Trump Was Right About TPP Benefiting China

Donald Trump lambasted the Trans-Pacific Partnership at Tuesday night’s Republican presidential debate, contending that China would use it to “take advantage of everyone” — generating snickers from journalists and a withering refutation from Rand Paul, who said “we might want to point out that China is not part of this deal.”

But Trump never suggested that China was part of the TPP, only that the country would “come in, as they always do, through the back door” of the agreement. And he was right.

The TPP does indeed allow China and other non-members to reap benefits from the deal without having to abide by any of its terms.

Here’s how it works: TPP and other free trade deals allow signatories to exchange goods without tariffs. But we live in a complicated world, with source materials derived from one country often traveling through a supply chain to another and completed in a third before moving to a retail market.

To cope with this, TPP adds a “rule of origin” chapter to determine whether an amalgamated good qualifies for tariff-free status. This is particularly important in Southeast Asian nations like Vietnam or Malaysia, which get asignificant amount of production materials from China.

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