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Major Trade Deal Takes Effect Without U.S. Participation


This week, a massive trade deal begins to take effect - without the United States. It was called the Trans-Pacific Partnership. Now it's the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. It's going to ease trade between 11 countries. Some analysts expected that this pact would fail after President Trump pulled the U.S. out, but it didn't. So what does that mean for the countries that stayed in and for the U.S.? Matthew Goodman is the senior adviser for Asian economics at the Center for Strategic and International Studies.

Thanks for coming in.

MATTHEW GOODMAN: Good morning.

KING: So briefly, what is this trade agreement meant to do for these 11 countries?

GOODMAN: Well, it's going to open markets. There are some substantial tariffs and other barriers in these countries - Japan, Vietnam, others. It's going to open those markets up for exporters from the other countries and actually provide some real economic stimulus to these countries. Some of the estimates show that Vietnam could grow as much as 10 percentage points more than it would have done otherwise. And Japan is going to grow more. So it's going to be good for them economically.

KING: Was the deal weakened at all when the United States pulled out - because at the time, there were questions about whether or not the center could hold?

GOODMAN: Yes. Actually, very much so. This was originally an agreement of 12 countries, including the United States, that represented about 40 percent of the global economy. It's now down to about 15 percent of the global economy. So right there, the economic impact is less. And then the U.S. was effectively the leader that was driving a lot of the - particularly the tougher rules that were established under this agreement. Japan, quite surprisingly, stepped up after the U.S. pulled out and, working with Australia and Singapore and others, managed to push it over the line. And so that was a little bit against expectations. But Japan did a great job of moving this thing forward.

KING: What does easing trade restrictions between these 11 countries that are not the United States mean for the United States?

GOODMAN: Well, it's going to be a loss for some of our exporters. One of the widely discussed examples is the beef market in Japan. So Japan maintains a tariff of about 38.5 percent on beef imports coming into the country. That tariff is going to be reduced for Australia and other competitors of the United States. It already has been reduced as of a couple days ago, and it's going to gradually drop to 9 percent. U.S. cattlemen are going to continue to pay 38 percent if they want to sell into this very lucrative market. So that's just one example of the kind of loss to the U.S. from a sort of microeconomic, sectoral perspective. Macroeconomically, not a huge impact on the U.S. - but some of these particular sectors are going to be hit.

KING: Can we say whether or not the U.S. is in a worse position economically with this new agreement, with these countries being involved in it than if no deal had ever been struck?

GOODMAN: I mean, I think that for those specific sectors - yes - that's for sure - the cattlemen, for example, or the digital economy. That's another important area of this agreement. There were new rules established on keeping the Internet open, making sure that data could flow across borders substantially, you know, freely. You don't have to store data in a country. We've lost now our participation in all of that. And I think that's going to affect, potentially, you know, this core part of our future economy. So I think it's a blow.

Beyond the economics, I think it's important, also, to stress what else has been lost here. TPP was also about sending a signal to this important region that the U.S. was engaged and had committed to the region. And by pulling out, I think it's really sent some questions about our commitment to this important region, where China is rising and others are uncomfortable with that.

KING: Matthew Goodman of the Center for Strategic and International Studies, thank you.

GOODMAN: Thank you. Transcript provided by NPR, Copyright NPR.