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Trade Agreements Mean Business

By William DiBenedetto, CBN Feature Editor

The controversial Trans-Pacific Partnership free trade agreement will be a big deal for trade in the Pacific Rim, if it ever actually gets implemented in our lifetime.

It’s been nearly six years since the U.S., Australia, Brunei, Chile, New Zealand, Peru, Singapore and Vietnam launched TPP negotiations in March 2010. Malaysia, Mexico, Canada and Japan joined a bit later. Just when the goal seems in sight, things get blurry. The U.S., Japan and 10 other Pacific Rim countries held ministerial talks in Hawaii in July, but failed to reach a deal following marathon negotiations.

Now the situation is in limbo while the countries try to figure out when to reconvene the talks — they want to conclude the agreement "as soon as possible," according to the U.S. Treasury Department, but that’s diplomatic-speak for "who knows?"

There are concerns that the TPP talks have been shelved for the time being, as U.S. political attention turns to next year's presidential election cycle.

But despite the uncertainties, the importance of the TPP for ocean shipping and world ports is evident: for one thing, it would encompass about 40 percent of global output. Some 25 port complexes handle 85 percent of the volume of international goods in the U.S. But the largest four port complexes — New York, Los Angeles, Detroit and Houston — move a combined $1.1 trillion in international goods annually, about 37 percent of all U.S. exports and imports, according to a Maritime Executive article.

TPP is likely to increase the movement of goods at the few ports that move most of the country’s Asian trade. Trade deals like TPP and other international freight developments like the Panama Canal expansion "have the potential to increase the flow of exports and imports across the U.S.," says Brookings.

"Given the TPP’s focus on Pacific trade, many West Coast port complexes that already handle large amounts of Asian imports and exports, such as Los Angeles, would likely be at the center of these exchanges," said Joseph Kane, Brookings senior research assistant and co-author of  the report, "Metro Modes: Charting a Path for the U.S. Freight Transportation Network."

For Alberto Oltra, head of Spanish-speaking South America for DHL Global Forwarding, the TPP is down the road — he deals with the multiplicity of existing

trade agreements every day.

"I would like it if the entire world had a free trade agreement among themselves, it would be much easier," he said in an interview. "Every single free trade agreement that is signed is very good news for the industry and for DHL because this promotes the exchange of trading in general in the countries or in the region," Oltra continued. He explained that DHL Global Forwarding’s job is to make sure that "once a country signs an agreement we understand the scope of the free trade agreement; we also do a kind of consultancy so that we understand the needs of our customers to make sure we can expand business with them."

For open economies such as Chile, Peru and Colombia, trade has increased drastically in the last few years, Oltra said. When a country has an open economy, "then DHL and the entire industry can benefit, (making sure) this volume increases." DHL has seen this in Latin America with Chilean fruit, which is now an allowed export in some Asian countries. Four years ago DHL Chile had six charters and last year that increased to 37 charters, or more than 3 million kilos of fruit, "just because the regulations are much more open and the knowledge base between the markets is higher." FTAs provide a clear framework that allows countries to become competitive, he noted.

Oltra said DHL’s "Global Connectedness Index" is an ongoing resource and guide that lists and correlates each country according to their different trading aspects.

Simply put, the GCI is a detailed analysis of the state of globalization around the world. The index — there have been three so far, with the most recent compiled in 2014 — "is pretty useful to us because we can check to make sure we are trading with countries with more openness and more connectivity, making it easier to trade," Oltra said.

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