What is the TPP and Why Should Investors Care?

The TPP stands for the trans pacific partnership. It is a trade deal that will feature:

• the United States,
• Canada,
• Chile,
• Singapore,
• Malaysia,
• Vietnam,
• and other countries centered around the Pacific rim.

Importantly, China would not be a part of the trade deal. In many ways, member countries are developing and designing this pacific trade agreement to counter China’s growing power and influence.

So what is TPP specifically? It’s a trade agreement, which means that various countries are trying to reach agreements on trade laws. Under the Transpacific Partnership, trade barriers between various nations would be lowered.  This will make it easier for companies and individuals to conduct trade and business between member states.

The TPP agreement is drawing a lot of criticism, however, from labor unions and other people/ organizations who are afraid that the deal will produce profits, but will hurt ordinary citizens. Fact is, when agreements like the TPP trade deal are put into place, some people and companies will win while other companies will lose.

As it stands, the TPP deal will cover trade between:

• Australia,
• New Zealand,
• US,
• Canada,
• Mexico,
• Chile,
• Peru,
• Japan,
• Malaysia,
• Singapore,
• Vietnam,
• Brunei.

Japan and the United States are generally ranked in the top three national economies. Canada and Chile are both known as regional powerhouses. Meanwhile, Singapore is one of Asia’s leading finance centers. Combined, the trade deal will mark the largest such deal ever agreed upon, should it come to pass.

As of right now, the TPP deal is facing some pretty stiff resistance at the national level. Most politicians support the deal, as do most business leaders, but citizen push back is growing more relevant.

Why Should Investors Care About the TPP?

Larger socio-political debates are best handled in the political realm. For investors, the most important considerations center around figuring out who the winners will be, and who the losers will be, and then investing in companies most likely to gain ground.

It’s easy for investors to become focused on smaller events, like financial reports, quarterly results, sales statistics, and all the rest. Yet major events that have an impact on the entire investing “environment” must also be monitored closely. They can have a big impact on business performance.

For example, many reports suggest that during the NAFTA trade agreement, big companies like General Motors and Ford, benefited from open access to markets and the reduction of trade tariffs. Meanwhile, agricultural companies in Mexico and to a lesser extent, Canada struggled to compete with their American counterparts. At the same time, smaller American factories, and some Canadian factories, struggled to compete with the lower prices in Mexico. Many were put out of business.

As an investor, it is important to consider who will benefit from a trade deal, and who is going to struggle. When it comes to the TPP trade deal, there are simply too many factors to consider in such a short article. What is important to recognize is that some companies are going to do very well under the trade deal, while others will struggle. Your job as an investor will be to pick the winners, and if necessary, divest from the companies likely to lose.

Why Is The TPP Drawing So Much Attention?

Right now, the TPP trade deal is one of the most contentious topics in the world. This might sound like hyperbole, but if you keep an eye on the news, you’ll most likely hear quite a bit of talk about the Trans Pacific Proposal. This is especially true if you live in one of the countries where the deal will have an impact.

The TPP will be one of the largest and most wide-sweeping trade deals ever launched. This means the deal is going to affect a lot of people. Average citizens in just about every country are worried about how the deal might affect them. People in the U.S. and Canada, for example, are worried about competing with the lower wages found elsewhere.

People in Vietnam and Peru, on the other hand, are worried that companies from the United States and elsewhere will dominate their local economies. Even if American companies invest in the local economy, many locals are worried that the benefits to locals will be limited.

Either way, the Trans Pacific Partnership is a controversial topic. During elections in potential member countries, the deal has been a hot topic of debate. News coverage has been near constant too, and many civil organizations and non-profits have been slamming the deal. The reason is simple: the deal will have wide sweeping effects on the countries involved, and many people fear change.