ASEAN’s Winners and Losers under TPP

Oct 21, 2015

Earlier this month, 12 countries in the Asia Pacific region signed the Trans-Pacific Partnership (TPP) which ranks as the biggest trade agreement in history – signatory countries account for 40% of total global output.

While the treaty still must be ratified by each and every party to it, its initial passage represents a monumental moment in the integration of economies on each side of the Pacific.

Four countries in the ASEAN region are among the signatories of the agreement; Brunei, Malaysia, Singapore and Vietnam, with additional member countries interested in joining the free trade area in the future.

In this article we will look at who are the biggest beneficiaries in the region, the effects the treaty will have on intra-regional trade, as well as the impact on investment opportunities in non-TPP signatory ASEAN states because of this landmark trade deal.

Thailand could see its exports affected

Thailand is one of the countries that could see its exports affected if it remains excluded from the TPP.

A new study by the Trade Negotiations Department within the Commerce Ministry concluded that the country should join the pact, while carefully considering the areas in which the country needs to improve its competitiveness.

While the treaty has not yet been ratified, Thailand in fact already has incentives to join given that its signatories include Thailand’s main competitors in the region.

This incentive is compounded by the given that the country has seen its slow growth trail other countries in the region.

Vietnam, an overall winner of the TPP agreement

Vietnam is being touted by many as the overall “winner” of the TPP agreement.

The opening of US and Japanese markets presents enormous opportunities for the country’s booming garment and apparel industry, which has the potential to act as a major magnet for FDI into the economy.

Most of this investment would likely be diverted from other countries, such as China and Cambodia.

The fishing industry will also benefit from the elimination of import taxes on shrimp, squid and tuna. In fact, with 18,000 tariffs being slashed across the 12 TPP participating countries, exports are expected to increase by 38 percent within a decade. The increased exports coming out of an overall low wage economy will boost the country’s GDP by 11 percent, or US $36 billion, as more factories move to the country.

Meanwhile, the elimination of import taxes on pharmaceutical products could hurt local players. The current average import tax stands at 25 percent, and eliminating them would lead to stiffer competition between domestic and foreign pharmaceutical players.

While this could hurt local players, it could also benefit local consumers.  The agriculture and livestock industries could also struggle to compete against the TPP’s industry behemoths, such as the United States or Canada.

Malaysia could become the second largest winner after Vietnam

Authorities in Malaysia have cautiously welcomed the TPP – it is believed that the agreement will provide some gains and some losses. Moreover, not all of the details of the agreement have been made public yet.

Among the industries that stand to benefit from the TPP are electronics, chemical products, palm oil, and rubber exporters. On the other hand, the TPP may hurt state-owned enterprises which benefit from weak competition for government contracts. This legacy has the potential to create opposition to the agreement both within the business community and interest groups within the government – tension which the country can ill afford given ongoing political protests.

However, according to Credit Suisse, a global bank, Malaysia will become the second largest beneficiary of the treaty after Vietnam.

Malaysia could see an additional five percent increase in GDP by 2025 through being part of the TPP. As a highly export-oriented economy, where goods and services account for 80 percent of GDP, Malaysia stands to gain much from lower tariffs and increased access to larger markets. This preferential access to partner markets could present the country with a competitive advantage over those ASEAN members not party to the TPP.

Source: Thailand Business News