Five to 10 Years From Now, Asia Won't Need America's markets

Industry news

Five to 10 Years From Now, Asia Won't Need America's markets

1. Consumption boom will limit impact of US withdrawal from TPP

2. China to gain if it signs strong trade deals, says Subbaraman

The remaining 11 members of the Trans-Pacific Partnership are trying to work out how to move the trade agreement forward after the withdrawal of the US. TPP ministers met in Hanoi last month, and trade officials are due to put forward plans on how to proceed by November.

Rob Subbaraman, chief economist for Asia ex-Japan at Nomura Holdings Inc. in Singapore, believes the rapid growth of Asia's consumer markets will make up for the US's absence. "If you're far-sighted you realise consumer markets are growing fastest here in Asia. Over five or 10 years, many of these Asian markets are going to be much bigger. People say, without the US, the TPP is not important, but five to 10 years from now Asia won't really need the US. Close to two-thirds of US consumption is services and much of that is not traded, it's produced in the US. Once that's taken into account, the US consumer market isn't as big as it looks at face value.” According to Subbaraman, "RCEP including China and India is a much bigger agreement in terms of the population size nd also the size of the consumer markets. Once you take into account how fast these markets are growing, particularly China and India, it makes a lot of sense to keep these agreements, even without the US."

Subbaraman shares calculations by Nomura comparing the nominal consumption in Asia's top 12 consuming economies with the US's top 12 consuming states and how it changed between 2007 and 2015.

"In 2007, California consumed almost as much as China, while Texas and New York each consumed more than India. Fast forward to 2015 and the changes are striking. China now consumes more than twice as California, and India consumes more than Texas and more than New York.”