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Friday 18 January 2019
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Trump Threatens Trans-Pacific Partnership (TPP) withdrawal – how broke will USA become?

The US president elect, Donald Trump promised that in his first 100 days in office he will withdraw from the TPP trade agreement. Trump must realise that his enterprise is nothing like side-lining trillion-dollar trade agreements built on macroeconomic principles that affect billions of businesses and jobs. Thus, he cannot tie his emotions to distort global trade ambitions that are structured to eliminate trade limitations. Private deals are about quick returns but trade agreements safeguard the health of long-term plurilateral issues, measures and governance principles.
The TPP is a mega bloc trade agreement signed on 4 February 2016 by the following 12 member states; Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. According to Wikipedia.com, the policy will only be active in 2018 or after ratification by key states that contribute 85% of its GPD. At the same time, the US is also negotiating another trade agreement called the Trans-Atlantic Trade & Investment Partnership (TTIP) with the EU. There are also rumours that the US wants to improve on the current AGOA treaty with Africa and negotiate an EU-EPA-like agreement with Sub-Saharan Africa. According to Wikipedia, the TTIP will boost the EU economy by 120 billion euros, the US by 90 billion euros and the world by 100 billion euros. According to the Congressional Research Institute, the TTP intends to boost trade flows by US$905 billion in goods alone and US$980 billion in services, which is one third of world trade and 40% of global GDP (www.wikipedia.org). Withdrawing from the TPP with this elaborate framework will be an unambitious move I must say. How does the US intend to trade if they do not integrate with existing economic zones? If China grasps the opportunity it will be a huge turning point, as possibilities exist that China will penetrate the US via Canada, because Canada is a member of TPP and will allow the diversion of goods into the US. This might result in serious conflict for the NAFTA agreement.
Trade agreements possess a globalisation agenda and can harm employment creation in smaller economies. The TPP member states intend to eliminate trade barriers and liberalise trade by ensuing reduced tariffs, duty-free access and market entry, thus hindering smaller economy competitiveness.
Trade agreements aim to remove protectionist rules placed in certain economies. Most countries in the TPP are APEC members and the US will gain an opportunity for market access in the 21 member APEC trade bloc.
According to Andrew Stoler, a researcher, who is the former Deputy Director of WTO, TPP has a market of 800 million people in the world (11% of global population). Donald Trump will have to justify if he has a better market for US goods. Further, its key features are market access, supply chain development, regulatory coherence, competitiveness, small and medium enterprise and development agendas. Currently, it has WTO+ features that are exceedingly attractive and flexible and referred to as the 21st century trade agreement with modern protocols aimed at internet, e-commerce, state owned enterprise ownership, etc.
Africa’s trade agenda is still in a backward mode, as our focus on market access, supply development, regulatory coherence, competitiveness and SME development is not as attractive as that of the TPP. We are having many overlapping economic partnership agreements and random bilateral treaties, weaker cross-border trade, corruption and other trade barriers, poor standards, low investment and unstructured consumer markets (informal trade).
TPP also aims to eliminate tariffs on agricultural imports and this is a huge challenge for Africa’s exports, our products are bound to tariffs and will be more expensive to import for TPP members.
TPP offers total liberation in financial services sector whereby businesses can trade in this sector across the borders and without need for physical presence. This means that banks owned by member states can trade in another member state without setting up a branch, this will enhance money flows and fast-track investment. This is a huge barrier for Africa, as the financial services sector is stiff, heterogenous and highly overregulated. Good agreements enhance employment creation among their member states. TPP also has a clause on ecommerce protection and improved roaming access.
Africa’s biggest trade threat is South America as they also export natural products and commodities with cheap labour and since they have proximity to NAFTA states, USA has potential to open their markets for TPP and TTIP. Africa could also further its interest under the clause on special and differential treatment (SDT) but WTO members are silent on a post Doha round.
An African Investment Conference planned by the US Corporate Council on Africa, was supposed to take place in New Orleans but was cancelled due to lack of interest from African delegates and invited 400 business executives. The purpose of the meeting was to focus on Africa Infrastructure. (eastafrican.com)
In conclusion, trade agreements can create employment and enhance trade, therefore, we must speedily advance the continental free trade agreement (CFTA) and trade in similar fashion as mega blocs like TPP, APEC, AZEAN and TIPP. CFTA must also focus on improving on market access goals, regulations, ecommerce, supply chains, SOEs, etc. God Bless




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