Does Trump’s TPP exit dash hopes for growth in Asia?
- Latest News
- Monday, 13 February 2017
US president Donald Trump’s decision to withdraw the country from the Trans-Pacific Partnership (TPP), a proposed trade agreement between 12 Pacific Rim countries, leaves the TPP in limbo at best, given the US accounts for more than 60 per cent of the signatories’ joint total GDP, according to analysis by Atradius.
Atradius claims the US decision will impact all the signatories and has highlighted the following:
Australia and New Zealand: Food producers and exporters plus service providers would have benefited from increased market access to TPP markets, not just the US.
Malaysia: TPP envisaged improved access for palm oil exports to the US and other TPP markets due to decreased import tariffs. This would have provided Malaysian businesses with a competitive edge against Indonesian palm exporters. At the same time the Malaysian manufacturing and textile sectors expected significant increases in exports as a result of the access to a large duty free market, while more foreign companies would have increased investment in Malaysia to set up branches for regional operations.
Japan: Auto manufacturers face a setback to improvement in long-term growth. Under the TPP, they would have gained better access to the US market, including manufacturing US-bound cars with more parts provided by (cheaper) Asian sources.
Singapore: As the city state is largely export-orientated, many businesses exporting to the US would have benefited from the removal of duties on more types of goods than previously. Port facilities, shipping and trade financing would have benefited from rising intra-TPP trade flows. TPP also would have enabled Singapore companies in the IT, construction and consultancy sectors to bid for government procurement projects in markets such as Malaysia, Mexico and Vietnam, which were previously closed to foreign bidders.
Vietnam: The country was expected to be a major beneficiary of a US-led TPP, which would have led to a significant increase in its medium-term growth prospects. It is estimated that Vietnam’s GDP would have grown an additional 10 per cent over the next 10 years. Reduced and discontinued tariffs would have boosted growth in export-orientated food, textiles, furniture and consumer electronics industries. For textile/footwear manufacturers alone, better market access to Japan and the US was expected to boost export growth by about 50 per cent over the next 10 years. If TPP fails, it could leave Vietnam more economically isolated and dependent on China.
China: While not being a member of TPP, the US exit gives China a greater opportunity to shape trade and the economic order in the Asia Pacific region by launching its own trade agreements. Beijing is already actively promoting its own trade agreement known as the Regional Comprehensive Economic Partnership (RCEP) to countries including such as Japan and Australia.
While the US exit from TPP does not kill it, it does reduce opportunities for growth, given that the agreement was already in the ratification process.