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Trade Agreement Should Boost Our Portfolios

After seven years of wrangling over terms, definitions and protocols, twelve countries surrounding the Pacific Ocean announced last month that they had finally reached an agreement on the Trans Pacific Partnership (TPP).

Governing trade relations between the United States, Canada, Australia, Japan, Malaysia, Mexico, Peru, Brunei, Vietnam, Chile, New Zealand and Singapore, the deal will cover roughly 40% of global trade with a value of about $30 trillion, so it’s a pretty big deal. It also may grow with six more countries having expressed an interest in joining the trade pact.

The deal has been controversial here in the United States, with many lawmakers concerned that it will have relatively little economic benefit for our country and could actually help send more jobs overseas. That’s a big part of why Congress built a 90-day cooling off period in the fast track authority it granted the President to negotiate and implement the TPP this summer. With 30 chapters and running to more than 2,000 pages, Congress will need every one of those days to actually wade through it.

While there is still some risk that the deal might not get Congressional approval here in the U.S., despite the muted economic impact the pact would give us some important political advantages in the Asia-Pacific region. By giving the other participating countries easier access to the U.S. markets, particularly as Chinese demand for commodities has been cooling, we can help smooth out any potential economic swings as the Chinese economy cools. At the same time, by reducing the economic dependence on China, we’re securing more geopolitical sway for ourselves.

Macroeconomic and geopolitical issues aside, the TPP could have real benefits for individual companies in our Global Income Edge portfolios.

 


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