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Trump Is Considering Joining The TransPacific Partnership (Now TPP-11). Will This Be Possible And Advantageous?

ArmchairTechInvestor, April 22, 2018, by Brad Peery

Book Under Development-Simon and Schuster: China vs. U.S. (Scheduled publishing date: September 1, 2018)
Book on Trump’s Political Agenda and Achievements,

President Trump’s trip to Asia in early November, 2017, was supposed to be about the possible de-nuclearization of the Korean Peninsula. However, an important element of the trip was to make it clear that Trump wants to follow-up on the U.S. withdrawal from the TPP by arranging bilateral trade agreements with the countries in Asia. Had the U.S. done this 15 years ago with China, instead of relying on the World Trade Organization to police the compliance of countries with its edicts, including China, the trade situation with China might be quite different today.

*An advantage of an agreement such as TPP includes preferential terms for member countries that can reduce tariffs from what they might be otherwise. The TPP group of countries represents 16% of global GDP. However, countries other than the U.S. would be only 35% of TPP, and the U.S. would be 65%. Japan is 16% of the GDP of the original 12 countries. And, Mexico and Canada, with whom the U.S. is negotiating a Nafta agreement, together are 9% of the GDP. The other 8 countries total only 10% of the GDP of the original 12 countries.

Not being a member of TPP could be negative for U.S. farming interests. For example, in July, 2017, Japan imposed a 50% tariff on U.S. frozen beef. Australia’s tariff cost is 27.5% because of their membership in TPP. Japan has also signed an agreement with the European Union to import their farm products. It is working on a similar agreement with Canada, whose pork producers are taking market share from the U.S.

**There are many barriers to the U.S. rejoining the TPP. The other eleven countries have already reached an Agreement, forming TPP-11. Once 6 countries ratify the agreement, it will become active. That could occur about first quarter, 2019. Until the Agreement is ratified, the U.S. will not be able to join it. 20 provisions in the original agreement, some of which were important to the U.S. were eliminated. These would need to be restored, and other concessions given to the U.S. to make this a better deal that the original agreement. To add additional benefits for the U.S. and get all 11 countries to agree to add the U.S. as a new member could be very difficult.

While the U.S. is emphasizing its policy of negotiating bilateral trade agreements, China is doing just the opposite. It has developed a trade agreement, called the Regional Comprehensive Economic Partnership with 16 countries making up 39% of global GDP. China is the main trade competitor of the U.S. on the global stage. It has an ambitious project called the One Belt, One Road Network that will connect 60 countries to China economically, as joint investors, and perhaps also politically and as defense partners. These types of activities can result in relationships that go far beyond trade and can involve joint investment, political and military relationships.
*Trump’s Pacific Trade Tear, Wall Street Journal Editorial, November 11, 2017
**Re-Entry to Trade Deal Won’t Be Cheap, Wall Street Journal, by Bob Davis, April 16, 2018

ArmchairTechInvestor Opinion

It may turn out the renegotiating Nafta with Mexico and Canada will work out to the benefit of the U.S. mainly by requiring and verifying certain levels of U.S. content in automobiles imported into the U.S. It is much less certain that this will be the case for the U.S. withdrawal from the TPP. There is no evidence yet that any of the countries will be willing to negotiate bi-lateral agreements with the U.S. There are benefits in developing relationships with countries in Asia, beyond just the trade aspect of those relationships. Having the TPP as one element of a relationship with a country can be very beneficial overall.

If the U.S. wants to be a player in Asia, it will need to be viewed as a reliable longterm partner. Being a democracy that can change policy, as administrations change, does not bode well for forging lasting partnerships. That is the main issue for the U.S. in developing lasting foreign policy relationships, including trade relationships. It is no wonder that results occur such as how disadvantaged the U.S. is in its trading relationship with China. They know who they are, and where they are going, and can therefore take a very longterm view in executing their plans.

The U.S. withdrew from the Trans Pacific Trade Partnership (TPP) The TPP was the 12-nation trade deal that included the United States, Japan, Mexico, Canada, Australia, New Zealand, Vietnam, Peru, Chile, Malaysia, Singapore, and Brunei. It was never ratified by Congress. Trump’s America First theme, and the cancellation of the TPP has led many in Asia to view the U.S. as anti-trade, and China as pro-trade. However, the U.S. has negotiations underway with many of these countries, plus the Nafta trade agreement with Canada and Mexico. The main uncertainty is whether the U.S. can negotiate a bi-lateral agreement with Japan, which prefers to have the U.S. join the TPP.

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