Complaints, Conspiracies -- and China. Oh My!

The Trans-Pacific Partnership deal that was tentatively reached on 5 October 2015 is an expansive agreement forged by 12 participating Pacific Rim countries.

It allows countries making up 40% of the global GDP to lower or abolish tariffs, making trade cheaper and promoting business in all countries involved. It includes international trade, environmental issues, labor and intellectual property rights – most notably the hot contentious issue of bio-pharma patents. 

The absence of China from this potential trade agreement was often mentioned, but rarely explained by the North American media.

By contrast QQ.com, Asian social media, has been abuzz since the announcement of the agreement earlier this week. There was talk about China being shut out of this deal from both camps. Those who feared this would negatively impact the Chinese economy by isolating it from the “outside world” and from others who think China does not need to be part of such a partnership.

Studies suggest that the Chinese economy stands to dip negligibly as a result since it enjoys trade partnerships with 120 other countries. However conspiracy theories abound on the social media platform. There are fears that the eventual inclusion of India into the TPP will greatly impact the Chinese economy. They fear China will be force to make concessions by the USA and its partners. And while confirmed that China and the US are not enemies (thank goodness!), there is mistrust and fear over Sino-US competition in the Asia-Pacific region.

Interestingly, while China’s media is pointing fingers at the TPP and India, China is negotiating its own free trade agreement, the Regional Comprehensive Economic Partnership (RCEP). Negotiations began in 2012 and will cover trade in goods, services, investment, economic and technical co-operation, intellectual property, competition, dispute settlement and other issues.

While the TPP agreement appears to cover more trade between richer countries of the world, these countries are also slower-growing than RCEP ones.  RCEP nations have outpaced TPP ones in GDP growth: 

Covering about half the world’s population, the RCEP countries pose a formidable alliance:

India is sometimes described as the “swing” country: a potential future partner in TPP and a negotiator in the RCEP.

These past weeks US and Canadian protesters expressed concerns over issues such as dairy industry protection, higher drug prices and increased job loss over the fear of “NAFTA on steroids.”

“The TPP would expand the North American Free Trade Agreement (NAFTA) "trade" pact model that has spurred massive U.S. trade deficits and job loss, downward pressure on wages, unprecedented levels of inequality and new floods of agricultural imports.”

The TPP will remove trade barriers across 40% of the global economy for North American industries. It offers the opportunity to evolve global trade and business models that have come with rising global economic integration. This particular agreement represents a valuable opportunity to gain a foothold in Asian economies. With market access to partnering countries for goods and services, business and investment opportunities will abound.

One has to wonder why any country wouldn’t consider a trade alliance as part of a positive protected environment. Especially when faced by a rival trade agreement covering one half the world.

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Sources:

Lynda at Sonoran Sun | Private Equity Investments 

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