The Trans-Pacific Partnership (TPP) is a trade agreement between 12 countries in the Pacific Rim. Right now you may only be familiar with it because of the protests internationally and the vote to Fast Track the TPP in the US Congress. This trade agreement appears to be moving forward aggressively despite criticism that US jobs would be cut. Politicians like NYC Mayor Bill de Blasio have stood against the TPP because of the jobs that were historically cut when NAFTA was signed.
Ok- why should you care?
As a small business the TPP will open up your capacity to export. That is if you are interested in exporting to Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The trade agreement would slash 18,000 tariffs and allow easier access for those countries to export to the USA. This means that as a company based in the USA you will have increased competition domestically. There are some great laws in the TPP, namely the labor laws and the ability to combat child labor and more enforceable environmental laws.
99% of the brands I work with on a daily basis are focused on building a brand online and through brick and mortar channels. The TPP will enforce e-commerce laws that will ensure your products can be sent to the member countries with expedited customs and protected payment gateways. For those of you with big ideas to have international brands being able to work more closely with big markets like Australia could be a game changer. And, if you manufacture your products in the USA you will have zero tariffs and a reduced number of regulations to test, certify and fill out paperwork.
So, what’s the big deal?
There is always a flip side, isn’t there. With international brands able to flood the market with lower priced goods, the strength of your brand will become more important. For the brands out there that are working with US manufacturing I urge you to continue to invest in the domestic economy. It will become easier to manufacture at one of the partner countries due to export ease, however keep in mind that minimums on production will most likely stay the same. So if you are still producing small quantities you may want to stay with the manufactures you are working with. The Huffington Post “The Economic Policy Institute estimates that under the TPP we stand to lose more than 130,000 jobs to Vietnam and Japan alone, with American workers having to compete with their counterparts in Vietnam, where the minimum wage is just 56 cents an hour.”
What to Do?
Strengthen your brand now. Look at your long-term plan and determine if you will want to play in the new markets. Start to read up on the new markets. The Japanese customer is very different from the USA customer. In fact some of my clients currently do very well in the Japanese market- this will only get stronger. Evaluate your current manufacturing needs and be on the look out for apparel trade groups to pop up in these new markets. Similar to how a lot of brands produce in Colombia due to tariff free exports on swim and attend ColombiaTex. Make sure your site is mobile friendly and look into language plugins for your e-commerce platform.
Syama’s Crystal Ball
I predict that the TPP will pass. Mostly because this trade agreement will make it easier for the USA to lessen ties to China imports. As we have seen in the past with NAFTA there will be job loss and an increasing trade deficit. Given that the TPP has been primarily created for the 500 big corporations who have been seated at the negotiation table it won’t be a surprise that they will benefit the most. Small businesses that can take advantage of these potential opportunities will see higher growth.
As you prepare for what’s ahead keep in mind that we keep moving towards a free trade world and not a fair trade world, despite the need to protect people and laborers these agreements tend to mostly exploit them. There are other trade agreements, such as the Bolivarian Trade Agreement, which tend to be people first, but no agreement is ever failsafe. As a brand it will always be your job to vet your manufacturers and really find out what their practices are, no matter what policies or agreements are in place. You can have profitable businesses that are good for all parties involved, but you need to brand, position it and do your research.
Syama Meagher is the CEO of Scaling Retail, the retail-consulting firm for startup and growth stage fashion brands and retailers. Contact Syama at email@example.com to schedule a consultation.