The Trans-Pacific Partnership is a proposed 12-nation trade pact, led by the United States. Current negotiating members include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, [Company Formation | Offshore Company | Company Incorporation]Singapore, the US and Vietnam.

Together, these countries account for almost 40 percent of global output and about a third of global trade, making it one of the largest free trade areas in the world. Negotiations were originally slated to be completed this month, but contested issues, primarily in the area of agriculture, remain unresolved.

As a ��21st century trade agreement,�� the TPP encapsulates a wide range of issues. It is reported that only five of its 29 chapters relate to traditional trade matters. Other aspects range from environmental protection to labor unions and intellectual property rights.

In the simplest sense, TPP members would enjoy lower tariffs and simplified customs procedures. China would miss out on these benefits if it does not enter into the agreement.

Yet a bigger concern lies with rules of origin. It is likely that TPP countries will offer lower tax rates only for products using materials imported from member countries. The most prominent example of this is the US��s ��yarn-forward rule of origin,�� applied under North American Free Trade Agreement. The rule stipulates that all contents in a garment from the yarn stage forward must be made in one of parties to the agreement in order to be eligible for tariff benefits. If the same rule were applied to the TPP, non-members such as China would be punished. China��s textiles and garment sectors stand to lose the most. Under a worst-case scenario, TPP members would refrain from engaging [Company Incorporation USA]China in the textiles manufacturing process altogether.

If the ��yarn-forward rule�� were applied, Vietnam would benefit the most in Asia. The Peterson Institute forecasts that Vietnam by 2025 would be 14 percent richer than if it stayed out of the TPP, assuming China does not join. In fact, Vietnam could potentially usurp China��s role as a global textiles hub. Some Chinese manufacturers, including listed ones, are already considering relocating to Vietnam.

The potential success of the TPP is [Hong Kong company registration]a threat to China because its exports to TPP countries accounted for 36 percent of its total exports in 2012. Textile exports to TPP countries comprised more than 36 percent. The potential economic losses from not joining could be enormous.