What The Hell Is The TPP & What Does It Have To Do With Me?

Photo: Ron Sachs/Pool/Getty Images.
U.S. President Donald Trump shows the Executive Order withdrawing the US from the Trans-Pacific Partnership (TPP) after signing it in the Oval Office of the White House in Washington, DC on Monday, January 23, 2017.
Throughout election season, you likely heard one particular term repeated over and over again by Republicans and Democrats alike: "TPP," short for the Trans-Pacific Partnership. But if we're being honest, hardly anyone outside of politics knew what the hell that really was, except that it has something to do with trade, and it was maybe bad for the U.S. Or was it maybe good? This week, the TPP retook center stage after President Trump signed an executive order pulling the U.S. out of the agreement. So, what exactly is the TPP — and why should you care? Ahead, we give you the 411 on everything you need to know about this trade agreement and how Trump's executive order will affect you. (Oh, and we also sprinkled in some information about the other oft-discussed trade agreement, NAFTA. Time to look super smart during Sunday's brunch.)

What is the TPP and how does it work?

The Trans-Pacific Partnership is a 12-nation, free-trade deal that was negotiated by the Obama administration. Some of the other participating countries included Canada, Mexico, Australia, Chile, Japan, Vietnam, and Peru. Its goal was to reduce tariffs (taxes) for American imports and exports traded with those countries, allowing goods to move more freely and cheaply between them. The treaty was made public in October 2015, but it was never approved by Congress, and the deal had not yet taken effect.

Why did Trump pull the U.S. out of the agreement?

This was one of his main campaign promises. Trump was outspoken in his disapproval of the deal, to the point that he once called it a "continuing rape of our country." One of the president's main issues with the TPP was that he believed it would hurt workers and undercut American companies. He also thought China was going to use a "backdoor" to take advantage of the countries involved in the deal, even though the Chinese are not part of the agreement. Throughout his campaign, Trump had a very protective stance about trade: He held that developing nations have been stealing jobs away from the average American worker in industries like agriculture and the auto industry because labor is cheaper there. That's also why he has beef with NAFTA, and has stated that he plans to renegotiate the terms. That agreement makes it easy for U.S. companies to move operations to Mexico.

Wait, what is NAFTA again?

NAFTA is short for the North American Fair Trade Agreement, a deal between Canada, Mexico, and the U.S. The agreement was signed into law back in 1994 by President Clinton, though the framework had been set by the Reagan administration in the late 1980s, and it was originally negotiated by President George H.W. Bush. NAFTA pretty much eliminated all tariffs between the three countries, allowing goods and supplies to cross their borders almost seamlessly. Right now, an estimated $1.4 billion in goods pass through the U.S.-Mexico border daily. Trump called it "the worst trade deal ever" on the stump during the campaign. But unlike the TPP, NAFTA has been in place for two decades, so we have data to help determine whether or not it has worked. It's true that because of NAFTA, a lot of jobs have gone back to Mexico. But it's also true that because production costs are cheaper south of the border, Americans pay lower prices for the food, clothes, cars, and electronics produced there. The Council on Foreign Relations argues that about 14 million jobs depend on the trade agreement and that NAFTA has improved U.S. competitiveness.

So, what happens now?

We'll have to wait and see what comes out of Trump's negotiations with Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau. But if he decides to withdraw from that deal too, it's likely that the price of many goods will rise, and also that many more jobs will be lost. When it comes to the TPP, experts believe that even more jobs will be outsourced to China as a consequence. They could also become the leaders in negotiating free trade deals with countries in the region. This is also a shift away from a more globalized economy, which is something that has been pushed by other presidents, but Trump is opposed to.

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