In the aftermath of a highly-charged and polarised Presidential campaign, TPP is an expected but unfortunate casuality. Its rejection is misguided for at least four reasons:
- Firstly, in a world of diffused supply chains, where a product crosses borders in unfinished form several times during its gestation, tariff on the final product is less of a determinant of competitiveness. Relative competitiveness also changes with technology such as the onset of 3-D printing which might facilitate reshoring of functions previously sent offshore.
- Secondly, the main benefit of TPP would've been the harmonisation of standards embedded in traded products and this harmonisation would've unambiguously helped US workers.
- Thirdly, it is a fact that more than twice as many American jobs were lost to technology than they were to foreign trade. The largest companies today are 'platform companies' such as Google, Apple and Facebook that employ significantly fewer people per unit of market capitalization. That march of technology is gathering more pace, not less, and adequate policy responses need to be designed once the red herring of TPP is removed.
- Finally, rejection of TPP marks a significant change in the geo-political world order. As we previously saw with the Asian Infrastructure Investment Bank for example, this is another example of US ambivalence towards its role vis-à-vis China. This vaccum is getting filled in real time.
Greater trade integration will continue. However, grand multi-lateral arrangements will probably be superseded by cobwebs of bilaterals - between the US and a post-Brexit UK for example.