WHAT IS TPP?
The TPP is a trade and investment agreement designed to eventually create a new single market, similar to the EU. The twelve Pacific Ocean countries who signed up to the TPP in February 2016, represent roughly 40% of the world’s economic output.
The TPP was created to improve economic ties, generate serious tariff cuts to help increase trade and ultimately boost growth. It was hoped that member countries would foster closer relationships on economic policies and regulation. Furthermore, by reducing tariffs, the TPP was set to level the global playing field among countries that already trade with each other. The partnership also addresses many non-tariff barriers, such as the standards and regulations that govern some services and investments.
WHICH COUNTRIES ARE STILL INVOLVED?
The remaining 11 member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Together, these countries are responsible for almost 40% of world trade and have a population of about 800 million. Notably, China and now, the US are not part of the agreement. The remaining 11 countries indicated that they wanted to press ahead TPP despite the US’s absence.
SO, WHAT HAPPENS NOW?
Many experts believe that China will fill the void left by the US. China was not involved with the TPP, however it has been actively negotiating an alternative agreement called the Regional Comprehensive Economic Partnership (RCEP). With this partnership comes much lower standards for the environment, labor rights and intellectual property protection compared to the TPP. Moreover, because RCEP does not include the United States, some say that this puts US businesses at a real competitive disadvantage in Asia. The US absence from TPP could seriously impact it’s existing relationships with trading partner countries. As an example, Peru, which is largely a trade-dependent country, may turn to China as it’s new principal trading partner.
Robert Lawrence, a professor at the Harvard Kennedy School and a trade policy expert said recently, “There’s a broader geo-strategic and leadership issue. I think that’s where we’ve had a whole group of Asian leaders and Pacific leaders who’ve put their neck out, in a sense — who negotiated agreements, some of which were costly in their domestic political terms, and now are going to be disappointed about that. And what it all means is an increase in China’s influence in the region.”
WHAT PEOPLE SAID ABOUT TPP.
MORE ON TPP
- TPP covers comprehensive trade areas not currently dealt with by the World Trade Organization.
- TPP includes enforceable labor standards that will impact members. Vietnam, for example, will have to allow the creation of independent unions for the first time in its history. TPP also addresses over-fishing and illegal logging, whilst countries not doing enough to combat trafficking in endangered animal species, could face trade penalties.
- TPP is seen by China as a challenge to its growing dominance in the Pacific region. China had been invited to join the trade group but balked at restrictions that the deal would have placed on its financial sector and other areas.
Sources: The BBC, The Economist, CNBC, SBE, PRI and the USDA.