- The Trans-Pacific Partnership (TPP) may soon be dead, as the White House, Democratic and Republican leaders announced they are ceasing advocacy or withdrawing support during the lame duck session, The Wall Street Journal reported Friday.
- The 2016 election revealed concerns about globalization, trade deficits and stagnant wages are foremost on the minds of many Americans. President-elect Donald Trump indicated he would immediately back out of the agreement during his campaign.
- The TPP would have eliminated 18,000 tariffs and was a hallmark of President Obama's "pivot to Asia." The Journal notes China has begun to make moves to establish a regional trade pact as the U.S. falters on its TPP ambitions.
Voters worldwide are increasingly choosing isolationism over expansion, and while the seeming failure of the TPP will not directly affect supply chains, the loss of potential benefits is significant.
For one, the agreement updated all previous trade agreements in place, including NAFTA, to include more stringent labor standards, electronic trade facilitation and intellectual property protections. Independent renegotiations may reach similar goals, but at higher concession costs given the lack of positive incentives. (Negative incentives could remain, however, as Trump has promised to renege on trade deals if partners do not concede.)
Yet, Trump has moderated his rhetoric in the days since winning the election, and business leaders are hoping the moderation extends to his trade platform. Furthermore, if Trump does not follow through on his promise to fully back out from the agreement, and instead pledges to renegotiate it, the agreement could still pass in Congress.
Some would call these hopes fools errands, however, as the campaign rhetoric and transition team documents show Trump intends to enact his trade platform immediately. Meanwhile, global markets are watching wearily as signs of isolationism strengthen in the U.S. and UK, weakening the prospects for trade-reliant industries like maritime shipping.