The Trans-Pacific Partnership (TPP) is a free-trade agreement (FTA) being negotiated between 12 countries within the Asia-Pacific ring. The countries included in the pending agreement are the U.S., Japan, Australia, Peru, Malaysia, Vietnam, New Zealand, Chile, Singapore, Canada, Mexico, and Brunei Darussalam. Together, these TPP countries represent approximately 40% of the global GDP and 33% of global trade. When this FTA is finalized, it will have a lasting impact on the supply chains of almost every major industry around the globe.
1. Past FTA (NAFTA) Provides Impact Forecast
Most noteworthy, this FTA is still open to debate, but it is vital for business leaders to understand how this trade agreement could impact their business. NAFTA provides us a strong guide on the timing, scale and shifts that can impact companies across a wide range of industries.
2. Import & Export Increases
A major goal of the TPP is to eliminate certain tariffs on U.S. goods. These tariffs are often barriers to entry for smaller companies. The consumer typically pays the cost of the current tariffs. This makes it difficult for companies to be competitive in international markets. Likewise, with the elimination of these tariffs, technology companies will be able to engage in international trade. The companies will be able to get their products into the TPP country markets while keeping costs down. The TPP is expected to accelerate global trade, so companies should review their current organizational structures to ensure they are prepared to potentially import and export more raw materials, components and finished products.
3. Supply Base Possibility Expansion
If passed, the TPP will be able to give high growth technology companies the edge they need to compete. It will be extremely important for high growth technology companies to establish an efficient supply chain because hidden costs prevent engagement in international trade. These hidden costs or “chokepoints” include excessive customs mandates, ineffective security mandates, inadequate infrastructure, and burdensome regulations. It can prove to be detrimental if these issues are not addressed when building a supply base within TPP.
In conclusion, the TPP brings a chance for profit and growth. As the global supply chain landscape changes, new opportunities will arise. It will be essential for high growth technology companies to have the necessary infrastructure to take advantage of to these rapidly expanding markets.