TPP - Trump's gift to China [Podcast]

The Bannon departure and the announced Section 301 investigation prompt us to revisit our discussions with Dr Deborah Elms, Founder of the Asian Trade Centre back in March. On a client call, she discussed the implications of the US's withdrawal from the TPP

From Tom Mitchell in today's Financial Times (Link to Full Article) : "As it stands, Chinese officials cannot believe their luck, beginning with Mr Trump’s decision to abandon the Trans-Pacific Partnership trade agreement on his first full day in office. The TPP would have locked the US and China’s largest Asian trading partners in a formidable economic block from which Beijing was initially excluded. In the likely event that the Chinese government later applied for TPP entry, Washington would have had its best opportunity to pry open the China market since Beijing asked to join the World Trade Organisation in the late 1990s."

Paul and Deborah came to the same conclusion (Podcast with Deborah Elms ) - the biggest loser of the US withdrawing from the TPP negotiations is probably the US itself. Under TPP, Companies from the US would have gained unprecedented access to the other eleven markets, and now it is unclear if, and when, the US will be able to negotiate bi-lateral treaties to gain the same benefits. Another loser is Vietnam. Vietnam always viewed TPP as opening access to the enormous US textile market, so their gain from a TPP deal has diminished. Japan is also a loser in the energy space, where the US has a current policy stating that energy can only be sold to Free Trade Agreement (FTA) partners. There has been some discussion that China could be the big winner from the US retreating from global trade, but it is still unclear what role China will want to play in the region. Regional Comprehensive Economic Partnership (RCEP) is a potential vehicle for them to exert leadership, but it seems more likely right now that they will want to work through their One Belt-One Road Initiative where they have a greater ability to control the terms.

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Editor

Interesting to note that the balance of the TPP 11 countries will be meeting in Australia around the same time as the APEC meeting that President Trump could be attending. TPP is happening and the big loser for not participating is the US.