TPP: What’s in it for Australia?

In this article we will discuss the impact of TPP on Australia.

Over the long term, Australia would probably benefit from increased productivity and access for Australian industry to parts of Asia that are currently closed to it. However, the advantages for Australian consumers are not that obvious.

SUGAR– One of the most lucrative markets that Australia wants access to is America’s sugar consumers but this may be a struggle as the US sugar lobby is very powerful.

DAIRY- The US and New Zealand all want more access to Canada’s milk market, which the government has traditionally restricted supply to thereby keeping prices high.

MEDICINE- Currently, the government sets the highest price and also subsidizes the cost of these medicines. But the US wants the market to be less regulated to benefit new medicine manufacturers.

REGIONAL COOPERATION- Members of the TPP account for nearly 40 per cent of the global GDP and Australia would benefit from being part of the regional supply chain.

Current Situation

Many of the sweeteners that Australia are hoping for, including access to America’s sugar consumers and to Canada’s dairy market, are probably unlikely to happen. This has some National MPs starting a “no sugar, no deal” campaign, which demands Australia abandon negotiations if access to new sugar markets is not included. Also, there is speculation that the US could be using the agreement as a way of limiting China’s expansion. This has triggered a rival Chinese deal, the RCEP, which excludes the US and which Australia is also involved with.

Source- http://www.news.com.au/finance/economy/the-transpacific-partnership-agreement-whats-in-it-for-australia/news-story/418aaf44c026a90a6febfc908481c838

If Trump has His Way, Singapore Will Lose Out if TPP Not Ratified

In the article, How Donald Trump’s views on the TPP could sink Singapore, the author examines a Trump presidency could would affect the TTP as well how the TPP, or lack thereof, will affect other countries in the Pacific, mainly China.  The TPP involves 12 countries that account for approximately 25% of global exports and 40% of world GDP, so the deal is very significant.  Furthermore, the World Bank predicts each participating countries’ GDP will climb by 1.1% by 2030 should the deal come into being.  With the ratification or dissolution of the TPP, Singapore stands to gain much or experience significant losses.

Donald Trump’s recent comments on the TPP and China may have some truth to them.  He believes China will attempt to take advantage of its position as not being part of the TPP and initiate back door trading with the countries involved, including Singapore.  China stands to lose out on $46 billion worth of investments and trade each year if the TPP is ratified.  Interestingly, China already has a free trade deal with Singapore.  That being said, Singapore stands to lose much given the fact that total trade as a percentage of GDP is over 300%.  For comparison, the number is just 28% for the US.  So the TPP not being ratified could seriously hurt Singapore’s economy.

In 2015, Singapore was China’s second favorite investment destination.  China actually has free trade deals with two-thirds of the countries in the TPP agreement.  These previously existing deals insulate China a bit should the TPP be ratified.  Unfortunately, a country like Singapore does not have these deals in place.  It’s not surprising Singapore has very publicly supported the TPP, and no matter which US presidential candidate is elected, Singapore will continue to push for ratification.  If Trump is elected, it will be interesting to see if he completely scraps the TPP as he says he will even in the face of serious objections from countries with high vested interest like Singapore.

 

Do you believe Trump is telling the truth about how he feels about the TPP?

With China not being a part of the TPP, does Trump actually have a valid point?

What will Singapore do if the TPP is not ratified?

http://sbr.com.sg/economy/commentary/how-donald-trumps-views-tpp-could-sink-singapore

TPP to balance out trade deficit between Vietnam and China?

An article published in The Diplomat, titled “The potential of TPP for Vietnam”, dtd September 04, 2014 by Truong-Minh Vu & Nguyen Nhat-Anh (http://thediplomat.com/2014/09/the-potential-of-the-tpp-for-vietnam/) asserts  how the TPP will help counter the trade deficit with China. The article argues that while Vietnam has been majorly exporting only raw materials to China, imports from China are a broad range of products for export production including machinery, steel, chemicals, and raw materials. The authors contend that a spill over effect of the excess trade with Canada and US may lead to deeper cooperation in development of higher quality services and production enablers. Another aspect of TPP is the soft power balance in Asia. While China has steadily increased its assertion in Asia, Vietnam following a non-aligned policy cannot directly have alliances with other countries. In such a state, a trade deal is a perfect soft deterrence for China’s growing influence in the area. So how will TPP actually work in favor for US and check China? Will we see any retaliation from China to counter the TPP (lowering prices on goods, services,  Chinese companies expanding in Vietnam? With the Regional Comprehensive Economic Partnership (RCEP) in horizon, what would be the long term impact of TPP?

TPP Trade Deal: Who Stands to Gain, Suffer in Asia-Pacific

According to the article, (http://www.bloomberg.com/news/articles/2015-10-06/tpp-trade-deal-who-stands-to-benefit-suffer-in-asia-pacific), the TPP deal sealed Monday in Atlanta will bring various gains and losses to the countries involved, as follows:

