The trans-pacific partnership

The trans-pacific partnership

The trans-pacific partnership is an agreement with eleven countries designed to eliminate and reduce trade barriers. TPP focuses on the potential economic effects more, especially in creating job opportunities. The TPP provides several principal trade rules through lowering tariff and non-tariff barriers goods. TPP enforce provisions that are designed to minimum standards of labor in TPP countries. TPP was the first regional deal to include comprehensive digital commerce rules to ensure the free flow of information. Through the elimination of tariffs, TPP supports the creation of good jobs and higher wages for workers.

However, workers and businesses in TPP still face barriers from TPP countries. The agreement has mandated privacy protection for consumers and banned policies that force investors to migrate their servers to the related facilities in the country, hosting it by Labonté (2016).

Why the Asian states have decided to continue with the Trans-Pacific Partnership (TPP), even as the United States has decided not to join the blocs

What are the specific theories to the question?

The agency theory

This is a theory used in explaining and resolving issues in the business relationship between principals and their agents. The difference in priorities of principals and agents is known to be a big problem for the question of why Asian states have decided to continue with the trans-pacific partnership even though the united states did not join, is because the economic interests and priorities of the Asian states are not the same as that one of the united states and their currencies are also different. The TPP has delegated the authority of decision-making to its agents. This explains why the united states decided to quit the partnership while the Asian states decided to remain as members of the partnerships.

The differences in priorities and interests that arise in a partnership portray that the principal and the agent’s interests are not in alignment. Even though the TPP was the centerpiece of the strategic pivot to the United States in the Asia-Pacific region, Asian states did not withdraw their membership since other members of TPP had interests and priorities on the Asian states. The TPP has implemented an agreement with Investor-State Dispute Settlement (ISDS) to sue members of the state that try to breach treaties signed among TPP members.

How do any of these three apply to the TPP question?

Agency theory

The theory applies in this question because all the Transpacific partnership members have common interests and priorities, which makes them work towards common business goals. The members of the partnership are given authority to make decisions. For example, the United States made a decision not to join the Transpacific partnership. The United States declined the TPP members’ deal since it was seen as a barrier to manufacturing, lowering wages, and increased inequality, as argued by Payne and Oleg (2019).

Hypotheses

All the countries in the trade bloc do not have the same economic muscles.

Each country has a different currency, some with strong and others weak ones.

Some nations may perceive free trade as a cause of structural unemployment.

Nations may be concerned about losing their sovereignty.

Summarization of hypotheses

All the countries do not have the same economic muscles;

This hypothesis is true since not all the members of the TPP have common economic muscles. Some of the members are economically stable and may also use other union members to make their economies strong by attaining some trade items. The TPP members constitute of members with high income and varied economic systems. Members with the digital economy affect scheduled liberalization elements of the TPP. The TPP is considered a standardized comprehensive agreement designed to eliminate and establish trade rules and disciplines in the trading systems among the members of TPP. Most economists, for instance, Ciuriak (2016), argue that trade creates both economic benefits and costs. They can be positive and operate efficiently through competition in international trade that benefits the economy through a wider variety of goods at different prices and quality levels. Trade can also enhance the economy through production and employment.

Each country has a different currency, some with strong and others weak ones;

Countries like the united states have strong currencies as compared to other states. The difference in currencies affects the exchange rate in the trade surplus. Countries with weak currency stimulate exports and make imports expensive. In contrast, a strong currency makes exports expensive and imports cheap hence countries with strong currencies gain more economically as compared to countries with weak currencies. Some member countries in TPP weaken their currencies to gain favor in international markets to sell their exports. Since the member countries do not use the same currencies, other member countries artificially weaken their currencies by lowering interest rates.

The TPP included a mechanism to curb abusive practices through manipulating currency policy. Exchange rates between two currencies are the rate at which a currency will be exchanged for another. Exchange rates are known to be determined in the foreign exchange market that is open to a wide range of buyers and sellers where currency trade is continuous. Money dealers in the exchange market will quote a buying rate and a selling rate, but delivery and payment are set on a specific date.

Some nations may perceive free trade as a cause of structural unemployment;

Free trade has caused a higher degree of structural unemployment. Globalization and free trade do not create new job opportunities. Domestic firms reduce production costs, including the layoff of workers to adjust free trade equilibrium hence structural unemployment. Structural unemployment occurs as a result of a mismatch of skills between unemployed people and available jobs. Structural unemployment is caused by a change in the economy, which renders unemployed workers unable to work in new industries that require different skills.

Structural unemployment occurs when weak economic growth changes to strong economic growth. The TPP has formed policies to reduce structural unemployment, including training employees to fit new industries and subside them geographically. Monetary policy to boost and solve structural unemployment.

Nations may be concerned about losing their sovereignty;

This hypothesis is considered to be false since the TPP does not threaten state sovereignty. Some believe by nations including the Investor-State Dispute Settlement (ISDS), which allows investors to sue state treaty breaches. ISDS has been a subject of negative criticism by prominent leads across most TPP countries. Other TPP states are concerned that ISDS cases waste government money, but this is not true since the United States has international agreements with ISDS mechanisms and has never lost any case.

Quasi-experiment

Non-equivalent group design

I chose an existing group to obtain information concerning TPP.

Findings

They found out that the differences in currencies made trade exchange complex since some nations have weak currencies as opposed to others with strong currencies.

They also found out that the ISDS agreement prevents breaching of treaties among the member states of TPP.

Threats of non-equivalent group design

Bias in selecting

When the baseline group differs from the group receiving the intervention

Maturation bias

This can occur when natural changes over some time may influence the outcome of the study.

Historical bias

It is a threat that occurs when other events occur during the study period and can affect the outcome.

The need for advanced statistical methods when using more complex designs