22 February 2019
US Trade Representative Michael Froman (center) speaks at the end of a four-day Trans-Pacific Partnership ministerial meeting in Singapore. Photo: Reuters
US Trade Representative Michael Froman (center) speaks at the end of a four-day Trans-Pacific Partnership ministerial meeting in Singapore. Photo: Reuters

How TPP will affect China’s regional trade dominance

US equities shot up sharply while the services purchasing managers’ index fell to 56.9 points in September from 59 points in the previous month.

The market expects a delay in a US rate hike, which has boosted market sentiment. The Dow Jones is up more than over 300 points.

Big investment banks believe the Federal Reserve may maintain zero interest rates longer than expected.

These big investors have come back to the fray, hoping for a rebound in the last quarter after staying away in the previous quarters.

Goldman Sachs said the Fed may switch its policy stance given negative news on US output and employment.

The best-case scenario is a December liftoff but the outcome is difficult to predict, according to chief economist Jan Hatzius.

Hatzius thinks US economic growth is unsustainable given lackluster financial conditions and weak economic data.

Meanwhile, the US and 11 Pacific Rim countries have signed the Trans-Pacific Partnership agreement, one the largest regional trade pacts in history.

The accord removed thousands of tariffs on a range of imports from cars to rice and other commodities.

It’s the largest free trade deal for the US after the North American Free Trade Agreement in 1994.

“We can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products,” President Barack Obama said.

Apart from removing tariffs, the signatories agreed to set an eight-year patent period for new drugs.

The deal brings together 12 countries which account for 40 percent of the global economy.

These are New Zealand, Singapore, Brunei, Chile, Japan, Canada, Mexico, Australia, Vietnam, Malaysia, Peru and the US.

The agreement is widely seen as a key plank of Obama’s pivot to Asia.

Some analysts warned the deal discriminates against China.

The mainland dominates external trade in Asia Pacific and its exports to the US and East Asian nations account for more than half of its foreign trade.

The US, Japan and South Korea — none of which has a bilateral trade agreement with China — along with ASEAN are the mainland’s top trading partners.

Also, Chinese exporters are competing with rivals from Japan, South Korea and ASEAN.

China failed to reach an agreement on TPP during President Xi Jinping’s recent US visit.

The National Development and Reform Commission said China needs bilateral trade agreements with all TPP members before it can join the grouping.

China said it is “open to any mechanism” that follows World Trade Organization rules.

This article appeared in the Hong Kong Economic Journal on Oct. 7.

Translation by Julie Zhu

[Chinese version中文版]

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columnist of the Hong Kong Economic Journal

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