Mexico will be one of a dozen countries that will reap the benefits of free trade.

In the next article, we will talk about why we should do business with Australia and New Zealand.

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