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CPTPP Takes Affect Without the US

An outcropping of the U.S.-backed Trans-Pacific Partnership (TPP) is now in effect—but it doesn’t include the world’s largest economy.

The new year has brought enactment of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, (CPTPP), an 11-nation trade pact that came in the aftermath of the defunct TPP that was negotiated and signed by President Barack Obama, but killed by President Trump as one of his first acts in office.

Six of the signatories–Australia, Canada, Japan, Mexico, New Zealand and Singapore–have enacted the multilateral trade deal, with Vietnam set to officially join in on Jan. 14. The other four countries—Brunei, Chile, Malaysia, and Peru—still need their governments to ratify the deal. The 11 nations have a combined gross domestic product (GDP) is an estimated $10 trillion, accounting for 13.5 percent of the world’s economic output.

The pact includes tariff cuts on a range of qualifying goods, lowering trade barriers in customs and other cross-border procedures, and stronger intellectual property rights protections, as well as provisions to increase minimum labor standards for workers in participating countries.

According to the Peterson International Institute for Economics, total GDP of participating countries will increase by about 1 percent thanks to the deal, with the largest gains for Vietnam and Peru. Peterson also estimates that U.S. income would have increased by about $130 billion under TPP, and the country is now set to lose roughly $2 billion in income as U.S. exports will be more expensive in CPTPP nations.

The CPTPP trade deal will eliminate more than 95 percent of tariffs in the trade with some products dropping to no tariffs over 10 years, according to Karen Lynch, a principal at Content Marketing Partners, in an article for American Express. Other countries have reportedly indicated interest in join the group, according to Lynch, including Indonesia, the Philippines, South Korea, Taiwan, Thailand and the U.K.

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CPTPP rules of origin provide incentives for companies to integrate production and supply chains within the trade bloc, treating materials from all CPTPP equally.

Trump campaigned on the notion that TPP wouldn’t be in the best interest of the U.S. and that multilateral trade agreements overall were not his preferred arrangements for the exchange of goods. Bilateral pacts work better, according to the president, although his administration recently reworked the trilateral North American Free Trade Agreement (NAFTA) into the U.S.-Canada-Mexico Agreement (USMCA), which is finalizing ratification by the three country’s legislative bodies.

Separately, the U.S. has also entered into negotiations for bilateral trade pacts with the U.K., Japan and the European Union. The U.S. is in the midst of trade war with China that has harsh tariffs imposed by both countries and a threat of a fresh tranche of punitive duties on Chinese shipments to the U.S. that could severely impact apparel, textile and footwear products if implemented.

The Office of the U.S. Trade Representative (USTR) on Friday announced the members of an official delegation from the U.S. to China to discuss the trade relationship between the two countries beginning Monday. The delegation will be accompanied by senior officials from the White House, USTR and the U.S. Departments of Agriculture, Commerce, Energy, State and Treasury.