I increasingly view the Trans-Pacific Partnership (TPP) as Asia’s version of U.S. healthcare reform: it’s messy, a lot has been invested in it, and it won’t die.

While the TPP was not approved, an executive order from President Donald Trump formally withdrew the United States from the trade deal.

Similar to U.S. healthcare reform, there is a perceived political trade-off involved with the TPP: Do you go quickly vote for a deal that is tolerable, or holdout for an improved deal that may be better but take much longer?

Japan and Australia still believe that the TPP can move forward and want to use TPP as a way to force reform. Similar to U.S. healthcare reform, there is a perceived political trade-off involved: Do you go quickly vote for a deal that is tolerable, or hold out for an improved deal that may be better but take much longer? Japan and Australia are taking the first option by still pushing to advance it quickly with few changes (other than removing the United States). They also seem to think that there is still some chance the United States will ultimately join.

With the decline of the TPP, the Regional Comprehensive Economic Partnership (RCEP) is gaining traction. This proposed free trade agreement is between the 10 member states of the Association of Southeast Asian Nations (ASEAN) and the six states with which ASEAN has existing free trade agreements (Australia, China, India, Japan, South Korea, and New Zealand). Malaysia is the most motivated to cheerlead this deal, especially as it leverages relations with both China and India. Japan is amenable as well, but wants a leadership role (along with China) and probably a deal that requires more depth.

One caveat: China may have difficulty leading a coalition such as this (especially one in which partners have serious geopolitical misgivings about one another) because the nation historically has not demonstrated this strength or shown the proclivity to lead in this way.

Finally, in regard to trade, Europe and the United Kingdom may be sleepers in the Asia game theater. European nations want to continue to expand trade commitments with Asia and vice versa. They have a common bond in their dislike of Trump’s rhetoric. London and Hong Kong are connected as global financial centers and Germany, as always, remains predisposed and keenly interested in global trade.

In our Asia game theater, trade and security issues remain the prominent focus in terms of drivers of investment opportunities and risks.

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Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

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