TPP Vital to Improve Competitive Dynamic for Manufacturers in the Asia-Pacific

By February 4, 2016Shopfloor Policy, Trade

Yesterday’s signing of the Trans-Pacific Partnership (TPP) is an important step toward improving export and sales opportunities for manufacturers in the United States in a growing part of the world.

The TPP would eliminate all tariffs in the five countries with which the United States doesn’t already have a free trade agreement (FTA): Brunei, Japan, Malaysia, New Zealand and Vietnam. The agreement would also require our TPP partners to adopt stronger standards across a range of areas from transparency and electronic commerce to the protection of private property and innovation.

The TPP is also an important agreement to restore and maintain U.S. competitiveness in a part of the world where the United States and manufacturers in the United States have been losing market share. Consider the situation in Vietnam. The U.S. share of Vietnam’s manufactured goods imports peaked at just 4.5 percent in 2009, before dropping to 3.7 percent in 2014. Meanwhile, China’s share of Vietnam’s import market has increased steadily in recent years, rising from 9.4 percent in 2000 to 25 percent in 2009 (the year prior to implementation of the ASEAN–China Free Trade Area, which includes Vietnam) and to 33 percent in 2014. China and other countries have also made inroads into other TPP markets, as the NAM documented in its testimony before the U.S. International Trade Commission.

America’s loss of market share in Vietnam is now facing yet another challenge. The European Union, which exports products that often compete directly with goods manufactured in the United States, finalized an FTA with Vietnam in December (the text of which was released this week). If this agreement were to be implemented prior to the TPP, U.S. exporters would be at a disadvantage as Vietnam’s tariffs—some of which are 70 percent or higher—would be slashed for EU exporters, while U.S. exporters wait on the sidelines. Manufacturers in the United States faced that competitive disadvantage when the EU implemented its agreement with South Korea before the United States.

As Congress continues to examine the TPP and its impact on the United States and manufacturers, it is critical for all to keep this competitive dynamic top of mind. There can be no assumption that current trade flows will continue. Indeed, if recent experience is any guide, America will be at an even greater disadvantage in Vietnam and other markets if the United States sits on the sidelines.

Ken Monahan

Ken Monahan

Director for International Trade Policy at National Association of Manufacturers
Ken Monahan is the Director for International Trade Policy at the National Association of Manufacturers (NAM), where he works with NAM member companies to develop and advocate the association’s positions and priorities on the Trans-Pacific Partnership, U.S.-EU trade matters (including the Transatlantic Trade and Investment Partnership), World Trade Organization (WTO) issues, miscellaneous tariff bills, conflict minerals, localization issues, and bilateral country trade matters. Mr. Monahan has on-the-ground experience negotiating trade agreements, having worked at the U.S. Department of Commerce on the WTO Doha Round negotiations, the U.S.-Korea free trade agreement and other international trade matters.
Ken Monahan

Leave a Reply