In late April, negotiations to advance the Trans-Pacific Partnership (TPP), a 12-nation trade agreement in the making since 2009, hit the kind of bone-jarring pothole that Minnesotans know to expect (and strive to avoid) as winter turns too slowly into spring. A hoped-for breakthrough during President Obama’s recent trip to Asia failed to materialize. Negotiators have not reached compromises on key sticking points, especially tariffs on autos in the United States and exports of U.S. agricultural goods.
At Cargill, we recognize the temptation, after years of difficult negotiations, to settle for less than the comprehensive liberalization that TPP envisions. But to back off now is the equivalent of letting the potholes win rather than addressing fixable problems.
TPP will create opportunities by opening markets in Asia to the United States and creating new trade rules for the involved countries. Fully seizing those opportunities means securing, through negotiation and compromise, the participation of all 12 countries joined in this process, not a subset of them. The 12 countries participating in the TPP negotiations make up 40 percent of the global economy. The TPP would be the largest free trade agreement in the world.
The breadth of the TPP is what makes agreement so challenging. Opponents are quick to point to the North American Free Trade Agreement (NAFTA) as a predictor of TPP’s presumed consequences for U.S. interests.
But NAFTA is working. Since its enactment 20 years ago, bilateral trade has grown exponentially. Mexico has become our country’s third largest commercial partner and the second most important market for U.S. exports. In addition, NAFTA enables U.S. businesses to work collaboratively with counterparts in Canada and Mexico to build integrated enterprises fully competitive with China and other parts of Asia.
Exploring further opportunities for collaboration and growth is one reason why Mexico’s ambassador to the United States, Eduardo Medina-Mora, is visiting Cargill this month. Mexico has become a leader in global trade, participating not only in NAFTA but also forming — with Chile, Colombia and Peru — the Pacific Alliance. This trade agreement has eliminated 92 percent of all import tariffs among the participating countries, while helping them become Latin America’s fastest growing and most competitive economies.
Free trade agreements reflect a fundamental fact: Our world is becoming more interdependent. This has been a net good for the world in the last four decades and it will continue to be.
Open trade creates jobs. International trade already supports more than 750,000 jobs in Minnesota. Implementation of the TPP is expected to add more than 15,000 new jobs in the state in the next decade.
Open trade benefits consumers, enabling greater choices and lower prices. According to the Business Roundtable, trade and investment liberalization are estimated to save the average Minnesota family about $10,000 annually.
And open trade is essential to feeding the world. Population is growing fastest on our planet in regions not endowed with the climate and soil that will enable them to be self-sufficient in food production. More food will need to move across borders to feed a planet that is more populous and prosperous.
Trade agreements foster competition. For businesses and their employees, this poses challenges to sustaining positions as cost-effective producers of certain goods and services. But fixable problems — such as flexibility in phasing out tariffs and quotas as the TPP is implemented — can mitigate disruption resulting from this competition. In addition, the TPP’s implementation period will provide opportunities to ensure that our workforce planning and educational systems are anticipating shifts in global trade flows — and the resulting shifts in high value skill sets.
Our state, our country and our planet benefit from an “open to the world” orientation where nations specialize in producing those goods and services they can produce more efficiently as a result of their respective endowments and trade with others for those goods and services where they do not have comparative advantage. As the TPP faces another pivotal round of negotiations this month in Vietnam, it’s time to persevere, keep the long-term best interest of all in mind, and get this treaty done.
David MacLennan is president and chief executive officer of Cargill.