Economic Tidbits

China & Others Want in CPTPP

China, Taiwan, and the United Kingdom have formally filed applications to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP was formed following the demise of the Trans-Pacific Partnership (TPP) in 2017 when the U.S. decided to withdraw. The CPTPP improves trade between participating countries through lower tariffs and regulatory harmonization. The 11 countries involved include both competitors to and customers of U.S. agriculutral goods.

The U.S. decision not to participate in TPP or the CPTPP will affect U.S. agricultural exports. A 2019 report by the Purdue University Global Trade Analysis Project published by the Farm Foundation indicated the U.S. decision to withdraw from TPP would cost U.S. agriculture $1.8 billion per year in lost exports. The losses occur because U.S. competitors have better access to key markets under the agreement. The U.S. pork and poultry sectors would be impacted most, followed by dairy products. For Nebraska though, the largest export sector most at risk from not participating in the CPTPP is the beef sector. Competitors like Australia, Canada, and New Zealand could have better access in key Asian markets relative to the U.S.

Countries within the CPTPP will decide whether China, Taiwan, and the U.K. can join. China’s application is ironic in that the TPP was initially billed in the U.S. as a means to keep China from exercising too much influence over trade and trading rules in Asia. Still, most observers believe China’s application will be denied. The prevalence of state-owned businesses, weak labor rights, and problems with data privacy cast doubt on whether China will make the changes necessary to become a member. However, the entry of China to the club could mean significant economic benefits for existing members given its massive market. If its membership were allowed, China could gain a inside track on guiding trade and economic policy in Asia, while the U.S. could be left in its wake.

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