Economy Watch: The Unspoken Significance of Trans-Pacific Partnership
- Jul 28, 2015
No blockbuster movies will ever be made about international trade negotiations (the Star Wars prequels reportedly mentioned trade deals as a major plot point, and were roundly mocked for it). It isn’t something that attracts a lot of public interest, or even interest among most pundits, any more than the movement to standardize accounting rules worldwide. But like the accounting rules, the devil’s in the tedious details, and a whopper of a trade deal is in the offing in Hawaii this week. It’s something that certain segments of U.S. CRE would do well to pay attention to — especially industrial real estate owners. If the deal is done, and has the impact its proponents say it will, it will be a boon to U.S. exports, making more goods will be flowing through American industrial real estate.
Negotiating teams are in Hawaii this week working on a treaty called the Trans-Pacific Partnership. The treaty would involve 12 countries that combine to 40 percent of the world’s GDP and 25 percent of global exports. Four (relatively small) countries formed the partnership almost 10 years ago: Singapore, Brunei, Chile and New Zealand. The goal Trans-Pacific Partnership is to expand the trading bloc, which would elimate many tariffs and other trade barriers, to include the United States, Australia, Peru, Vietnam, Malaysia, Mexico, Canada and Japan.
Conspicuous by its absence is China, but even without the East Asian behenmoth, the trade bloc would be enormous. Naturally it’s been a long and winding (and tedious) road to get to this point. Among other arcane sticking points have been access to Canada’s agriculture market; objections to American pharmaceutical patent rules; questions about Chinese components in Vietnamese textile exports; labor rights in Vietnam and Mexico, and much more. Most of them seem to have been ironed out.
No one has tried to quantify the impact of a successful Trans-Pacific Partnership on U.S. real estate.
But according to Gary Hufbauer and Cathleen Cimino, writing in a report by the Peterson Institute, the deal will boost exports of member countries by $440 billion, or 7 percent, and real GDP by about 1 percent indefinitely. That, and it’s also possible that there will be bigger gains if more nations join. (South Korea might, as well as others). Also, the partnership might become a model for further economic liberalization, which presumably would help U.S. exports even further, though that wouldn’t be in the near term. Anything that gets goods moving in greater quantity would around the Pacific Rim would presumably be good for the warehouse and distribution markets of the United States, especially on the West Coast (and maybe some Eastern markets, with a larger Panama Canal).