California’s Services Sector Stands to Benefit from TPP

by Natalie Hatour

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The Trans-Pacific Partnership (TPP) agreement is expected to open up markets in the Asia-Pacific region for American firms and boost U.S. services exports (see most recent TPP post). At the state-level, the TPP also has the potential to generate opportunities for Californian services trade.

The trade ministers from the 12 TPP countries officially signed the trade deal in Auckland, New Zealand yesterday. While the agreement still needs to be ratified at the country-level and has quite a ways until it goes into full effect, this formal signing brings the TPP another step towards its fruition.

A large amount of trade already flows between the Golden State and the 12 TPP nations. In 2011, California services exports to six of the nations that already hold existing free trade agreements with the United States reached $15.7 billion, which only makes up about 18% of California’s global services exports.

An overview of the TPP’s potential for California by the International Trade Administration cites an expansion of opportunities in the following service sectors: entertainment, telecommunications, software licensing, the Internet industry, retailing, and logistics/express delivery. More specifically though, the TPP consists of provisions pertaining to the electronic commerce (e-commerce) and telecommunications industries.

E-Commerce

The Washington D.C.-based Coalition of Services Industries noted “…the TPP would be the [first FTA] with an e-commerce chapter, creating a precedent for future trade negotiations, including the Trade in Services Agreement (TiSA) and the Transatlantic Trade and Investment Partnership (TTIP).”

The e-commerce chapter highlights the free cross-border flow of data, without the requirement to build data centers in the other TPP country. By expanding the global use of internet and cloud-based services, this provision especially helps small and medium-sized enterprises (which generally do not have the financial capacity to build data centers in every market they serve) serve more markets. According to a Los Angeles Times article, the overall “…loosening of restrictions on data and e-commerce could have a profound effect in California, where Silicon Valley continues to be a global industry leader,” and where Silicon Beach is growing as a major tech startup hub.

Telecommunications

Telecommunications service providers will benefit from decreased barriers to market entry and anti-competitive policy. With the goal of ensuring efficient and reliable telecommunications networks, TPP countries have agreed to promote pro-competitive network access provisions (such as in territorial co-location and pole access, and in international mobile roaming services). The TPP chapter also outlines the 12 countries’ commitment to transparency in regulatory processes, and in procedures regarding scarce telecommunications resources. Mixing California’s innovative and high-quality telecommunications with a larger digital platform to reach, California service providers could have the opportunity to directly connect to the various consumer and industry-based markets in the Asia-Pacific region.

The TPP’s provisions on intellectual property and copyright (highlighted in more detail in our previous post) can also have a huge impact on California’s entertainment, consulting, and architecture industries. In an interview with Southern California Public Radio, Stephen Cheung, President of the World Center Los Angeles, discussed the potential of the TPP giving firms more access to other markets, which could potentially be “a [less inhibiting and] great source of income for some of these service providers…without having to have a joint agreement with [a local] company in that country.”

By opening new markets to California firms and laying out provisions that reduce the costs and risks of conducting business in the Asia-Pacific region, the TPP will help support an increase in services exports, trade and investment flows, and economic and job growth in California.

 

Natalie Hatour is a member of the project support team at the Global Research Institute of International Trade. She earned her Bachelor of Arts at UCLA and a Master of International Business at Hult International Business, San Francisco. She has worked with the U.S. Department of State in Los Angeles, as well as with the U.S. Commercial Service in San Francisco and San Jose. Integrating her professional experiences with her graduate studies, Natalie is passionate about promoting public-private partnerships to expand international business and development opportunities. To learn more about Ms. Hatour, please click here.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

About Dr. Sarita D. Jackson

is the President and CEO of the Global Research Institute of International Trade, a think-tank/consulting firm that examines trade policies and their impact on domestic businesses. Prior to heading GRIIT, Dr. Jackson was a tenured associate professor of political science in North Carolina and worked as a trade policy consultant for an Arlington-based consulting firm. She has participated in trade policy projects and conducted research on free trade negotiations in Botswana, Antigua and Barbuda, Dominica, Dominican Republic, Mexico and Panama. Dr. Jackson has also traveled to Chile and Argentina to study their political systems and economic integration policies.
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