Trump Withdraws Trans-Pacific Partnership Trade Deal - What Does it Signify?

TPP Trade Deal

At the US Presidential Elections held on the November 8th, Donald Trump, a multi-billionaire with zero political pedigree took not only the country but the entire world by storm by convincingly winning the electoral vote. Trump's right-wing populism, combined with his attention-grabbing persona won the hearts of many republicans, while also swaying many democrats his way.

One of the tent poles of Donald Trump's campaign was to push for US withdrawal from TPP (Trans-Pacific Partnership), and within one month of him holding office, he has come true on his election promise. During his inauguration address, the President stated that U.S. trade policies formulated over the years have "enriched foreign industry at the expense of American industry," and vowed that he will ensure that the TPP deal is scrapped in order to help American workers.

What is TPP?

The Trans-Pacific partnership trade deal was an agreement between 12 countries bordering the Pacific Ocean, who together represent more than 40% of the world's total economic output. These countries include Canada, Japan, Singapore, Australia, Malaysia, New Zealand, Vietnam, Brunei, Mexico, Peru, and Chile. The TPP trade deal was considered important since it would allow these countries to control the Asian market while countering China's growing economic power.

This Trans-pacific partnership deal was formulated such that the economic ties between these nations could improve drastically while slashing trade tariffs and fostering closer economic ties between the 12 nations. Some of the more important points of the TPP trade deal include -

  • Extensive IP and copyright rules within the trading zone to foster creativity and less counterfeit products
  • Lesser tariffs on automobile imports
  • Extensive labor protection laws with stringent bans against forced and child labor
  • Raised environmental protection standards to fight illegal wildlife trafficking, logging, etc. and conservation of endangered animal species
  • Elimination of taxes on U.S. IT technology products
  • Free flow of data across borders

Trump Withdraws TPP Deal - The In's and Out's

Although the Trans-pacific partnership was initially discussed and negotiated under erstwhile president Barack Obama, it was never ratified by the U.S. congress. As a result, Trump's backing out from the TPP would not have any significant repercussions on the economy of the United States, but at the same time, has left this deal null and void for the other countries involved.

For the TPP to be a success, US participation was extremely important, and now, as things lie, the Trans-pacific partnership as we know it will not proceed ahead in its original avatar. Let us have a look at a few significant ways in which TPP withdrawal will affect global trade -

  1. TPP Withdrawal Might Help China

    According to the most pundits, withdrawal from the TPP trade deal will cause serious doubts regarding the credibility of the USA to hold its own against China, which is growing economically and strategically by forging new bilateral ties. It would also undercut the efforts of all U.S. allies in Asia, including Japan, Malaysia, etc. who would have benefited greatly from the reforms and the diversification that TPP would have offered.

    China had always declined to join TPP since it felt that the TPP trade policy would only serve to isolate them both economically as well as politically. But now, with U.S. backing out of the agreement, China has a major opportunity to step and create new trade ties with spurned countries looking to set up a better economic outlook.

  2. Mexico Will Get Better Trade Opportunities

    The Trump administration already has a lot of issues with its neighboring country. One of Donald Trump's promises during his presidential campaign was to build a wall along the US and Mexico border. With immigration policies under great duress, many experts believe that the TPP withdrawal could give Mexico a free hand when trying to find trade partners along the Pacific Ocean, while relying less on the United States.

  3. A Trade War is a Very Real Possibility

    If in the future, the TPP withdrawal is paired with even more measures to secure U.S. economy, then both China and USA could find themselves in a trade war, where both sides will start boycotting each other's products. This in turn, would not only have a serious impact on both these countries, but residual effects would be felt in Europe, Asia, etc.

  4. DRM Technology and US DMCA Rules Won't Become Prevalent

    The TPP withdrawal does have a few silver linings, though. If ratified by all the countries, the TPP would have compelled all nations to adopt US laws banning the circumvention of DRM protected items or digital locks. According to many analysts, the US DMCA is archaic and does nothing to further the progress of technology, and most would-be TPP trade partners such as Australia and New Zealand already have better versions of the same implemented. DMCA is frequently used by business competitors in the US to try and block people to hacking into their own phones, refill printer cartridges manually, etc.

  5. New Bilateral Trade Ties Could Be Forged

    The Trump administration has continuously elaborated that although the TPP trade deal would not go ahead, they would be looking to initiate bilateral trade agreements with other countries. This includes new trade deals with Britain post-Brexit and even renewal of in-depth trade ties with Japan. At the same time, it is still unclear if the US will see trade ties being set up with smaller Asian countries separately, all of whom were a part of the initial TPP agreement.

  6. American Workers Might Not Get Any Benefit

    President Trump's election campaign ran on the fuel of creating more American jobs and cutting down on outsourcing. Most experts agree that the loss of American jobs due to TPP is not entirely convincing, and in fact believe that the Trans-pacific partnership agreement was America's best chance to become a part of a large multinational deal which could have only helped the economy.

    A study conducted by the Petersen Institute suggests that withdrawal from the TPP would lead to an increase of a measly 0.1% in US labor.

  7. Trump Might Devise an Alternate TPP Deal

    In order to satisfy its allies, as well as to sell the "American Dream" to more American workers, Trump might devise a new TPP deal which would have more features benefiting the US as compared to the previous one. Even the most nationalistic Americans won't oppose this new deal if it is negotiated in broad daylight, and in full public view, as compared to the older TPP trade deal which was shrouded in secrecy.

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