Exiting TPP – an "Own Goal” for the US?
President Elect Donald Trump has said one of his first acts as President of the US will be to pull the country out of the Trans-Pacific Partnership (TPP) trade deal. Reactions in terms of the impact this will have on US organizations have been fairly passionate.
Kamel Mellahi, a Professor of Strategic Management at Warwick Business School and an expert on business in China and Asia, says the following:
"The TPP trade deal, yet to be ratified, took years of intensive negotiations and was hailed as a ground breaking free trade deal across the Pacific Countries.
"It is true that, in relative terms, some countries such as Vietnam, Malaysia, Peru, Singapore and New Zealand were expected to benefit more from the TPP trade deal than the US and even Australia. It is also true that the TPP trade deal gave multinational corporations enormous powers over governments and states, but the deal was going to bring significant economic benefits to all the countries involved.
"Beside all the potential economic benefits, the TPP trade deal was seen as a manoeuvre to reduce Pacific Rim countries’ dependence on China and tie them to the US economy. By announcing that it is going to withdraw from the TPP trade deal, the US has unwittingly scored an huge own-goal by kicking the ball in their own net.
"I don’t think the remaining 11 countries are going to go it alone. The US withdrawal from the deal will kill it off. One cannot see the trade deal working without the US. There is no doubt that China would fill this vacuum and strengthen its economic status in the Pacific Rim region. The announced withdrawal has the capacity to do huge damage to the economies of some Pacific Rim countries and one would expect them to move closer to China while reducing their dependence on the US economy."
For multinationals this may impact their ability to expand into growth markets. Much remains to be seen but the uncertainty this injects, at least in the short term, is a concern for senior management.
Congress had, in any case, all but stalled the ratification of the TPP agreement prior to the US Presidential election.