TPP Marches On Without U.S. – Will Exports See Impact?

A historic 11-country trade deal known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership was ratified by seven of its members just before the end of the year. The CPTPP had been called the TPP before the U.S. withdrew from the agreement.

The agreement will slash tariffs among the 11 nations, making the goods of non-CPTPP members such as the United States less competitive in those markets. American beef and wheat exports, in particular, are expected to suffer, as could other types of exports important to the U.S. FTZ industry.

American farmers, already hit by low commodity prices and China's punitive trade tariffs, are poised to endure further pain in 2019 now that this major Pacific trade deal has come into effect.

The CPTPP was ratified by seven of its member countries this past Sunday. Now that the massive free trade pact is a reality for Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam, the remaining four members — Brunei, Chile, Malaysia and Peru — are soon expected to follow suit.

The milestone agreement, a refurbished version of the Trans-Pacific Partnership, will slash tariffs among the 11 nations that cover 14 percent of global growth, making their exports cheaper in each other's markets. Around 90 percent of planned tariff cuts will be immediately take place, HSBC said in a note on Sunday, adding that businesses will benefit from reduced administrative costs thanks to other benefits such as pre-arrival customs clearance.

The goods of non-CPTPP members such as the United States are now expected to be pricier and less competitive in the 11 CPTPP countries. American meat and agricultural products are particularly expected to suffer in CPTPP nations that don't have free trade arrangements with Washington.

Japan is a prime example. The Asian giant is the top market for U.S. beef, but Australia's products could now take over America's spot since foreign beef tariffs in Japan will be cut by 27.5 percent for Australian producers under the CPTPP, The National Cattlemen's Beef Association has warned.

"The US beef industry is at risk of losing significant market share in Japan unless immediate action is taken to level the playing field," Kevin Kester, the association's president, said in a statement in December.

It's a similar story for American wheat.

Thanks to CPTPP, Canadian and Australian wheat exports to Japan now immediately benefit from a 7 percent drop in the Japanese government's mark-up price, which will become a 12 percent reduction in April, U.S. Wheat Associates President Vince Peterson said in a recent statement. By April, American wheat will face a $14 per metric ton resale price disadvantage to Australia and Canada, he warned, adding that his industry faces "imminent collapse" in Japan.

The U.S. and Japan don't have a free trade deal in place, something on which the President has been pressing Tokyo. In comparison, European nations, which also aren't part of the CPTPP, are expected to fare better given the new E.U-Japan bilateral trade deal.

If the CPTPP's roster of participants grows, the pressure on U.S. goods overseas would likely keep rising.

The United Kingdom, for one, has said that it is considering becoming a CPTPP member. The deal can help ensure "that a trade war in the Pacific does not hit British households in the pocket," the U.K. Department for International Trade said in a statement. It would also help U.K. businesses expand into new markets at a time when the country may no longer have special privileges with the E.U.