Twelve Pacific Rim countries – including the United States agreed Monday morning to a sweeping trade agreement that would eliminate thousands of tariffs and establish new trade standards. The Trans-Pacific Partnership (TPP) still has to be approved by Congress in what is likely to be a contentious election year fight.
The agreement is not expected to be made public for another month, so many industry groups remain on the fence about whether the agreement is good or bad. Here is a look some industries in California, and how they might be affected by the landmark pact:
This summer, Ilsa Metchek, head of the California Fashion Association, predicted that the TPP would invariably lead to cuts in the California apparel industry.
But when reached Monday, Metchek was more optimistic, because it appears that the agreement now includes a so-called "yarn-forward" provision that has long been part of the North American Free Trade Agreement (NAFTA). In order for a company to qualify for "duty-free" status and pay no tariffs, they must use only fabric produced from material made by a TPP country.
"If yarn-forward means that a country like Indonesia must buy their cotton from the United States or from another TPP country, it's fine," Metchek said Monday. "It's the same thing we have with NAFTA."
In a report published last year, the non-partisan Congressional Research Service warned the TPP could increase competition for Western manufacturers and reduce demand for U.S. textile exports because Asian apparel producers could export clothing to the United States duty-free.
California rice farmers hoped the TPP would open up Japan's restrictive rice market, which currently allows only 7 percent of its product to be imported.
Under the agreement, Japan would import an additional 70,000 metric tons of rice in 17 years, which represents a 20 percent increase. That would likely mean more international business for California's rice farmers, but the California Rice Commission responded with disappointment at the news. They thought Japan might have been required to important an additional 170,000 metric tons.
"It's certainly not the level of access we had been clearly been seeking for the last years of the negotiations," said Tim Johnson, President and CEO of the California Rice Commission. "Our industry will take a little time to decide whether or not the total increase in access to the Japanese market is sufficient for us to be supportive of the agreement."
One of the most contentious issues in the final negotiations of the TPP was opening up international dairy markets to other members of the trade pact. The U.S. Dairy Export Council and The National Milk Producers Federation said they still needed to review the agreement before taking a stand.
4. The Ports
The Ports of Los Angeles and Long Beach both declined to comment on the TPP, but the American Association of Port Authorities (AAPA) was very supportive.
"We believe this agreement, and others pending, will increase trade and U.S. exports," said Kurt Nagle, president and CEO of the American Association of Port Authorities, in a written statement. "This increase in trade will provide more jobs in our ports and throughout the nation."
Ports in Southern California will especially benefit, since they handle 40 percent of U.S. imports, said Michele Grubbs, a spokeswoman for the Pacific Merchant Shipping Association, a trade group representing shipping companies.
“It’s going to definitely be a positive for Southern California,” said Grubbs. "Anytime you increase trade, we are typically the focus for the goods coming in and going out.”
Stephen Cheung, President of the World Trade Center Los Angeles, said the TPP would undoubtedly increase the volume of trade through California ports, though he wasn't sure by how much.
"There’s no direct calculation yet," said Cheung. "But given that we have so many imports and exports in this area, if there’s one area that benefits, it’s Los Angeles.”
It's been said that the TPP is a 21st century trade agreement, which is as much about intellectual property and copyright protection as it is about physical goods. Hollywood studios and drug companies would be some of the biggest beneficiaries. Cheung also said that consulting and architectural firms in Los Angeles will benefit from being able to more easily access other markets.
"This potentially can be a great source of income for some of these service providers," said Cheung.
He used the example of Gensler, the Los Angeles-based architecture, design, planning and consulting firm, which he says has sometimes faced limits in countries where its operated, including the amount of work it can do or needing to partner with a local company.
"Now they might have more of that contract on their own without having to have a joint agreement with another company in that country," said Cheung.