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Trans-Pacific Trade Relations Continued Engagement Needed in Region to Strengthen Ties

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Trans-Pacific Trade Relations Continued Engagement Needed in Region to Strengthen Ties INTERNATIONAL TRADE Trans-Pacific Trade Relations Continued Engagement Needed in Region to Strengthen Ties BACKGROUND • Region has seen an average annual The Trans-Pacific region stretches from the west coast of the economic growth rate around 6% over the United States on the Pacific Ocean to the west coast of India in last five years. the Indian Ocean, connecting the two oceans through Southeast Asia. The region is made up formally of 14 countries: Australia, • New trade opportunities to help boost Bangladesh, Burma, India, Indonesia, Japan, Malaysia, New post COVID-19 economy. Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam. China typically is considered separately when • Consider re-engagement into the current discussing the region. The Trans-Pacific region is one of the great- est current and future engines of the global economy. comprehensive agreement (CPTPP) to counter The Trans-Pacific is the most populous, fastest-growing and China-led regional partnership (RCEP). most economically dynamic part of the world. By 2030, it will represent 66% of the world’s middle class, and 59% of all goods TRANS-PACIFIC ECONOMIES RUSSIA CANADA SOUTH KOREA UNITED STATES JAPAN CHINA TAIWAN HONG KONG VIETNAM MEXICO THAILAND THE PHILIPPINES MALAYSIA BRUNEI INDONESIA PAPUA NEW GUINEA CPTPP Members PERU SINGAPORE Pulled out of TPP AUSTRALIA Other APEC Members CPTPP: Comprehensive and Progressive Agreement for Trans-Pacific Partnership CHILE TPP: Trans-Pacific Partnership APEC: Asia-Pacific Economic Cooperation NEW ZEALAND Source: More Than Shipping 2021 California Business Issues 61 ® Agenda for California Recovery 2021 Business Issues and Legislative Guide See the entire CalChamber 2021 Business Issues and Legislative Guide at www.calchamber.com/businessissues Free PDF or epub available to download. Special Thanks to the Sponsors Of the 2021 Business Issues and Legislative Guide Major Gold Silver INTERNATIONAL TRADE and services sold to middle class consumers will be sold in the • U.S.-Australia Free Trade Agreement. The U.S.-Australia Trans-Pacific. Developing nations in the region will need about Free Trade Agreement celebrated its 15th anniversary in 2020, as $1.5 trillion in investment every year for the next decade in order it came into effect in January 2005 and eliminated tariffs on 99% to develop the infrastructure necessary to sustain their growth. of U.S.-manufactured goods exported to Australia at the time. Despite the Trans-Pacific region’s growth, over the last decade Since the agreement came into force, two-way trade between the growth in U.S. exports to Asia has lagged behind overall U.S. United States and Australia has doubled to $67 billion. Australia export growth. The United States is gradually losing market share is one of the United States’ oldest and closest allies due to sharing in trade with Asian countries. Meanwhile, Trans-Pacific countries common values and major interests in each other’s economies. have signed more than 150 bilateral or regional trade agreements, The United States is the largest investor in Australia. while the United States has just four trade deals in the Trans- In 2019, the United States exported $26 billion worth of Pacific region—with Australia, Singapore, South Korea and the goods to Australia, making Australia the 16th largest U.S. export newly negotiated deal with Japan. partner. The United States enjoys a trade surplus with Australia that reached around $15 billion in 2019. Australia is the 14th IMPACT largest export partner for California, which exported $3.88 Two-way investment and trade in the Trans-Pacific region has billion to the country in 2019. grown by almost 6% to a record of nearly $2 trillion, supporting • U.S.-Japan Limited Trade Deal. The U.S. and Japan began more than 3 million jobs in the United States and 5.1 million negotiations toward a trade deal in October 2018. After a year of jobs in the Trans-Pacific in 2018. The United States has made trade talks, a limited trade deal was reached and then approved foreign direct investments of almost $1 trillion into the Indo- by Japan’s parliament, with approval by the U.S. Congress not Pacific region in 2019. The region contains seven of the world’s needed. The limited trade deal went into effect in January 2020 30 freest economies—Singapore, Australia, New Zealand, and opened market access for certain U.S. agricultural and indus- Taiwan, Malaysia, South Korea and Japan. The sea routes of the trial goods in Japan. The agreement will help to give American Trans-Pacific facilitate 50% of world trade. farmers and ranchers the same advantages as Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) STATUS OF FREE TRADE AGREEMENTS IN TRANS-PACIFIC countries selling into the Japanese market. In return, the United REGION States will reduce or eliminate tariffs on agricultural and indus- • U.S.