The US decision to pull out could foretell profound
economic and strategic implications for certain Asia Pacific
economies and industries.
Australia and New
Zealand: Mainly food producers
and exporters and service providers would have benefited from
increased market access to TPP markets.
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 are facing a setback in respect
to improvement in long-term growth opportunities. Under the TPP
agreement 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-oriented, many
businesses exporting to the large US market would have benefited
from the removal of duties on more types of goods than previous
trade agreements provided for. Port facilities, shipping and trade
financing are sectors that would have widely benefited from rising
intra-TPP trade flows. TPP 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 supposed to be a major beneficiary
of a US-led TPP, which would have led to a significant increase in
its medium-term growth prospects. However, it has shelved
ratification immediately after the outcome of the US presidential
elections, expecting the US to exit TPP. It is estimated that
Vietnam¡¯s GDP would have grown an additional 10% over the coming 10
years. Reduced and discontinued tariffs would have boosted growth
in its export-oriented 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% over the next 10 years. The failure of
TPP would 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), which
would include several key TPP members, such as Japan and Australia.
While the US exit from TPP does not squash the
growth prospects of TPP members, in the short term, it reduces some
opportunities for more rapid growth given that the agreement was
already in the ratification process.
If you would like to find out more on this topic
from our experts at Atradius, please contact our Marketing and
Communications team.
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