Hacker News Reader

Comment by nl | Hacker News Reader

The TPP was absolutely designed to be a China containment strategy.

The idea was to reduce trade barriers within the Pacific region, which would make trade there cheaper and hence more attractive vs China.

Specifically, lower wage countries (Malaysia, Vietnam, Mexico) would have been more attractive as outsourcing locations compared to China, and in return good and services from high wage countries would have been cheaper in those countries making them more attractive compared to Chinese competitors.

As a specific example, most industrial machinery imported to Vietnam is subject to a 20% import tariff[1]. This means US companies like Caterpillar and GE are relying on political intervention to win deals[2], instead of being more competitive on price.

[1] https://www.customs.gov.vn/SitePages/Tariff-Search.aspx?port...

[2] https://www.thegazette.com/subject/news/nation-and-world/us-...

View on HN

Right, but you need to show that knocking down tariffs like the Vietnam one would actually directly result in more non-Chinese trade. I can pretty much guarantee that even without the 20% tariff, US imports would still be far more expensive than Chinese equivalents. Do you have any economic analysis articles or papers you can point me to that model the expected impacts based on actual market prices and labor costs?

Sure. Here's one on a potential free trade agreement between the US and Malaysia[1] (which is another TPP nation) that calculates direct changes:

As shown, following a free trade, the Malaysia’s export to the USA would increase by USD 30984 million or 7 percent and the US export to Malaysia would increase by USD 16051 million(22 percent). The substantial increase in the volume of export between two countries is due to removal of trade barriers. The higher increase in the US export to Malaysia relative to the Malaysia export to the US is because Malaysia currently has a higher tariff than the US.

Worth noting that it's absolutely unclear if it would have worked, but how TPP was supposed to be a China containment strategy is clear (which was your original question).

[1] http://www2.southeastern.edu/orgs/econjournal/index_files/JI...

Thanks! I'm still looking for an analysis on how this would impact the Asia region in general, and China specifically. For example, from the paper, the net result export impact outside the US-Malaysia trade relationship would be a decline:

"Further, the export of Malaysia and the US to the world is expected to decline by 0.8 percent and 0.1 percent respectively."

But it doesn't break out "rest of world" into groups, so it's not clear what the impact to China would be, if any. To me, the implication is that without a corresponding drop in imports from China, the net result is zero. Unfortunately the tables at the end are garbled, so I can't see in Table 2 what the import impacts would be from their dataset.

Yeah I agree entirely. I don't know where to find this analysis.

I'd also argue that most analysis is likely to be incorrect given that the rapid growth and specifically industrial expansion of China into new industries is unprecedented.

Having said that, all analysis is incorrect at some level, but some is still useful.

(Also, someone is going an downvoting all my comments on this thread! I'm not sure why - I'm not making an argument for or against TPP, just trying to explain how it aimed to contain China. Someone even downvoted my comment pointing out that China is TPP participant Australia's biggest trading partner, so it was never designed to cut off all trade to China, just make the region less dependant on it. It's pretty annoying really)

Reply on news.ycombinator.com