Representing 40% of the world’s economic output, the Trans-Pacific Partnership (TPP) agreement is set to bring free trade and other benefits to those countries involved. But, it is proving quite controversial and in the US its outlook may be doubtful despite the bill being approved for fast-track through Congress. This also happened in the 1990s with the passage of NAFTA and memories of that still linger on Capitol Hill. Promises of US job creation somehow did not materialize with the passage of NAFTA. Instead, what manufacturing was left in the US headed south to Mexico most notably the automotive industry. Fears of a repeat of this scenario with the passage of TPP are rising.
What hasn’t been noted in much of the press is the fact that yes, the US did lose quite a bit of its automotive manufacturing, in particular, to Mexico but it also forced the industry to invest in new technology, innovate, improve and expand its supply chain to become global leaders within the industry.
In addition, the details of the pact remain a mystery to many people which has resulted in numerous questions of its true benefits. Be that as it may, this potential trade agreement is historic and could usher in a trade renaissance between the Pacific-rim countries of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, US and Vietnam.
For Vietnam, reduced tariffs and the opportunity to lessen its dependence on trade with China will likely spur economic growth further in what is already a fast growing country. The same may occur with Mexico and Canada, both of which rely heavily on US trade. But, on the other hand, concerns of human trafficking in Malaysia may see that country left out of the agreement if left unsettled.
There are drawbacks and discussions are ongoing over special protections some countries have for certain industries such as US’ dairy market and Japan’s rice market. But, among the goals is to provide not only reduced or elimination of such tarrifs but also greater transparency of varying regulations among the participating countries governing such areas as product safety or the environment.
Where is China in all of this? Good question and another criticism of the pact. Some accuse the US of using the TPP as a means to exert its political power in Asia in an attempt to ward off China’s growing influence. But China will continue with its own plan of recreating its “Silk Road” initiative by expanding and investing in infrastructure projects across Asia as well as the creation of the Asian Infrastructure Investment Bank without US involvement. Will one impact the other? Yes, but how so is yet to be known.
First though, the TPP bill must now pass the US House of Representatives and the word is that it will be a tough fight. The likelihood of implementing the TPP this year as hoped is questionable as there are too many questions from a country that appears to be willing to let the global economy pass it by.