Yahoo Finance Trans-Pacific Partnership: Impact on Consumer and Retail Firms
A Global Spin on the Trans-Pacific Partnership Deal
Free trade agreements and the TPP
As mentioned in Part 1, efforts are being made to fast track the ratification of the 12-member TPP (Trans-Pacific Partnership).
Trade impact
The Office of the United States Trade Representative, along with the Peterson Institute, estimated that US traded goods and private services were worth ~$1.8 trillion with the 11 other TPP members in 2012. Trade with the TPP supported about 4 million jobs in the US.
If ratified, the TPP could generate $223 billion per year in additional global income by 2025. For the US, the annual incremental real income impact is estimated at $77 billion. The TPP could also see global exports rise by ~$305 billion. US exports are estimated to increase by ~$124 billion by 2025.
Consumer firms are impacted
The benefits of the TPP and TPA (Trade Promotion Authority) are particularly relevant for firms in the consumer and retail (XLY) (RXI) (RTH) sectors. The TPA and TPP trade deals are supported by the NRF (National Retail Federation) . According to Matthew Shay, president and CEO of the NFR, “International trade benefits American consumers and families with lower-priced and more-diverse goods, supports millions of American jobs, and creates new investment opportunities for American businesses and retailers, large and small, both here and abroad.”
A number of firms in the consumer and retail sectors, including Cargill , Archer Daniels Midland (ADM), ConAgra (CAG), Nike (NKE), and Walmart (WMT), have supported the agreement. We’ll cover more industry-specific impacts of the TPP on these firms and their peers throughout this series.
The SPDR S&P Retail ETF (XRT) provides exposure to the retail sector. It has ~1% of its holdings invested in Walmart. Together, Walmart, ConAgra, and Archer Daniels Midland account for 9.9% of the portfolio holdings in the Consumer Staples Select Sector SPDR Fund (XLP).
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