United States Officially Withdraws from the Trans-Pacific Partnership Agreement (“TPP”)

Making good on a campaign pledge, President Trump today signed an Executive Order withdrawing the U.S. from the TPP process, the marquee trade initiative of the prior administration.

The TPP would have lowered trade barriers amongst its twelve members (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam), accounting for approximately 40% of the world’s economy. 

Five years of negotiations culminated in an agreement in October of 2015; however it needed the ratification by the legislative bodies of the negotiating partners to take effect.  The U.S. Presidential candidates on both sides of the aisle had campaigned on a rejection of the TPP as part of an effort to protect U.S. manufacturing jobs.  Ironically, a required U.S. International Trade Commission report concluded that the probable economic effect of the agreement on the U.S. economy would have been minimal.

Many questions remain as a result of today’s action.  Vietnam had been touted as the big winner under the TPP based on its history as a manufacturing base and its attractive labor rates as compared to the more developed TPP countries.  A number of U.S. companies have invested in both factory space and local material mills in anticipation of the TPP taking effect.  However, Vietnam government officials promote the ongoing competitive nature of Vietnam along with the fact that Vietnam (either alone or as part of ASEAN) has implemented or concluded free trade negotiations with numerous other countries, including a pending agreement with the EU (awaiting ratification). 

In addition, although the TPP is now “off the table,” past statements by the President reflect his potential openness to negotiating separate bilateral deals with individual TPP countries (as well as others, such as a post-Brexit United Kingdom).   

No doubt the Trump administration will bring with it a number of developments on the trade front that will have to be closely watched and assessed.

Please do not hesitate to contact Arthur W. Bodek or any other member of the firm to discuss these or any other issues that may impact your business under the new administration. 


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