-Korea Free Trade Agreement. In 2018, President trial imports from Japan. A high-standard digital trade agreement Donald J. Trump renegotiated the U.S.-Korea Free Trade Agree- also was reached separately but concurrently and went into effect ment (KORUS), which originally entered into force in March in January 2020, as well. 2012. The renegotiated deal went into effect on January 1, 2019 Japan is the fourth largest export partner of the U.S. and the and included an extension to phase out U.S. tariffs on trucks, as fourth largest export partner for California; exports total $74.65 well as harmonized vehicle testing requirements, Korean recogni- billion and $11.8 billion, respectively. Japan is one of the largest tion of U.S. standards on parts, and improvements to fuel economy markets for U.S. agricultural products. The country also is the standards. There also were modifications to Korea’s customs and largest investor into California through foreign-owned enter- verification processes, and its pharmaceutical pricing policy. prises as of 2019. The Japanese and U.S. markets together cover South Korea is the seventh largest export partner for the approximately 30% of global GDP. The trade deal is an impor- United States and the fifth largest for California, exporting tant step in furthering the long-shared partnership between the $56.54 billion and $9.16 billion, respectively. U.S., Japan and California. • U.S.-Singapore Free Trade Agreement. The U.S.-Singapore • U.S.-Taiwan Trade. The United States and Taiwan first Free Trade Agreement went into effect in January 2004. All tariffs signed a Trade and Investment Framework (TIFA) in 1994. have been phased out now. Singapore is a strategic partner for the Under President Trump in 2020, the U.S. showed more support United States in the Trans-Pacific region and is the 14th largest U.S. for Taiwan and a possible trade agreement, with Taiwan, relaxing export partner; U.S. exports total $31.5 billion. Singapore is Cali- some regulations in order to show good faith in starting talks. fornia’s 13th largest export partner; state exports exceed $4.3 billion. Support for a trade agreement is popular among some in the U.S. Singapore has consistently ranked among the top countries Congress. In the Trans-Pacific Region, the Regional Compre- for doing business, according to the World Bank and is regional hensible Economic Partnership has been signed without Taiwan, headquarters for hundreds of U.S. companies. resulting in renewed interest for a possible U.S.-Taiwan trade deal. 62 2021 California Business Issues ® INTERNATIONAL TRADE Taiwan is the 14th largest export partner for the United States, Chile, Malaysia and Peru will begin 60 days after they complete with a total of $31.2 billion in goods exported to Taiwan. For their ratification process. California, Taiwan is the seventh largest export partner with The CPTPP agreement retained all the tariff reductions and $7.19 billion goods being exported, including $280 million eliminations from the original version signed in 2016; however, it worth of California agricultural products. suspended 22 other provisions, including some intellectual prop- erty rules. The CPTPP will reduce tariffs in countries that together CHINA, THE ASSOCIATION OF SOUTHEAST ASIAN amount to more than 13% of the global economy—a total of $10 NATIONS, AND THE REGIONAL COMPREHENSIVE trillion in GDP. With the United States, the agreement would ECONOMIC PARTNERSHIP have represented 40% of the world economy. Even without the After many rounds of tariffs on each other’s goods, China and United States, the deal will span a market of nearly 500 million the United States signed a Phase One Agreement on trade on people, making it one of the world’s largest trade agreements. January 15, 2020. This historic agreement required structural There is a push for the new Biden administration to consider reforms and changes to China’s economic and trade model, re-entering the TPP/CPTPP. U.S. engagement in the region including intellectual property, technology transfer, agriculture, is critically important to counter China’s influence and the financial services, and currency and foreign exchange. The China-led RCEP. Re-engagement in the TPP/CPTPP could be Phase One Agreement also included a commitment by China beneficial for California, which in 2019, exported almost $70.8 to purchase U.S. agricultural goods. Although the commit- billion to the CPTPP member countries. ment briefly fell to the wayside during the onset of the global COVID-19 pandemic, China has begun to act on its purchasing ANTICIPATED ACTION commitments, but more remains to be fulfilled. The California Chamber of Commerce is hopeful that the Biden While China and the United States have a complex relation- administration will continue to develop relations in the Trans- ship, China’s relationship with Association of Southeast Asian Pacific and strengthen partnerships within the region—including Nations (ASEAN) countries grew deeper in 2020 with the consideration of multilateralism rather than bilateralism.
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