Wednesday, August 5, 2015

Opportunities and Responsibilities in a TPP World

This has been the year of international trade agreements. President Obama won fast-track authority from Congress, allowing him to push forward on the Trans-Pacific Partnership (TPP), a somewhat secretive trade deal involving 12 Pacific Rim nations. Together, these countries generate 40% of the global economy. Last week, WTO negotiators from 54 nations agreed to drop tariffs on 200 technology products, which have a collective annual trade value of $1 trillion. And in Africa, three eastern and southern trade blocs moved to create a united Tripartite Free Trade Area, which will lower tariffs and streamline travel and development policies for 625 million people in 26 African nations (with a combined GDP of over $1 trillion).

Regional trade agreements have some clear benefits: lower tariffs, expanded markets, consumer and worker safeguards, IP protections, and the promise of more trade and transportation jobs in participating countries. More manufacturing jobs in low-income countries generally lead to higher incomes and a higher standard of living. However, trade agreements also have downsides. Gains in manufacturing jobs in some countries are offset by losses in others. And new jobs are not necessarily protected by fair labor laws. IP protection can keep costs high, a particular concern for life-saving medicines. And at a recent gathering at Wilton Park in the UK, some experts argued that the high level of trade and movement between Guinea, Liberia, and Sierra Leone probably contributed to the spread of Ebola last fall.

President Obama will argue the TPP will increase exports and benefit US companies, workers, and consumers. And there is some truth to this narrative: past trade agreements greased the wheels of economic growth in Asia and Latin America, creating a billion potential buyers who now shop for Nautica Kids clothing on their iPhones. But analysts look at the effects on specific sectors, and both the TPP and the new WTO deals suggest pharmaceutical, software, and media companies have the most to gain. Companies in these industries can re-align their strategies and investments for a post-TPP world of lower tariffs, stronger IP protections, and larger addressable markets in Vietnam, Malaysia, Mexico, Chile and Peru. However, these favorable terms also come with responsibilities. Pharmaceutical firms will have to demonstrate commitments to ensuring access to affordable, high-quality medicines in developing countries. This may include partnerships with governments and generic producers, or investment in tech-enabled supply chain solutions that deliver quality medicines, reduce stock-outs, and increase compliance. Investing in equitable access is not just a CSR play, it is a long-term business strategy to capture tomorrow's customers.