The US will lose an estimated US$3.1bn from its exports due to its Trans-Pacific Partnership (TPP) withdrawal, a new study shows.
Meanwhile the remaining 11 members would enjoy marginal gains from the US’ TPP withdrawal, with Mexico and Canada set to benefit most.
A new report from the Canada West Foundation, a non-partisan think tank based in Calgary, shows that TPP-11 will generate an increase of 2.43% in exports among the 11 remaining partners, however, this is just 40% of the increase that would have happened under the original deal.
Real GDP of the TPP-11 bloc will rise by 0.074%, with Canada’s gain growing fractionally, to US$2.56bn, up from C$2.11bn. For the US, a projected gain in exports of around US$17bn will be turned into a US$3.1bn loss.
The remaining members of TPP are working towards concluding their discussions by the end of the year. This study shows that the benefits are fractional, but a signed-off and ratified agreement is likely to be left open to the US rejoining, most likely under a new administration. Should that be the case, then the benefits will be much more pronounced.
The think tank is, understandably, focused on the effects on the Canadian economy and finds that these are, overall, beneficial, even without the US.
The authors write: “A TPP-11 would actually be better than the original agreement for Canadian agriculture and agri-food, because this sector would no longer compete with the US in TPP-11 markets.
“Beef, in particular, would benefit from access to the Japanese market without having to share with the Americans. Fruit and vegetable exports, processed food products, and pork and poultry would likewise do well. Canola would continue to see a significant change in the composition of exports from unprocessed oilseeds to crude and refined canola oil, due to the elimination of Japan’s tariff escalation policy in the oilseed sector.”
Canadian dairy, on the other hand, would suffer a significant negative impact on the US’ TPP withdrawal. “Because the main global dairy producer, New Zealand, is geographically distant from Canada, the US would have been more important competition to Canada in terms of fluid milk. Without the US, TPP-11 may mean less pressure on fluid milk.
“But generally under TPP-11 there may still be a dampening of prices from competitive dairy products from other TPP countries, a reduction of Canadian supply, and a corresponding higher level of consolidation, particularly winnowing out more higher-cost producers than is already the case,” the report reads.
Other countries in the region would avoid erosion of existing preferences in the US market, and would also benefit from not having to compete with US suppliers, post its TPP withdrawal.
Singapore is the Asian country to benefit most from the US withdrawal, since it would avoid loss to US competition in its existing Asian markets. Meanwhile, Vietnam and Japan are likely to see the biggest reduction of gains, since they stood to gain most in the US market as part of the original TPP agreement.
This tallies with GTR’s reportage from the Asian perspective: Vietnam will still gain access to large textiles markets in Asia and the Americas, but none of these are as potentially bountiful as the US market.
“The Vietnamese and Malaysian manufacturing export sectors were expected to be among the largest beneficiaries from the TPP owing to the much improved market access to the US. However, if the remaining 11 TPP members do move ahead with the TPP, it is possible that other Asia Pacific countries could eventually join the TPP agreement, adding to its importance,” Rajiv Biswas, Asia Pacific economist at IHS Markit, tells GTR.
The report authors also highlight a less tangible benefit of TPP conclusion: negotiating leverage. US President Donald Trump is likely to pursue bilateral trade agreements with some of the TPP members. TPP withdrawal is viewed a way of seeking leverage over potential negotiating partners.
“Forging ahead with the TPP without the US will help counter this move. TPP-11 is the most readily available instrument to emphasise to US interests the benefits of co-operative approaches to international trade by immediately highlighting the costs implicit in not co-operating. Importantly, given the politics of retaliation, TPP-11 does not require direct retaliation and thus does not raise for individual TPP11 parties the costs of retaliation – rather it generates a benefit,” the authors explain.
Read the full Canada West Foundation report here.