CPTPP finally ratified but is also causing nervousness
NEW YORK: Wendy Cutler, the Vice President of the Asia Society Policy Institute and a former acting deputy US Trade Representative who had also negotiated the US led 12-member Trans-Pacific Partnership (TPP), could hardly conceal her disappointment when this correspondent posed a question at a recent discussion at the Asia Society in New York on what she thought about the US withdrawal from the TPP. She called it a “mistake”. Pulling out of the TPP was the first foreign policy act by the then newly installed US President Donald Trump in early 2017.
However, the TPP did not die, as some experts were predicting, though it was gasping for breath after the US withdrawal.
The agreement, now known as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) embracing 11 member states led by Japan, was given finishing touches, with seven of its members formally ratifying the CPTPP last Sunday.
The ratification has caused nervousness among US exporters, particularly those engaged in the exports of high-end products such as aircraft, sophisticated machinery, as well as agricultural products. The 11 CPTPP member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The Asia-Pacific region em braces the world’s most dynamic growth markets and is seen by many as a growth engine for American exports.
The fact that the US is no longer a member of this multilateral partnership – President Trump has a strong aversion to anything that smacks of multilateralism – has caused trepidations among US exporters who were eager to benefit from the huge market accessibility allowed to them if the US had been a member.
There are now fears that other countries might step into the breach and reap the benefits that could have accrued to American shippers.
In particular, American suppliers of soybeans, corn, meat and other agricultural products will bear the brunt of the loss as a result of this development.
US agricultural produce suppliers, for example, have been the among the worst sufferers: already facing a downturn in commodity prices, and further hit by Chinese tit-for-tat tariffs, these suppliers will now also face the hurdles in the way of market accessibility because of the CPTPP.
Critics say that the Trump administration has, ostensibly, shot itself in the foot by pulling out of the TPP.
The CPTPP region will cut tariffs among its member states making their exports cheaper in each other’s markets. It is estimated, according to US research groups, about 90 percent of the tariff cuts will go into effect immediately, besides eliminating other redtape hurdles by allowing customs clearance before the arrival of shipments.
The American farmers’ plight becomes even more distressing, considering that their hopes had been raised with the so-called Asia pivot, designed and engineered by the previous administration of President Barack Obama.
The TPP was a key element in the US pivot strategy which had a combined security and economic component to assert US influence in the Asia Pacific region.
The farmers will face disadvantageous treatment from the CPTPP countries that lack free trade agreement with Washington.
The case can be illustrated with the example of Japan which is a huge market for U.S. meat which could now be replaced by Australia, also a big meat supplier in Japan’s geographic proximity.
Australian exports of meat products could benefit from a drastic cut in tariffs by Japan once the CPTPP goes into effect.
Other American exports that could attract tariffs will be agricultural products such as wheat whose price will be much higher compared to Canadian and Australian wheat exports to Japan which will reduce tariffs for the two CPTPP members.
While Trump has openly rejected the idea of multilateralism, his efforts to get a free trade agreement with Japan have, so far, met with little success. This will translate into a US$2 billion real income loss for the US.
Two years into the Trump administration, questions are also being raised about the economic prudence of pulling the US out of the TPP which some think tanks argue could have bolstered the country’s real income by some $131 billion annually.
Thus, besides not gaining the additional real income of some $ 131 billion, the US has lost $ 2 billion by way of US companies being put to a disadvantage in the CPTPP markets.
Indeed, many pundits are already questioning whether Asia produces for the US market or whether the US instead produces for Asia’s huge market.
“We have almost reached a stage when Asia no longer produces just for the US market. More and more Asian countries are producing increasingly for each other. As a matter of fact, the US is also, increasingly, producing for Asian markets. In the circumstances, does it make sense for the US to have just walked away from the TPP which could have offered US suppliers greater access to the world’s most dynamic region?” one Asian diplomat told Bernama on the condition of anonymity.
However, he added that the “door will always remain open for the US to re-enter the CPTPP”. — Bernama