The Trans-Pacific Partnership – Beyond the US

The Trans-Pacific Partnership (TPP) is a trade agreement signed by twelve Pacific Rim countries. The deal seeks to serve a path of entry of American goods into Asian markets, and is lately discussed in the context of President Obama’s administration’s “pivot to Asia.” Although the agreement primarily represents elimination of barriers between the United States and Asian countries the contract states 3 Latin American countries: Mexico, Peru and Chile.

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An invitation into the TPP signifies these countries entrance to a large trading bloc, which makes up about 40 percent of the world GDP. The counties have decided that their path forward is to embrace he the growing practice of globalisation and free trade agreements. Membership within TPP would facilitate I created integration with one another and offer a more coordinated approach to expanding trade with Asia.

On the other side of the spectrum are Latin American countries that fave the Atlantic. Their approach to regional and global integration has taken a semantically different course. Mercosur, which once held great promise, now includes a protectionist wing of Latin America that has come to include Argentina, Brazil, Uruguay, Bolivia and Venezuela. For them, the ability to make progress through regional trade will prove a challenge.
Meanwhile on the Pacific side, Peru and Chile can boost their exports of commidity goods. With lower tariffs in place, the countries can enter the world stage with more competitive goods, giving exporters access to more markets. Mexico has already been integrated into the American economy. Fulfilling the role of supplying auto parts and manufacture goods to the US, Mexico will now be supplying goods the Asian markets. It is likely to see a rise in supply to US and increase in exports to the rest of the world.
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The TPP can provide opportunities if the Latin American nations that are involved can climb the value-added chain, invent, say, the next Apple computer, and produce these products in competitive ways. The challenge is that other participants, for instance Vietnam [another member of the TPP] are also trying to upgrade their exports. Being part of the TPP is like joining a club. You have to perform when you get there.


Others may not get an opportunity to do so. The exclusion of an emerging giant such as Brazil will definitely hurt the country as much as its 7-1 World Cup semi-final loss to Germany. The economy is already facing a tough challenge to fight against protectionist measures, and the signing of this agreement will isolate the country from the global markets. Meanwhile, the more fortunate ones such as Chile and Peru must seek to take advantage. They benefit from reduced tariffs, but face stiff competition from Asia in terms of exports of food and vegetables. The opportunity is provided, but they must reap the benefits. Lastly, a member of NAFTA, and now TPP, Mexico can consider itself lucky to be next to the US.

Will Chinese Like Fish N Chips?

The British economic authorities aim to push for closer trade relationship with China, as Chinese President Xi Jinping arrives in London for a four-day visit. London is seeking stronger economic ties between the U.K. and China, despite the recent economic slowdown in China. This effort to enhance trading cooperation with China signifies that the U.K. has more options outside of the EU.

Currently, China is the 7th largest export market that the U.K. trades with, total export to China worth approximately 30 billion dollars last year. The major products that the UK exports to China are automobiles, telecommunications equipment and electronic components. Although the EU and US still take up most of the UK’s exports, the number of UK’s export goods and services to China will be riding on a rising trend, especially after Xi’s recent visit.



Chinese President Xi also states his intention to strengthen trade relationship between the two countries during his visit. China is the UK’s second largest source of imports, right after Germany but ahead of United States, according to Quartz (Quartz). Investments on British real estate coming from China has been increasing over the past five years; in the meantime, the increase of Chinese tourists’ purchasing power boosts local economy in the U.K.. According to the Reuters, “the People’s Republic has picked London as the host city for its first foreign-issued, yuan-denominated bond” (Reuters). Additionally, wealthy Chinese individuals are sending their children to the UK for schools. Reportedly, every one out of seven students on a British University campus is Chinese.

On the other hand, many remain suspicious of this newly established close relationship between the UK and China. One of the arguments against this relationship maintains that China’s economy is at an unstable place right now and that its growth will not skyrocket like it used to in the past ten years. Chinese stock market’s recent crash has hit not only the U.K., but also the world’s confidence in Chinese economy. As a result, critics comment that the timing might not be a perfect one for the two countries to strengthen trading partnerships.

