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Companies that engage in international trade could be left out in the cold as two major global free trade agreements are moving forward without the United States.
Arizona, which trades heavily with many of the countries in both agreements, could easily be put at an economic disadvantage if the U.S. does not act, said Glenn Hamer, president and CEO of the Arizona Chamber of Commerce & Industry.
Hamer and other chamber and business leaders are calling on Washington to join one of the agreements, the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is a revision of the former Trans-Pacific Partnership (TPP) and promotes tariff-free trade and other commercial ties with 11 countries that border the Pacific Ocean including Australia, Canada, Mexico, Singapore, and Vietnam. The CPTPP removes 99 percent of tariffs on goods and services and sets reciprocal trade quotas. If the U.S. were to join the agreement, American producers would likely see a rise in exports like pork, beef and wheat.
“We need to be part of the revised TPP,” Hamer said. “Trade with our allies and global partners increases prosperity for businesses and consumers in Arizona, and it lowers barriers for our companies so they can export goods and create new jobs to improve the outlook for all Arizonans.”
Growing Asian consumers target of RCEP agreement
The other major trade deal, the Regional Comprehensive Partnership Agreement (RCEP), was signed last month by China and 14 Asian neighbors and is expected to strengthen their hold on trade in North and Southeast Asia.
It creates the largest trade bloc in the world and is expected to make their economies more efficient, linking their strengths in agriculture, manufacturing, natural resources and technology.
Between them, the two trade deals represent more than 2.8 billion consumers and almost 45 percent of the world’s GDP.
What is the CPTPP trade agreement?
The CPTPP is a modified version of the Trans-Pacific Partnership, a trading bloc of 12 countries including the U.S.
Within days of taking office, President Donald Trump pulled the U.S. out of the deal with the intent of exerting pressure on China for its bad acts including theft of American intellectual property.
At the time, the coalition of countries negotiating the TPP represented about 40 percent of the world’s gross domestic product (GDP) at the time.
After the U.S. withdrew, the other 11 TPP countries entered into the newly revised CPTPP. Now, the trading bloc represents 495 million consumers and 13.5 percent of global GDP.
Seven countries have now signed onto the agreement including Arizona’s two largest trading partners, Mexico and Canada. Other countries in the agreement include Australia, Japan, Singapore, Vietnam and New Zealand. Four countries are in the process of ratification: Brunei Darussalam, Chile, Malaysia, and Peru.
Tariff-free for member countries
The CPTPP removes 99 percent of tariffs on goods and services and sets reciprocal trade quotas. These measures will make it more difficult for U.S. businesses, especially farmers, to export to CPTPP members, said concerned business trade groups. U.S. exports now will be more expensive due to tariffs than that of other signatories like Canada, Japan and Singapore.
Trade organizations like the National Pork Producers Council said they would welcome being added to the updated CPTPP.
“We really believe the U.S. needs to get back into a regional trade deal in that part of the world. It’s the fastest growing economic region in the world,” Nick Giordano, vice president and counsel, global government affairs for the pork council said last month. “For hog farmers, it’s really important. A country like Vietnam, a CPTPP country, has tons of potential for us.”
With ratification fast approaching, rejoining would help keep American companies remain competitive and boost foreign direct investment in the U.S and Arizona, Chamber President Hamer said.
The other major trade agreement, the RCEP, which was signed last month, is also a concern for industry advocates including the U.S. Chamber of Commerce, the world’s largest business organization, which represents about 3 million businesses.
The signing of the RCEP created a trade bloc that covers about 30 percent of the world’s population and a third of global economic output, extending Beijing’s influence to about 2.3 billion people. The other signatories are Indonesia, Australia, Brunei, Cambodia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam.
This pact will prove a strong competitor for America in the growing Asian regions, said Myron Brilliant, executive vice president and head of international affairs for the U.S. Chamber.
“The U.S. Chamber welcomes the trade-liberalizing benefits of the newly signed Regional Comprehensive Partnership Agreement but is concerned that the United States is being left behind as economic integration accelerates across the vital Asia-Pacific region,” Brilliant said after the deal was penned last month. “While U.S. exports to the Asia-Pacific market have steadily increased in recent decades, our market share has been shrinking in relative terms.
Asia represents 2.3 billion consumers and counting
Now more than ever is the time to act to ensure America’s prosperity, Brilliant said. According to the Organisation for Economic Co-operation and Development, Asia will represent 66 percent of the global middle-class population by 2030, doubling its share in 20 years.
“U.S. exporters, workers, and farmers need access to these lucrative markets if they are to share in this dramatic growth,” Brilliant said.
China has become the most important trading partner for most of the Asia-Pacific, and its central role in the RCEP will only cement this position, he said. The Trump administration’s move to confront unfair trade practices by China has secured only limited new opportunities for U.S. exporters in other parts of Asia.
“Given the shortcomings of RCEP, we would not recommend the United States joining,” Brilliant said. “The United States should, however, adopt a more forward-looking, strategic effort to maintain a solid U.S. economic presence in the region. Otherwise, we risk being on the outside looking in as one of the world’s primary engines of growth hums along without us.”