Effect Of Trans-Pacific Partnership Without United States

Introduction

The study focuses on effect of trans –pacific partnership with or without USA. Trans –pacific partnership refers to a free trade agreement among 12 countries that includes Canada, Chile, Japan, Mexico, New Zealand, Vietnam, US, Australia, Singapore, Peru and Brunei. The parties under TPP agreed to reduce non tariff barriers as well as tariffs on industrial and agricultural goods. Now, the present president of US has withdrew US from this TPP and this affected the both the consumers as well as producers in the nation. This report however reflects on the impact of US consumers, producers, effect on tariff , demand and supply in agriculture industries.

Effect of Trans Pacific Partnership (TPP) with or without USA

Impact on US consumers

TPP will adversely impact on the US consumer if the partnership moves without this nation. It will not protect as well as promote freedom of their choice and will lower the security as well as privacy of the US consumer (Petri and Plummer 2012). In addition, it will increase  the cost of the products that is mainly consumed by consumers of this nation. Even, the US consumers will not reap any benefits from advancement of technology and innovation of products in the market. As TPP allows the US consumers in choosing innovative technologies that is available in global market in order to protect their security, exclusion of this nation from TPP will adversely affect the US consumers. Moreover, it will stop allowing the consumers in utilizing devices in various markets.

Impact on US producers

If the USA withdraws from the Trans Pacific Partnership, then the effects on the production statistics of the USA will not be favorable too. The Agreement of free trade being the biggest of the free trade agreement, currently existing in the international scenario, as discussed above is meant to facilitate free trading between the different countries across the world (Williams 2013). Therefore, if the USA withdraws from this agreement or if the agreement is carried out without the inclusion of the country, then this may have negative implications on the external sector of the country, which in its turn is expected to have negative implications on the overall production statistics of the country.

If the country is not included in the agreement, then trading will be difficult on part of the country as it will not be entitled to the privileges that the countries in the agreement is entitled to have (Gordon 2012). Trading, as a result, will become costly as the country will have to face trade barriers and tariff restrictions in other countries. This will in its turn discourage the domestic producers to produce more as they will be losing incentives to do so. Thus, the country will be suffering from loss of productivity as a whole.

Impact on consumer of the 11 non-US parties to the TPP

USA is one of the primary economies in the international business scenarios and the primary producers and the second largest exporter in the world, with the primary exports being crude oil, petroleum and automobiles.  Then the exclusion of the country from the TPP, will have negative implications on the international consumers, especially those demanding the products in which the USA has economies of scale. The consumers will not get those commodities, especially crude oil, at the desired price, which will in turn affect them adversely. USA being a primary agricultural producer, this will be effecting the global agricultural market and the relevant consumers also adversely, especially those of the consumers in the 11 Non-US parties in the Trans Pacific Agreement. If the country, however, remains included in the concerned free trade agreement, then due to their lower costs and economies of scale, in the production of the above mentioned commodities, the global Non-US customers will be benefitted.

Impact on producer of the 11 non-US parties to the TPP

The USA being one of the biggest exporter in the international trade scenario, if the country no longer remains a part of the Trans Pacific Partnership, then it will be no longer be eligible for the benefits of the free trading among the different countries. This will, in its turn, increase the global export prices of the commodities and services that the country exports, as it has to face the tariff regulations and restrictions in this case (Flynn et al. 2012). Thus, this disadvantage on part of the concerned country will increase the benefits of the Non-US producers, especially those who venture in the same markets as that of the USA. With the absence of the USA from the free trade agreement, these producers will enjoy greater market shares in the international scenario, which will enable them to export more and enjoy greater revenues as well as economies of scale.

However, this may adverse those producers who import commodities or services from the USA as a part of their production process, including raw materials and technologies. The exclusion of the country from the free trade agreement, can increase the price of these products too, thereby making import as well as production costly for the producers, thereby affecting them quite adversely.

Elasticity of the demand and supply curve in the Agriculture industries

Tariff refers to the taxes that is imposed on the goods that are imported and this automatically increases the product price in the market. In this situation, as US has to provide tariff on agriculture goods, the supply of goods will automatically reduce (Capling and Ravenhill 2012). As a result, the price of the agriculture commodities will rise and demand curve will become inelastic. As the prices rises for the agriculture products, the consumers will purchase less goods and hence this will affect on their standard of living. This is shown in the diagram below:

Figure 1: Effect on demand and supply curve in the agricultural industries

Source: (As created by author)

The effects of a tariff without TPP for Australia

As TPP is the agreement of reduction of tariffs on agricultural as well as industrial products, there will adverse effect on the goods if US moves out of this TPP deal (Cheong, 2013). Without TPOP, tariff will increase and hence this will decline business opportunities in the nation. However, as tariff increases on goods, competition among the business reduces and trade also decreases. In Australia, tariff is already low(approx 5%) and hence increase in tariff will affect on the economic growth of this nation.

Consequences on Efficiency at the global level

The efficiency in the global level will decrease and this would adversely affect on the economic growth of the other 11 countries as US moves out of TPP deal. Moreover, the countries that are not included under TPP experiences mixed impact because some nations will lose their efficiency in trade owing to diversion of trade from their markets. However, many countries will move out of trade agreement and hence this will reduce their nations income.

Will the US eliminates trade deficit by withdrawing from the TPP and imposing trade restrictions.

US will definitely eliminate trade deficit by withdrawing from TPP and hence will impose trade restrictions (Capaldo  et al. 2016). The nation will impose trade restrictions in order to protect the business organizations as well as laborers in the economy from the competition of international companies. On the other hand, import restrictions might discourage protected entities in this nation and hence this will influence on their efficiency as well as management. Thus, they will become more dependent on US governmental support for surviving in the competitive market.

Conclusion

It can be concluded from the above assignment that if US president withdraws the nation from the TPP deals, then this might adversely influence on their economic growth. Even other countries will also be affected by this decision of the US president.

References

Capaldo, J., Izurieta, A. and Sundaram, J.K., 2016. Trading down: unemployment, inequality and other risks of the Trans-Pacific Partnership agreement (No. 16-01). GDAE, Tufts University.

Capling, A. and Ravenhill, J., 2012. The TPP: multilateralizing regionalism or the securitization of trade policy. The Trans-Pacific Partnership: A Quest for a Twenty-first Century Trade Agreement, p.279.

Cheong, I., 2013. Negotiations for the Trans-Pacific Partnership agreement: Evaluation and implications for East Asian regionalism.

Flynn, S.M., Baker, B.K., Kaminski, M.E. and Koo, J., 2012. The US proposal for an intellectual property chapter in the Trans-Pacific Partnership Agreement.

Gordon, B.K., 2012. Trading Up in Asia: Why the United States Needs the Trans-Pacific Partnership. Foreign Affairs, pp.17-22.

Lim, C.L., Elms, D.K. and Low, P. eds., 2012. The trans-pacific partnership: a quest for a twenty-first century trade agreement. Cambridge University Press.

Petri, P.A. and Plummer, M.G., 2012. The Trans-Pacific Partnership and Asia-Pacific Integration: Policy Implications.

Williams, B.R., 2013. Trans-Pacific Partnership (TPP) countries: comparative trade and economic analysis.