Secondly, the U.K. has been known to the rest of the world for its criticism on Chinese refrain of human rights, represented by Prime Minister David Cameron’s meeting with the Dalai Lama in 2012, which resulted in great diplomatic tension between the two countries. In September 2015, however, British Chancellor of the Exchequer, George Osborne indicated that the U.K. would no longer engage in “megaphone diplomacy” and will avoid its criticism on Chinese human right issues during his visit to China (Bloomberg). Unfortunately, the two countries’ difference in cultural values might still pose as a barrier before the two countries manage to pull each other closer.

The Trans Pacific Partnership Effect in California

NAFTA, the North American Free Trade Agreement is currently the world’s largest free trade zone but that position will soon be overtaken by the Trans Pacific Partnership (TPP) agreement, which involves the United States and 11 other countries that produce 40% of the world’s total GDP of $107.5 trillion, 26% of its trade and over 793 million of its consumers. It is basically a trade agreement that will help support economic growth and jobs by removing trade barriers (such as steep tariffs) for goods and services between the 12 countries involved. The TTP help boosts exports and economic growth by increasing the employment of the 12 countries involved. It is estimated to increase exports by $305 billion per year by 2025, by removing the 18,000 tariffs placed on US exports to the other countries.

So obviously the agreement creates an advantage to our country’s economy, but what would it mean to the state of California?

California has important trade and investment ties with the 11 other countries involved with TPP. In 2013, California exported $70.1 billion worth of goods to these countries, hence with the TPP agreement in motion, it will surely help strengthen the trade and investment relationships between California and the 11 countries and support the California jobs that depend on them. The TPP agreement will also provide California with an opportunity to increase its trade in goods with current US FTA partners, which of the 11 TPP countries, there are 6 of them (Australia, Canada, Chile, Mexico, Peru and Singapore). California exported $54 billion worth of goods to these six countries in 2013, accounting for roughly 32% of California’s goods exports globally. The TPP will help to support these global supply chains and facilitate further trade with these current FTA partners, along with 5 other countries that has the potential to expand in terms of trade relationship with California.

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As mentioned before, the TPP will also provide California with the opportunity of expanding its market for goods and services to the 5 other countries that are currently not a part of the US FTA. The 5 countries which have a combined population of 252 million people, and a combined economy of $5.6 trillion have the potential to be new markets for Californian exports. Although currently California has good trade ties with some of these countries, exporting $24.6 billion in goods and services in 2013 to the 5 aforementioned countries, the state still faces very high level of tariffs to export to them. For example, the tariff rate for export of fresh Californian Oranges go as far 32.0% to Japan.

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All in all, the TPP creates a better opportunity for California to not only expand existing trade between the six current US FTA partners, but it also help California expand to new markets around the world, which leads to an increase in the state’s economy, in terms of increasing investment ties between California and the TPP countries, and also supporting jobs in California.


Gone Shipping: A Visit to the Port of L.A.

It’s hard to look at the Port of L.A. and not think about Legoland on steroids — towers of interchangeable blue, grey, and orange containers climbing up toward the sky, cranes as tall as skyscrapers, and a handful of life-size people who, against this scale, looked like little more than Lego men, keeping the whole thing going.

My own forays with Legos were haphazard. Every project would become a multicolored wall about two blocks deep that an X-Men action figure or a plastic dinosaur would end up running through. A technicolored prop, basically. Of course, that bears absolutely no resemblance to the Port of L.A., whose container ships are the building blocks of international trade here in the United States.

Yes, I went there.


While the pun may be obvious, it applies in a number of ways. Sure, the port is the foremost container port in the U.S. (and, depending on whether you count neighboring Long Beach, either in the top 10 or top 20 worldwide). It’s also a living, ever-expanding testimony to the mechanics of modern trade, which is now the most streamlined and efficient it’s ever been. You’ll find thousands of containers packed neatly on ships and on the shores, you’ll ships of all sizes and purposes, you’ll even find sea lions. But absent from the shores of San Pedro are about 15,000 longshore workers.

Years ago, it would take that amount of man-power to offload these ships, which typically carry between 5,000 and 8,000 containers. Now, a few automated cranes can handle that load between two and five days, depending on the size of the ship. These efforts have been largely rewarded as the Port remains ever busy, thanks in part to a rebounding economy and new, expansive trade deals. One official noted that even a “bad year for cargo” typically sees growth of 4%.


