TPP: What’s in it for Hawaii?
By: Steve Craven
The upcoming report due from the U.S. International Trade Commission will give us a better read of the net impact of Trans Pacific Partnership for the entire country, but things are already looking good. Though estimates vary, there seems to be a consensus that TPP will grow the national economy (GDP) by about 0.4% a year. That may not sound like much, but it translates to about $70 billion or 425,000 new jobs every year. Not shabby.
It’s tough to come up with equivalent numbers for TPP’s impact on Hawaii and we don’t have good enough data to make a meaningful try. Trade data for Hawaii doesn’t include our high earnings from selling services, yet does include goods made on the U.S. mainland that merely pass through Hawaii on their way to foreign markets. But we are confident that TPP will make a substantial difference for Hawaii companies – and their employees – doing business overseas and for Hawaii’s consumers looking for lower prices.
The jury is still out, but our first blush analysis is that Hawaii’s small firms will get a big boost from TPP’s simplification of trade requirements. Big business knows how to navigate the trade regimes of the twelve TPP countries and have specialized staffs – sometimes dozens of experts – to do just that. Small companies can’t afford that, so TPP seems likely to make life and business a lot easier for our little companies. It will do so by reducing the volume of documents needed to move goods around the world, by standardizing many of the document requirements that remain, and by making it more convenient to file trading documents electronically. That’s going to make trade less daunting for small companies.
Large parts of the TPP focus on improving trade in services. Hawaii’s services companies, such as architects and engineers, education providers, health services and financial firms are likely to find it much easier to do business in the TPP markets. For instance, our A&E firms will no longer be required to have an office in countries to bid on government contracts.
Hawaii’s hard goods exporters will find it easier to compete on price overseas. Our largest state export – water – currently faces a maximum tariff of 35% in TPP markets. Chocolate, jewelry and mac nuts can encounter 30% duties. All of these will go to ZERO. So will the present 22% duty on cosmetics, a 35% tariff on beer, 50% on beef, 10% on boats, or 35% on fish. Even surfboards and paddles face a 5% customs duty. All of these will go to zero. Hawaii is likely to see its sales grow most to Japan, Malaysia and Vietnam.
The lower customs duties of TPP work in the other direction, too. While the United States generally has low tariffs, we still have some significant customs duties on apparel, footwear and some food products – things of interest to every consumer in Hawaii. These, too, will be coming down to zero for imports from the other TPP countries. Though there will be a delay of several years, Hawaii’s car and truck buyers will eventually see a drop in the U.S. duties on imported vehicles.
We’ll likely find more, both positive and negative, for Hawaii as we work our way through the TPP agreement, but our first impression is that Hawaii is in good shape to get an economic boost from the TPP.
Steve Craven advises companies on international business strategies and how to overcome problems encountered in foreign markets. He is a former consultant, American diplomat and a U.S. trade negotiator. He served as a Career Diplomat and Senior Foreign Service Officer, member of the U.S. Commercial Service, U.S. Department of Commerce. Mr. Craven also previously served as Chair of the Hawaii Pacific Export Council.