18/01/2019 CPTPP – The Evolution of Globalisation – Supply Direction

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CPTPP – The Evolution of Globalisation

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CPTPP – THE EVOLUTION OF GLOBALISATION This is a personal blog and a platform for
RAYMON KRISHNAN JANUARY 13, 2019 NO COMMENTS industry professionals to share their passion for
supply chain and related content. The opinions
expressed here represent the author’s own, and
not those of my or the author’s employer(s).

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We have seen press coverage and a number of LinkedIn posts that the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP) has entered into force. Still called TPP or
TPP-11 by some, commenced in a fairly low-key manner over the new year. Much of the hyperbole
and enthusiasm around the agreement was dampened by Donald Trump who withdrew the US from
the agreement on his first day in office in 2017.

This move by the leader of the pre-eminent global power in relative decline, but refusing to admit it,
should not disguise the importance of the CPTPP for dynamics of supply chains and wider global
trade.

Shifting Attitudes Towards CPTPP

The free-trade agreement brings together a string of economies in Eastern Asia and the Pacific rim;
Australia, New Zealand, Canada, Japan, Malaysia, Chile, Peru, Mexico, Brunei, Singapore and Vietnam.
Originally, the agreement would have covered around 40% of World Trade but as it is, it is still an
important agreement. Aside from the size of the economies it covers, the effect it is likely to have on
others could be fairly significant.

One benefit could be the stimulus it could give to ASEAN actually concluding Regional Comprehensive
Economic Partnership (RCEP) in 2019. RCEP is a proposed Free-Trade Agreement (FTA) between the
ten member states of and the six Asia-Pacific states with which ASEAN has existing free trade
agreements.

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18/01/2019 CPTPP – The Evolution of Globalisation – Supply Direction
Additionally, ASEAN economies that are not in the CPTPP are drawn by the prospect of closer trade
relations. Thailand and Indonesia are still struggling with the problem of opening-up their economies
to greater external investment whilst managing their political situations. South Korea and the UK
amongst others have expressed interest in joining and may do so at some stage. If these economies
were drawn into the agreement it would dominate the world’s trade regulatory structure. It would also
be one that implicitly excluded China and could perhaps in itself be reason to seek inclusion.

Japan’s position and role in the CPTPP and on global trade has been very interesting. Formerly both
dependent on, yet fearful of free trade, it has performed an about-face to become an evangelist of
open markets. Japan stepped up to fill the gap after the US departed.

This reflects a fundamental re-orientation of the Japanese economy reflected in a new approach to
supply chain management by many Japanese companies and illustrated by their expansion into South
East Asia over the past decade. As Logisticians, one example we have of this is the acquisition of Toll
and APL Logistics in the last few years.

Importance in Light of the US-China Trade Dispute

Although Trump not being supportive of the TPP, the example of NAFTA and the USMCA agreement
that superseded it, illustrates that even he does not preclude big free trade deals. Also, no one knows
for sure what will happen after 2020 – or the very latest after 2024.

The agreement sweeping away tariffs on whole categories of goods including most agricultural
products and along with new customs processes, we envisage many companies will be looking at how
their supply chains should be leveraged to capitalize on this into 2019 – especially given the fact that
many companies are already looking at supply chain re-design as a result of the US-China trade war.

As a result of the latter, Taiwanese companies are looking at re-shoring production to Taiwan as a
result of the trade dispute. The CPTPP also introduces a new arbitration mechanism for trade disputes
and rules on labour regulations

Globalization Is Still the Order of the Day

The effects on logistics markets within and between the economies involved are likely to be dramatic.
Not only are agricultural trade routes between Australasia or South America and North and South Asia
likely to grow rapidly but investment in assembly operations in an economy such as Vietnam are likely
to benefit from easier movements not just between it and Japan but also between Australia, Chile,
Mexico, Peru and Canada.

The CPTPP, and RCEP when it eventuates, is a strong indication that globalization is still the order of
the day. Although the US may not yet be in this agreement, the prospect is one of the CPTPP laying the
foundations of a huge free trade structure including much of the developed world but pivoting around
Asia. An opportunity even for a free trade structure that could supersede the floundering WTO?

Interesting times ahead and certainly opportunities abound for those with the expertise and fortitude
to act.

Dr. Raymon Krishnan, currently serves as President of the Logistics & Supply Chain Management Society.
With a career spanning close to three decades across multiple geographies, he is the regions foremost expert
and thought leader in Supply Chain Management

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