  • Japan: Japanese car and auto-parts makers may be the biggest winners, as they gain cheaper access to the US, the industry’s largest export market. During negotiations, Japan was forced to reduce some of the protections granted to its rice farmers, creating a non-tariff import quota of 1% total consumption, while livestock farmers may be hit harder, as tariffs on beef will be cut from 38.5% to 9%.
  • Australia: The TPP deal will remove approximately $9 billion of import taxes from Australian trade, and they will gain access to the US sugar market. Additionally, the cut in the beef tariff will help Australian ranchers, and seafood and most horticulture products will see tariffs dropped as well. Furthermore, Australia and New Zealand successfully pressured the US to compromise on the amount of time that pharmaceutical companies will get to monopolize new biotech drugs, which could lead to cheaper drug prices and more competition.
  • New Zealand: Tariffs are due to be eliminated on 93% of New Zealand’s trade with its TPP partners, representing annual savings of approximately $259 million New Zealand dollars, with the Dairy industry seeing savings of approximately $102 million New Zealand dollars per year. Additionally, tariffs on beef exports will be completely eliminated, with the exception of Japan, where they will drop from 38.5% to 9%.
  • Vietnam: Vietnam will be among the biggest winners, with GDP being boosted approximately 11% and exports growing 28% in the next ten years. Reduced imports in the US and Japan will benefit the country’s apparel manufacturers and the fishing industry will benefit from elimination of import tax on shrimp, squid, and tuna. Eliminating import taxes on pharmaceutical products, however, will lead to tougher competition between domestic Vietnamese companies and foreign companies. The TPP will also increase patent protection, restricting Vietnamese companies’ access to new products as well as inhibit their ability to produce new drugs.
  • Malaysia: State-owned enterprises in Malaysia may suffer from the TPP deal, which calls for equal access to government procurement, however electronics, chemical products, palm oil, and rubber exporters are among beneficiaries.
  • China: Since China failed to join the TPP, they are likely to be among the biggest losers, and are now indicating some interest in joining the TPP in the future. In the meantime, Chinese exporters may lose some market share in the US, Japan, and Vietnam. To combat these losses, China will try to reach more free-trade deals with other countries, especially in Asia.

Trans-Pacific Partnership Deal is Reached

According to the article, (http://www.nytimes.com/2015/10/06/business/trans-pacific-partnership-trade-deal-is-reached.html?_r=0), the 12 Pacific Rim countries involved in the TPP reached a final agreement on Monday, preparing President Obama for what could be the toughest fight of his final year of presidency: securing approval from Congress.

Now that negotiations of the TPP have come to an end, the deal will face months of scrutiny in Congress, where opposition is imminent. Regardless, for President Obama the deal could be a legacy-making achievement; the TPP draws together countries representing 40% of the global economy, and spins them into a web of common rules governing trans-Pacific commerce. The argument that the TPP will be key in limiting China’s power in the global economy is Key to the President’s hard sell of the act to Congress. Obama stated: “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”

Vietnam textiles will face new challenges in the TPP

Once Vietnam joins free trade agreements like TPP and Vietnam EU FTA, it will face new challenges in the textile and garment firms. Their use of outdated technology, shortage of capital and weak management capacities will raise quite a lot of competitive pressure from the large global companies was highlighted by Tran Quang Nghi, chairman of National Garment and Textile Group(Vinatex) at a conference on “Garment and Textile – Opportunities and Challenges.”

http://en.vietnamplus.vn/garment-textile-firms-face-tough-bigger-rivals/82512.vnp

Also, Truong Thi Thanh Ha, general director of Dong Xuan Knitting Company said that domestic textile and garment companies have not invested in modern technology in recent times. Seeing this, the question arises for Vietnamese government as to whether they will support domestic business or not because it seems they have more challenges than opportunities from the upcoming trade pacts. Vietnamese companies depend to a great extent on imported materials which along with low productivity will make it more difficult to take advantage of FTAs.

Phan Chi Dung, head of the Light Industry Department, said that despite high growth rates in recent years, the value added to garment imports is still limited. Vietnam would have access to wider market once the TPP is in place, but investors will gradually prefer to shift their manufacturing base there. This would require businesses to restructure to enhance their competitiveness. Bank for Investment and Development of Vietnam (BIDV) has already committed to provide loans of $2 million to support garment and textiles firms for the next 5-year period.

There are mostly small and medium sized enterprises in Vietnamese textiles, and the 12 countries part of TPP account for 70% of total value of garment export made by Vietnam. Therefore, Government of Vietnam has targeted to increase Vietnam’s textile and clothing exports to $35 billion by 2020 and further to $60 billion by 2030.

Importance of TPP to Latin America

The TPP is discussed in terms of ‘pivot to Asia,’ but it is also very important to the three Latin American countries of Peru, Chile and Mexico. The TPP will not transform their economies but will allow them to enter the world stage with similar rules to the United States and other wealthy countries. CFR’s Shannon K O’Neil says that these countries will produce more value added goods in  a competitive way.

http://www.cfr.org/latin-america-and-the-caribbean/does-tpp-mean-latin-america/p36556

However, these countries already have free trade agreements and in the case of Chile and Peru, their commodities are not too high to begin with. TPP won’t be as transformative for others, but it will help them to enter the world stage and give access to more markets. So TPP is like joining  a club of wealthy and well performing countries, and if you are a part of it then you need to perform. This is the case of Vietnam who has already tried to upgrade their exports. Even though this won’t boost the trade between U.S. and these countries, it could deepen existing regional supply products like autos, electronics, and aerospace and also open up new markets, and reduce tariffs.

There are also some concerns in the Latin American countries like the IP rights and the challenge of whether prices of particular drugs will go up or make it affordable to segments of the population. In Mexico, major concerns revolve around auto parts. If they open up North American industry to heavy Japanese competition, then the domestic auto industry may suffer.

How important will the TPP be in the short term? Mexico can take the advantage quickest because of diversity in their manufacturing industry. Also, Mexico complements rather than competes with what Chile, Colombia and Peru produce. It can strengthen Mexico’s integration with the U.S. and protect the linked sectors from losing ground. If they were left out of TPP then it could have broken current U.S.-Mexico supply chains.