Expedience is key in shipping, as the goods from these containers need to be transported throughout the United States, traversing America’s highways and railways before they land in your local Ralph’s, Target, Forever 21, Meineke, or Best Buy.

The number one good found in these containers now is furniture — and has been for the last twenty years. In second comes autoparts, which have seen an increase in import rates. These parts are shipped here from Asian, then assembled in autoplants throughout Mexico and North America (namely, Texas; Memphis, Tennesee and Detroit, Michigan). Next comes clothing and shoes, followed by electronic goods. Rounding out the U.S.’s top five imports are toys and sporting goods — the latter of which is already causing an uptick of activity at the port as the holidays approach.

And what are we sending back to Asia?

Air, for the most part. Since U.S. imports far outpace U.S. exports, many of our containers will go back to Asia empty. And what we do send back to countries like China aren’t ready-made goods, like the ones we receive, but commodities.

More specifically, trash.

The top export out of the Port of L.A. is waste paper — material you directly contribute to when you accidentally print out 10 copies of that out-dated resume. Next is metal scrap, which is shredded before being put on the ships, followed by plastic scraps, which will be recycled and repurposed in China before making their way back to the United States as eco-friendly dog bowls. Through the Port of L.A., we also send animal feeds and autoparts. Since the port also processes these materials, you don’t have to go too far to smell the burning metal, dust and rust of the scrap factory as it mixes in with the sea air.

Eli Goodstein, who refused to be intimidated even though his camera wasn't the largest on the yacht.

Eli Goodstein, who refused to be intimidated even though his camera wasn’t the largest on the yacht.

In fact, along the shores of the Port is an entire ecosystem that features industries from the past and present. Nissans and Infinities fill one side of the dock, as 150,000 of these cars are brought in to the Port per year before being distributed throughout the U.S.

You’ll also find a cement processor — previously out of commission, but scheduled to rev up again in 2016 — and a borax factory. Not to be confused with the Kazakh reporter, borax is an earth mineral commonly used as a household cleaner that can only be found in South Africa, Turkey, and Southern California. Experts estimate that, as it stands, there are only 30-40 years of borax left on earth.

And that’s among the things most interesting about the port — how you can see remnants of old mechanisms, old industries, old ways of doing trade, even as management charges the port’s systems and technologies forward.

Everything’s Coming up Empty!

20151013_102630 20151013_102907By Alexa Ritacco

The number of empty containers being shipped back to China from US ports is pretty alarming. According to the Wall Street Journal, the Ports of Long Beach and Oakland have reported a 20% increase in the number of empties since last year. That is a pretty steep jump. In August, the Port of LA dealt with more than 225,000 empty shipping containers, bring their increase up to 21% from the following year. Even the east coast is feeling the effects, with New York and New Jersey ports reporting a combined increase in empty container exports of 31.5%.
It was crazy to actually see all of the giant empty containers in person on our class trip to the Port of LA. It really put the importance of this issue into perspective, and obviously made it seem much more real as well as pressing. The fact that most of those containers used to be going back filled, and that are now just sitting there empty, is most definitely concerning, and something that needs to be more widely addressed.
These increases are huge, and are happening because of a few reasons, but the main one being the high-profile slow down of China’s economy. The article notes that normally after receiving the imports from China, the containers are stuffed with American agricultural products, specialty luxury goods and recycling waste, that is typically turned into products or packaging once it enters China’s factories.
China’s demand for U.S goods has been faltering over the past few years, with the article citing that its “imports fell 20.4% year-over-year in September following a 13.8% decline in August” and as “of June, U.S. exports of scrap materials were down 36% from their peak of $32.6 billion in 2011.” These figures not only reflect the weakening of China’s economy, but economist Paul Bingham believes it to reflect a lowering demand in Europe as well, so it would only be natural for the US to be feeling these types of effects at our ports.
It will be very interesting to see how these issues progress, and to see what solutions are brought forward as concrete ideas to help handle these looming problems. The continuous growth of empty containers being shipped back is just not sustainable for US Trade. Is this simply just a cyclical slow down that the global economy will bounce back from? Or is it something more serious that may require some sort of intervention?