Over the past two decades, the quantity of regional trade agreements (RTAs) has greatly increased as more and more countries see the importance of having them. The total amount has grown from approximately 50 in early 1990 to over 377 agreements in January of 2014 (World Trade Organization, 2014). This increase can partially be attributed to the cumbersomeness of the World Trade Organization, which over the years has become slower and ineffective for nations wishing to get faster results (Schott). One of these RTAs is the Trans Pacific Partnership (TPP) Agreement which is currently under negotiation with twelve different countries located in the Asia-Pacific Region. The goal of the TPP is to increase trade and investment, encourage innovation, and promote economic growth and development which will help boost long term sustainable job creation (Leaders of the 9 TPP countries, 2011). These goals will be accomplished by creating a new standard for global trade and will help give all of the member countries a competitive edge. Some of the more prominent characteristics of the TPP include the elimination of tariffs and other barriers, production of supply chains among member countries, and to create common regulation rules (Leaders of the 9 TPP countries, 2011). The TPP is also focused on the future as it plans to promote trade and investment in innovative products and create a fair competitive business environment for all member countries.
Specifically, we are going to focus on how joining the TPP is going to affect Australia. Even though RTAs provide a lot of economic benefits in theory, some of these have been less realized in past RTAs such as North American Free Trade Agreement (NAFTA). We are going to analyze the possible pros and cons of joining the TPP using data and different economic models.
AUSTRALIA AND THE TRANS-PACIFIC PARTNERSHIP
Gross Domestic Product (GDP) and Exports
As RTAs have become more prevalent around the world, it has almost become a necessity for a country to join beneficial trade agreements, or they fear being left outside at a disadvantage. As of 2013, the countries currently involved in the TPP negotiations make up 27,750 billion dollars in combined GDP which is 37.5% of the world’s overall GDP (Australian Government, 2014). The TPP also makes up a quarter of the world’s trade and has 11% of the world’s population. This agreement has a very large global impact on trade, but more specifically to Australia where 70% of their trade travels through the Asia-Pacific Region (Australian Government, 2014). The TPP involves five out of ten of Australia’s top trading partners with possibly more to join in the future. Recently, Australia’s GDP growth has been very strong even while many other countries suffered from economic turmoil, which can be partially attributed to their growing international trade. According to Australia’s department of foreign affairs, from 2012 to 2013 Australia’s international...