The withdrawal of the U.S. from the TPP is likely to result
in numerous longer-term implications, the CPOs say.
For one, they feel it will cause a potential erosion of U.S.
competitiveness. One CPO comments that there will be
“shortages and cost increases of electronic components
from Pacific countries (that) will make the U.S. less
competitive worldwide.” The impact will also be felt in
other industries like dairy, respondents say. One CPO
states that not being part of the TPP will “impede U.S.
market access for dairy products in certain Pacific Rim
The TPP also would have affected trade in other ways. In
general, it would have promoted free trade among Asian
nations. Its elimination leaves a vacuum in Asia — and an
opportunity for China to fill it.
CPOs seem concerned about
China’s expanding role on the
global stage without the U.S.
According to one respondent,
economic conditions left by the
elimination of TPP will provide
“a great opportunity to other
countries, especially China, to
fill the gap left by America’s new
policy.” Another indicates that
China will be able “to potentially
step into a pro-globalization and
trade gap left by the U.S.” One
CPO goes even further, saying,
“The U.S. will not win a trade war
CPOs prefer having trade
agreements in place that reduce the complexities of
moving product across borders. Thus, another potential
longer-term concern pertains to the types of trade
agreements the U.S. will enter in the future. The TPP was
a multilateral agreement, a type of agreement that often
results in more concessions than individual agreements
between two parties. As was the case in the formation of
the European Union, a multilateral agreement can result
in the development of a single system that facilitates
trade and disposes with costly barriers that slow down the
movement of goods and services.
Individual treaties are different. While negotiating them
could result in favorable agreements for the U.S., it is
unlikely that a single system would occur. And other
issues could result: It’s generally thought that if a
country tries to take advantage of economic allies, that
country usually ends up with no allies. While leaders
may calculate that it’s a better strategy to have individual
bilateral relationships on every issue, at some point the
relationships become intertwined.
Despite short- and long-term TPP implications, CPOs
indicate the more immediate concern is the future of the
North American Free Trade Agreement (NAFTA). Referring
to the elimination of TPP, another CPO says, “If similar
action were taken on undoing NAFTA, it would have a
potential impact on us.”
Because Mexico was an original signatory to the TPP,
some of the concerns about NAFTA would have been
alleviated by the participation of the U.S. in the TPP.
However, because the U.S. walked away, potential trade
changes Mexico agreed to through the TPP will need to
be negotiated with Mexico directly.
One CPO indicates that without the TPP, an uncertain
environment surrounds tariffs. Another says, “Hedging and
derivative risk management strategies will change (and)
supply chain risk management will change, meaning that
eliminating the TPP will likely make (an organization’s)
supply chain risk management threats more difficult to
New trade barriers can increase risk
because they are likely to result in
higher costs and uneven product
flows. CPOs prefer stability because
instability creates risk. For supply
management, the worst kinds of
trade barriers are those that fluctuate
and are uncertain.
Walking away from the TPP may
temporarily hold off the impact of
globalization by forcing firms to
keep jobs in the U.S., but sustaining
inefficient and uncompetitive
enterprises usually brings, at some
point, a hard fall. Also, automation
likely will continue to increase,
CPOs see a minimal short-term impact from the U.S.
departing the TPP. However, in the long term, they believe
the global competitiveness of the U.S. could erode,
raising concerns about how that could fuel the growing
influence of China.
While these TPP implications are significant, CPOs say,
potential changes regarding NAFTA could be more
Thomas Choi, Ph.D., is Executive Director of CAPS Research and
Harold E. Fearon Chair of Purchasing at the W. P. Carey School of
Business at Arizona State University (ASU) in Tempe, Arizona. Dale
Rogers, Ph.D., is interim chair of the Department of Supply Chain
Management at the W. P. Carey School of Business at ASU.
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