The conclusion of the Trans-Pacific Partnership after years of negotiations could mean a lot of things to each of the countries that is party to it. For a long time, details of the TPP agreement were supposedly kept in guarded room at the US Congress.  The TPP would allow companies to bypass the laws of each country if there are any disputes. Companies such as Monsanto will be able to force and sell GMO seeds and chemicals with no restrictions in member countries. For Sri Lanka, it certainly spells trouble.

Sri Lanka would lose its bargaining powers to ban Glyphosate which has been cited as a leading cause of CKDU.

Twelve countries have finally signed the Trans Pacific Partnership (TPP) agreement headed by USA. Japan, Vietnam, Malaysia, Singapore, Mexico, Canada and Australia are other noteworthy members. They will be almost totally reducing tariffs on key traded items.

The biggest winners of TPP are Vietnam and Malaysia. The biggest losers are Bangladesh, Sri Lanka, Pakistan, Cambodia and China. Sri Lanka’s share of US apparel imports is expected to fall by 0.2% from 1% to 0.8%. Although they look small in terms of US trade, it is a drop of 20% (1% to 0.8%). With more than 22% Sri Lanka’s exports going to USA which is the island nation’s largest export destination, a 20% drop will be devastating. It will be about $350 million or 0.5% of the GDP.

It will not be like NAFTA which ruined many garment factories in the mid 1990s but eventually stabilised as Sri Lanka had a still lower cost of production. Surviving TPP will be nearly impossible unless Sri Lanka too joins the TPP.

Non-TPP members  such as Sri Lanka are expected to bear the brunt of losses due to the impact of trade diversion, where countries prefer to export to their FTA partners rather than non-participating countries.

“The trade diversion effect of the TPP fall mainly on China,” The Peterson Institute of International Economics (PIIE) said, adding that exports would be 1.2 percent lower in the case of a deal compared to without. As Vietnam benefits from increased market access to the U.S., other Asian exporters of textiles and clothing may hurt.

“Bangladesh, Cambodia, Pakistan, and Sri Lanka are also expected to suffer negative impact effects from trade and investment diversion in the textiles and clothing industry towards TPP members, notably Vietnam,” Rajiv Biswas, Asia Pacific chief economist at IHS added.

India is also expected to suffer as Vietnam gains. “While New Delhi has a relatively well-diversified export sector, textiles and clothing industry still accounted for 13 percent of total merchandise exports in the 2014-15 financial year,” Biswas continued.
However, the European Union isn’t expected to be impacted greatly: It already boasts a number of FTAs with Asian economies and is currently negotiating one with the United States, PIIE said.