China, Iran, and TPP – Let’s Be Decisive

China devalued its yuan in 2015 by calculating the reference rate on a daily basis and letting market forces affect the value. For some, it seemed like a good idea to get China more into the dynamic financial market. For others, it’s not playing out that way.

With the Iran nuclear deal and US sanctions lifted, Iran’s market – read oil production and related industries – should open up to companies. Not really. There is just too much bad feeling and economic turmoil for some to engage.

While the cases of China and Iran involved decisions being made (by China and by the US vis-à-vis Iran), TPP has been in negotiation since March 15, 2010 without an agreement. TPP, often talked about, seldom spelled out, refers to the “Trans-Pacific Partnership” and involves 12 primary countries as potential trading partners. Nineteen official negotiation rounds between 2010 and 2013 and numerous other meetings since led simply to indecisiveness.

Indecisiveness

Now we have indecisiveness on the meaning of China’s devaluation of the yuan (although no one liked the worldwide stock market drops as a short-term result), and indecisiveness on what to do with Iran – in the US, the White House is driving the idea of lifting sanctions but two-thirds of the US states are not obliged to go along. And TPP seems like a get-together of arguing family members wanting their personal wishes and not being focused on the thanks for being in the family.

Indecisiveness of the world community will likely strap China tighter to its market-based command economy and hubris of thinking it can affect the world market in a significant way long term. Iran relations, whatever they are for different countries, will create confusion among politicians and businesspeople. And, TPP seems to be an acronym used to refer to trade agreements in general as bad, when in reality many trade agreements would be important for companies, customers, and the global marketplace.

Indecisiveness among political decision makers in the global community may be one of the reasons business leaders are making inroads in being politically elected. As for the US, whether we have democratic or republication leaders, historically the US leads and sets the tone for the global community. As always, the US should continue to focus on economically sound and business-oriented decision-making.

At the same time, stalling on decisions, perhaps overreacting to alternatives, is not an economically prosperous path forward. Other countries can stall, the US doesn’t. Delaying decisions would render what could be US decisions, or at least heavily influenced by the US, on various issues be left to China, Iran, and other TPP participants to conquer. And that is unlikely to be good for the US and becomes an uncertain path for global financial markets.

Decisiveness

There are no easy political, economic, or practical solutions on China but one leadership idea with decisive action would be to encourage China’s recent hubris-based venture into letting market forces affect the yuan. Economic market forces having a role in the value of the yuan, albeit a significant short-term problem, should be good long-term.

Perhaps also by bringing Iran more in to the mainstream global trade community, if that is possible, may result in positive outcomes on a number of fronts, such as nuclear restraint and (slowly) moving away terrorist harboring. And while it is clear that agreeing across 12 (or more) countries on an all-encompassing platform of a TPP agreement is unlikely, agreeing in a decisive way to something logical would be good for trade and the global economy. At least the US is halfway there with President Obama signing the TPP; now, let’s see what Congress does with it.

Clearly all countries need to be deliberate, thoughtful, and careful when engaging with China, Iran, and in a TPP agreement, but indecisiveness is not a long-term solution. Indecisiveness typically leads to an economic policy that adversely affects financial markets, consumer confidence, and global trade.

This adverse effect spreads deep. Recent research shows that country-level policy significantly affects companies, industries, and ultimately customers in both emerging and developed markets. Indecisiveness is not a developed-country problem, it becomes a global problem.