Pacific Trade Deals

24 Aug 2016

Image via zerohedge.com

 

It looks like the United States will not enter into the Trans Pacific Partnership, as neither of their presidential candidates are supporting it. Without the US there will be NO Trans Pacific Partnership Agreement (TPPA) due to the way the deal is currently structured.

So step aside, United States, and let China take your place! Last week there were meetings in Vietnam with Far East and Pacific countries to create an agreement called RCEP – the Regional Economic Partnership. China was not included in the TPPA, and the US is not included in RCEP; this may force a change in the US that will see the TPPA entered into. 

China is a leader in the discussions on RCEP.  If agreed, RCEP could include 16 nations and 3.4 billion people. One reason that China is keen on RCEP replacing the TPPA is that it will help China maintain ground with its manufacturing competitors, such as Vietnam. Under the TPPA, for example, Vietnam would have greater duty-free access than China to the United States and other TPPA nations.

The question is what will be the impact on the US if RCEP replaces the TPPA; US goods entry into China and the RCEP nations will face tariff and other barriers. So essentially what we are seeing is a power struggle play out between the US and China, where US domestic presidential politics will likely end up disadvantaging US manufacturing, agriculture and horticulture. That would seem to be the opposite of what the presidential candidates actually want for the US (and what the US needs to revive its sluggish economy) as well as another sign of the economic power shift from the US to China.

Time will tell.

 

- Mike Chapman, CEO