TPP vs. NAFTA: A Guide to TPP’s Significant Improvements

by Amrietha Nellan

With the Trans-Pacific Partnership (TPP) currently being reviewed by Congress and the public, it is clear that the TPP has made significant improvements from past trade deals. In particular, the TPP improves upon the North American Free Trade Agreement (NAFTA) on labor and environmental commitments, balance of trade considerations, and the investor-state dispute settlement process. These changes address key issues within the NAFTA framework and promotes a new set of trade rules focused on sustainability and growth. Let’s look at the two agreements side-by-side:

TPP

NAFTA

Labor

TPP puts labor standards at the heart of the deal and makes them enforceable, unlike NAFTA.

  • Mandates the International Labor Organization Declaration on Fundamental Principles and Rights at Work be put in law in every TPP country.
    1. freedom of association and the effective recognition of the right to collective bargaining
    2. the elimination of all forms of forced or compulsory labor the effective abolition of child labor
    3. the elimination of discrimination in respect of employment and occupation
    4. minimum wages, hours of work, and occupational safety and health
  • TPP countries must put these standards into law before they can access benefits of the deal.
  • TPP will affect the first minimum wage in Brunei, universal minimum wage in Vietnam, and independent unions in Vietnam, Malaysia, and Singapore.
Labor Chapter
Article 19.3
  • Not in NAFTA.
    • Only an unenforceable side agreement suggesting best labor practices.
Side Agreement on Labor
Part 1: Article 1
Annex 1
  • Applies all TPP labor standards to special trade or customs areas, like minimum wage and workplace safety standards.
  • Closes loophole for TPP members to escape labor standards and gain economic advantage.
Labor Chapter
19.4
  • Not in NAFTA
  • Requires TPP countries to effectively enforce all labor commitments
  • Prohibits TPP countries from lowering or changing labor standards for economic gain.
  • Moreover, countries are required to enforce TPP labor standards.
  • If a country fails in these commitments it is subject to dispute settlement under the TPP subject to trade sanctions for failure to comply.
Labor Chapter
Article 19.4, 19.5, and 19.15

  • Not in NAFTA

Environment

TPP puts environmental standards at the heart of the deal and makes them enforceable, unlike NAFTA.

  • Requires TPP countries to maintain current environmental laws.
  • Commits TPP countries pursue high level environmental protection in furtherance of sustainable development.
Environment Chapter
Article 20.3
  • Not in NAFTA.
  • Only an unenforceable side agreement outlining model environmental regulations.
Side Agreement on Environmental Cooperation
  • Obligates TPP countries to protect endangered species based on their commitments under CITES and includes additional responsibility to stop illegal trafficking of wildlife between TPP countries.
  • TPP also requires countries to promote the long-term conservation of sharks, marine turtles, seabirds, and marine mammals, through the implementation and effective enforcement of conservation and management measures.
Environment Chapter
Article 20.16 and 20.17
  • Not in NAFTA
  • First trade agreement in history that addresses illegal, unregulated, and unreported (IUU) fishing. Requires Partners to stop subsidies:
    1. That negatively affect overfished stock
    2. To fishing vessels identified by the relevant authority engaged in illegal, unregulated, and unreported fishing
Environment Chapter
Article 20.16
  • Not in NAFTA
  • Requires countries enforce all TPP environmental commitments including new rules on illegal wildlife trafficking and IUU fishing.
  • Prohibits TPP countries from lowering changing domestic and international environmental agreements for economic gain.
  • If a country fails in these commitments it is subject to dispute settlement under the TPP subject to trade sanctions for failure to comply.
Environment Chapter
Article 20.3 and 20.23

  • Partially in NAFTA.
    • Only unenforceable and limited provision prohibiting a Party from changing its domestic and international environmental agreements to attract investors.
Investment Chapter
Article 1114

Balance of Trade

TPP takes unprecedented action to rein in unfair trade practices that harm American workers, unlike NAFTA.

  • Prohibits TPP countries from providing non-commercial support to their State Owned Enterprises (SOEs) providing unfair competitive advantage over other TPP countries' private companies.
  • Exempts SOEs from sovereign immunity when faced with a legal challenge
  • If a country fails in these commitments it is subject to dispute settlement under the TPP subject to trade sanctions for failure to comply.
State-Owned Enterprises and Designated Monopolies Chapter
Article 17.4, 17.5, and 17.6
  • Partially in NAFTA.
    • Only unenforceable provision asking a Party to regulate its SOEs independently.
Competition Policy, Monopolies, and State Enterprises Chapter Article 1503
  • Each country's monetary body affirms its IMF commitments on currency manipulation.
  • Each country must publicly release its monthly foreign-exchange reserve data and quarterly balance of payments portfolio capital flows, quarterly exports and imports, domestic “broad” money stock, and any intervention in spot and forward foreign exchange markets.
  • Experts agree that publishing this information will help keep countries accountable.
Currency Manipulation Joint Declaration
Section I and II

  • Not in NAFTA

Investor-State Dispute Settlement

TPP protects a state's right to regulate and limits the scope of investors rights, unlike NAFTA.

  • Authorizes enactment and enforcement of regulations for the public welfare and require investments meet those environmental, health, or other regulatory objectives.
  • Establishes the superior right of a state to regulate over those of foreign investors to financial gain.
Investment Chapter
Article 9.9 and 9.15
  • Not in NAFTA
  • Foreign investors cannot make claims exclusively for lost future expected profits due to a country's regulatory action or inaction that frustrate their business endeavor.
  • Explicitly limits investor claims to the amount it can prove were sustained in making the investment.
Investment Chapter
  • Not in NAFTA.
    • Therefore, investors have sought recovery for future expected profits in NAFTA cases.
Investment Chapter
Article 1116
  • Authorizes dispute settlement panels to dismiss frivolous claims by investors.
  • Brings TPP ISDS process more in line with U.S. court procedure minimizing the cost to governments in defending such suits.
Investment Chapter
Article 9.28
  • Not in NAFTA