TRANS-PACIFIC PARTNERSHIP Benefits to U.S. Agriculture

An article published on October 16th, 2015 by the United States Department of Agriculture, http://www.fas.usda.gov/sites/default/files/2015-10/tpp_details_alcohol_10-16-15.pdf, describes how the TPP will provide significant new market opportunities for United States exporters. The TPP will promote economic growth in the Asia-Pacific region, which will increase the demand for U.S. food and agriculture products. In specific, the TPP strengthens trade rules and provides new market access for US exports to Japan, Malaysia, Vietnam, New Zealand, and Brunei. Without the TPP, US alcohol exports to the TPP region face a competitive disadvantage and are subject to many duties and tariffs. The US exported $579 million of wine, $359 million of beer, and $539 million of distilled spirits to countries in the TPP region in 2014. Of that, the US exported $2.9 million in alcoholic beverages to Malaysia. Malaysia’s current import duties for wine range from $2.08-$25.58 per liter, for beer are $1.18 per liter, and for distilled spirits they range from $0.71-$22.04 per liter. Under the current agreement, all of the import duties for alcoholic beverages entering into Malaysia will be eliminated 16 years after the agreement is ratified. This could have a significant impact not only on the Malaysian and the United States economy, but also on all of the other countries that Malaysia imports their alcoholic beverages from.

What impact will this have on Malaysia’s economy? How will Malaysia’s domestic alcohol industry be affected by the TPP? Will the US and other countries have an opportunity to export significantly more alcohol to Malaysia?

What does Trans Pacific Partnership mean for Vietnamese Clothing Industry?

While the whole world is looking at TPP passage, the Vietnamese Clothing Industry will have a special interest in TPP proceedings. Vietnam is one of the major apparel exporters to the United States and a free trade agreement would mean a cost reduction of up to 16.5% due to tariff waiver. Such a reduction will make Vietnamese apparels more competitive in the US market alone.

Let us take for example Cotton T-Shirts. In 2014, the United States Import for these articles was $3.9 billion. The major import was from Honduras who had 12% ($503 million) of the import share while Vietnam was 8th with 5.1% ($205.6 million) worth of imports. For 2015, Vietnam has already exported t shirts worth $173.9 million dollars till July, while the leaders Honduras have exported $299.4 million. Now please note that this data is only for t-shirts. There are many other categories of clothing where Vietnam is doing extremely well (like Shirts, where it is the top exporter to US).

So what does TPP mean for Vietnamese T Shirt manufacturing? If we note that in the top 10 exporters to US, only Mexico and Vietnam are TPP partners. Thus any reduction in tariffs will give an advantage to these two countries over other countries which will lead to greater exports from Mexico and Vietnam. Moreover, considering Vietnam, China and India are the only Asian countries in top 10 suppliers, we will see an influx of many manufacturers from other Asian countries to Vietnam to take advantage of the partnership benefits.

With the stated benefits for Vietnamese clothing industry, what effects can we see on the economies of non-TPP countries esp. China and Honduras, for whom US is the main export market? What will the influx of new manufacturers mean for labor rates in Vietnam? With the TPP taking a backseat, what is the future of the market where many foreign companies are trying to get a foothold?

*US Import data for T shirts and shirts taken from https://usatrade.census.gov for HTS code 610910.

What the Trans-Pacific Partnership Means for Southeast Asia

An article published on July 27th, 2015 in The Diplomat (http://thediplomat.com/2015/07/what-the-trans-pacific-partnership-means-for-southeast-asia/) describes how the Trans-Pacific Partnership could be a huge step in the right direction for the four Southeast Asian countries of Singapore, Brunei, Vietnam, and Malaysia that are involved in the negotiations. These countries could see significant financial and social reforms stemming from the TPP. For example, Vietnam and Malaysia currently have some of the world’s highest tariffs and non-tariff barriers against foreign businesses, which has reduced foreign competition and caused rapid growth in their economies. Even with their high tariffs, Vietnam still exported almost US$7 billion worth of apparel and US$2.4 billion worth of footwear to the United States in 2012. Upon completion of the TPP, Vietnam will be able to export to the United States at a 0% tariff rate, which will make their exports much more competitive in the American market and could significantly increase their share of the market. The phasing out of these high tariffs will also expose US domestic industries to more strict competition from overseas, but ultimately the new reforms stemming from the TPP will make these Southeast Asian’s economies stronger. Should the United States and other countries involved in the TPP want increased competition from overseas? Why would the Southeast Asian countries want to open the doors to change and reforms? What effect will the TPP have on industries in the United States? Could the TPP cause even more foreign imports into the United States and other similar countries?