This past weekend, political leaders of the Asia-Pacific Economic Cooperation forum met in Lima Peru to discuss free-trade, and specifically pending ratification of the Trans Pacific Partnership (TPP). According to various media reports, the delegates sent a direct message to President-Elect Donald Trump, namely that they will move forward with Asia-Pacific trade pacts with or without the support of the United States. The implication could well be more trade influence for China.
The election of Trump reportedly loomed large over this summit of 21 nations, and President Barack Obama had his hands full in trying to assuage fears of the U.S. withdrawing from TPP and other pending global trade pacts. The U.S. Congress has failed to take up TPP ratification in the now lame-duck session, with little likelihood of doing so in 2017 now that there is full Republican Party control across all branches of government. During the presidential campaign, Donald Trump blamed bad trade deals as one of the primary causes of manufacturing and other job losses in the U.S. and threatened to specifically scrap TPP and re-negotiate the North America Free Trade Agreement (NAFTA). In the light of this current perceived trade retrenchment climate, China indicated at the summit that the country was prepared to take the lead in promoting trade. The TPP alliance was a critical component of the Obama policy to counter China’s influence in influencing trade deals and more attractive trade arrangements among Asia-Pacific regions.
This weekend, the countries of Chile and Peru, two existing members of TPP, indicated they were interested in joining the Regional Comprehensive Economic Partnership (RCEP), a China led pact that could involve 16 nations.
Leaders of Both Canada and Mexico also indicated this weekend that they remained committed to North America based trade, which leaves open the question of how much they are willing to re-negotiate the existing NAFTA agreement.
As industry supply chains complete 2016 activities, there is a clear uncertainty looking out to 2017 and beyond if the United States, one of the globe’s largest trading partners takes on a harder trade stance. Many are looking to President-Elect Trump’s policy statements and pending Cabinet appointments to assess how hard a line the U.S. will take.
There are obviously many implications related to protections to intellectual property protection rights (IPP), more open access to Asia Pacific markets and the potential for tariff implications for certain products. All could involve impacts to existing global supply chain product sourcing strategies.
Stay tuned as we continue to assess these changing geo-political developments and their impacts to global supply chain management strategies.