The Supply Chain Matters blog provides observations on the new CPTPP trade pact that went into effect in 2019, specifically on its reported negative impact on certain U.S. industry sectors.

This blog serves is a supplement to our third 2019 Prediction calling for unprecedented levels of global supply network challenges reaching high levels of executive concerns among industries and individual businesses.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which was reformulated from the original Trans Pacific Partnership (TPP) after the United States withdrew in early 2017, went into effect on at the beginning of 2019. This free trade agreement currently includes Australia, Canada, Japan, Mexico, New Zealand and Singapore, with Vietnam now part of the agreement starting today. Other countries in the ratification process include Brunei, Chile, Malaysia and Peru.  Global Trade

According to various reports, the new eleven nation trade agreement covers economies representing around 14 percent of global economic output and 500 million people. The Peterson Institute for International Economics indicates that member economies stand to gain upwards of $147 billion in global income benefits from this trade pact. The non-profit agency further estimates that overall, the U.S. will be worse off because US exports will now be less competitive in CPTPP nations.

Compared to the original TPP, changes to the pact include suspension of the intellectual property provisions in the original agreement that were pushed for by the United States. Other changes were made to the agreement’s chapter on labor and environmental rules as well as to its provisions on investor-state dispute settlement. In all, about 20 of the more than a thousand provisions of the original TPP remain in the revised agreement.

Asian business media has a generally positive outlook for CPTPP in the new year, especially in the light of escalating trade tensions among the United States and China. And, as the trade pact grows among other Asia and global based nations, the likely attractiveness will grow since other global economies would not want to be excluded in such a pact.

 

Alarms for U.S. Businesses or Industries

U.S. business media and certain industry groups have sounded concerns and alarms concerning CPTPP’ s effects on certain industries.

The conservative Wall Street Journal, a general friend to the Trump Administration, recently penned a rather scathing Editorial column , America’s Lost Markets. The editorial essentially indicates that U.S. producers, especially agricultural businesses will be the losers.  The column indicates that U.S. farmers will lose out to Australia, Canadian, and to some extent, Latin American farm interests in this new trade agreement.

As an example, current tariffs for Japan concerning the import U.S. beef currently stand at 38 percent.  Tariffs exist at 9 percent for imported beef from Australia, Canada or New Zealand. Australian farmers further stand to gain from the ongoing steep tariffs enacted by China on certain U.S. agriculture products including wine, certain fruit, vegetables and seafood. The president of a U.S. wheat association indicates “imminent collapse” of U.S. wheat exports to Japan as a result of the trade pact as U.S. farmers will face an effective 40-cent a bushel price disadvantage with Australia and Canada.

Australian business media has been eager to point out that 20 percent of that nation’s grain exports were sold to countries within the new trade agreement and that the country’s farmers are eager to the opportunity to take additional market share from U.S. agricultural competitors.

Economists and scholars point to other ASEAN countries that are considering joining on to CPTPP in its next round. The list potentially includes China, Indonesia, South Korea, Taiwan and Thailand. The implication for global industry supply networks can be significant and far-reaching.

 

An Insightful Interview and Podcast Coming Next-Week

This Editor recently had the distinct opportunity to speak with renowned globalization scholar and author, Dr. Parag Khanna, author of the recently published new book, The Future is Asian.

Our discussion reflected on changing trends in global supply chain management as if effects the future of Asia in business markets, production sourcing and global based supply chain dimensions. One of many discussion areas was the changing global and Asia-based trade landscapes and specifically the effects of CPTPP.

Stay tuned to Supply Chain Matters next week as we feature highlights of this discussion in a featured recorded podcast.

 

Bob Ferrari

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