US President Barack Obama has defended the Trans-Pacific Partnership (TPP) on a trip to Vietnam, one of the 12 states currently waiting to ratify the world’s biggest trade deal.
Obama has come under pressure in the US from all of his potential successors, with Democrat hopeful Donald Trump and presumptive Republican nominee Bernie Sanders dismissing the agreement as being bad for America, while former Secretary of State Hillary Clinton, one of the early proponents of the TPP, has changed her tack in a bid to regain ground on the Democratic left lost to Sanders.
The president had hoped to travel to Vietnam, which is predicted to benefit the most in pure GDP terms, with a ratified agreement, but instead he had to tell politicians there that he was still confident a deal would go through.
In a joint press conference with the Vietnamese President Tran Dai Quang in Hanoi, Obama said: “I remain confident we are going to get it done, and the reason I’m confident is because it is the right thing to do. It’s good for the country, it’s good for America, it’s good for the region, it’s good for the world.”
Vietnam is by some distance the poorest of the TPP’s first round of members. But the nature of its economy – manufacturing and exports-driven – means that falling tariff barriers with the US and other member states could be a huge boon to its economy.
“TPP offers Vietnam preferential access to markets representing 40% of global GDP,” Douglas Lippoldt, HSBC
“Vietnam’s competitively low cost of labour, compared to the other Asean nations in the TPP [Brunei, Singapore and Malaysia], and its young and growing middle-income economy, make it an appealing destination for companies to expand into. The TPP will significantly enhance Vietnam’s attractiveness both as a market and a production hub,” UOB economist Francis Tan tells GTR.
It’s a view shared by HSBC’s senior trade economist Doug Lippoldt, who said in an email exchange: “TPP offers Vietnam preferential access to markets representing 40% of global GDP. This can provide producers in Vietnam with a significant advantage over non-TPP countries in areas such as apparel or agriculture. In such sensitive sectors in some TPP countries, duties can peak well into the double-digit range.”
He added: “Moreover, TPP will tackle non-tariff barriers to trade as well, which often impose significant barriers to trade. For example, TPP will streamline customs procedures and improve transparency of related regulations. Such trade reforms will offer Vietnam an economically important expansion of market access to the TPP region.”
And while there are concerns among small businesses in the country about the influx of US produce that would follow TPP’s conclusion, it seems the biggest battle for hearts and minds is being fought by the White House.
A report mandated by the US Congress found that TPP would have a negligible impact on US trade. Authored by the US International Trade Commission, the study found that the TPP would add just 0.15% to real GDP in the US.
The report found that there would be a small dip in employment as a result of the agreement – the argument which has dominated trade discussions in election season.
This official study flies in the face of others of its kinds. The FT reported that the benefits predicted are less than half those forecast by the pro-free trade lobby group, the Peterson Institute for International Economics (PIIE).
It is highly unlikely that the TPP will be ratified over the coming year, given the political climate in the US, with some fearing that it will not be completed by the end of the decade.
A survey of economists conducted for law firm Baker & McKenzie released this month found that even if it is completed imminently, the TPP will not have a major impact on trade until at least 2021.