In a January 8th article in the Nikkei Asian Review, It discusses the predicted implications for the 12 member TPP alliance. In a positive projection, all members GDP will increase by an average of 1.1%. Southeast Asian countries will benefit the most with Vietnam projected at a 10% increase, Malaysia at an 8% increase and Brunei with 5%. This all bodes well for Japan as many of these countries are looking to expand business opportunities for Japanese companies. How will Japan’s GDP be affected? What type of business will grow for Japan in Southeast Asia? Will these Southeast Asian countries really grow this much under the new TPP deal?
In an article in, The Japan Times, the Abe administration estimates that the new TPP deal will boost the country’s GDP by ¥14 trillion. This new figure represents a significant increase from the previous projection of ¥3.2 trillion. This figure will be presented to a special group designated to review the impact of the new deal. The reason for the increase is the emphasis that has been put on supporting local Japanese farmers to compete with international products.
An article published on October 7th, 2015 in the New Straits Times Online, http://www.nst.com.my/news/2015/10/malaysia-no-2-beneficiary-tpp-after-vietnam-says-credit-suisse, states that Credit Suisse believes that Malaysia will be a close second to Vietnam in terms of the biggest long-term beneficiaries from the recently concluded Trans Pacific Partnership. They believe that Malaysia could see a 5 per cent boost in their GDP by 2025. Singapore based research economist Michael Wan expects that the manufacturing sector will be the largest beneficiary from the TPP in Malaysia. Also, based on a Peterson Institute Study, Malaysia’s electronics, apparel, and foot ware sectors are expected to gain the most. Although, according to Fitch Ratings, the TPP will be a significant contributor to economic integration over the long term, but it is unlikely to be a major game changer in the short term. The next significant step in the TPP will be to setup the rules and guidelines for the economic integration of the countries in the Pacific Rim. Either way, the countries involved in the TPP will benefit from it in various ways, but it is apparent that Malaysia may benefit more than others.
Why do you think Malaysia will benefit more than others from the TPP? How will the increase in Malaysia’s economy affect the non-TPP countries surrounding it? Do you think the projection of a 5% increase in GDP is accurate?
According to the article, (http://www.bloomberg.com/news/articles/2015-10-06/tpp-trade-deal-who-stands-to-benefit-suffer-in-asia-pacific), the TPP deal sealed Monday in Atlanta will bring various gains and losses to the countries involved, as follows:
- Japan: Japanese car and auto-parts makers may be the biggest winners, as they gain cheaper access to the US, the industry’s largest export market. During negotiations, Japan was forced to reduce some of the protections granted to its rice farmers, creating a non-tariff import quota of 1% total consumption, while livestock farmers may be hit harder, as tariffs on beef will be cut from 38.5% to 9%.
- Australia: The TPP deal will remove approximately $9 billion of import taxes from Australian trade, and they will gain access to the US sugar market. Additionally, the cut in the beef tariff will help Australian ranchers, and seafood and most horticulture products will see tariffs dropped as well. Furthermore, Australia and New Zealand successfully pressured the US to compromise on the amount of time that pharmaceutical companies will get to monopolize new biotech drugs, which could lead to cheaper drug prices and more competition.
- New Zealand: Tariffs are due to be eliminated on 93% of New Zealand’s trade with its TPP partners, representing annual savings of approximately $259 million New Zealand dollars, with the Dairy industry seeing savings of approximately $102 million New Zealand dollars per year. Additionally, tariffs on beef exports will be completely eliminated, with the exception of Japan, where they will drop from 38.5% to 9%.
- Vietnam: Vietnam will be among the biggest winners, with GDP being boosted approximately 11% and exports growing 28% in the next ten years. Reduced imports in the US and Japan will benefit the country’s apparel manufacturers and the fishing industry will benefit from elimination of import tax on shrimp, squid, and tuna. Eliminating import taxes on pharmaceutical products, however, will lead to tougher competition between domestic Vietnamese companies and foreign companies. The TPP will also increase patent protection, restricting Vietnamese companies’ access to new products as well as inhibit their ability to produce new drugs.
- Malaysia: State-owned enterprises in Malaysia may suffer from the TPP deal, which calls for equal access to government procurement, however electronics, chemical products, palm oil, and rubber exporters are among beneficiaries.
- China: Since China failed to join the TPP, they are likely to be among the biggest losers, and are now indicating some interest in joining the TPP in the future. In the meantime, Chinese exporters may lose some market share in the US, Japan, and Vietnam. To combat these losses, China will try to reach more free-trade deals with other countries, especially in Asia.
According to the article, (http://www.nytimes.com/2015/10/06/business/trans-pacific-partnership-trade-deal-is-reached.html?_r=0), the 12 Pacific Rim countries involved in the TPP reached a final agreement on Monday, preparing President Obama for what could be the toughest fight of his final year of presidency: securing approval from Congress.
Now that negotiations of the TPP have come to an end, the deal will face months of scrutiny in Congress, where opposition is imminent. Regardless, for President Obama the deal could be a legacy-making achievement; the TPP draws together countries representing 40% of the global economy, and spins them into a web of common rules governing trans-Pacific commerce. The argument that the TPP will be key in limiting China’s power in the global economy is Key to the President’s hard sell of the act to Congress. Obama stated: “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”
According to the article, (http://www.cnbc.com/2015/10/06/tpp-why-its-too-early-to-pop-the-champagne.html), it will take many years before the economic benefits of the TPP are actually felt. To start, there are several hurdles to overcome before it is implemented.
First, the deal must be ratified by each country’s legislature, which is looking to be very difficult in the US; both Democrats and Republicans are opposed to the deal, meaning it is possible that the TPP will be blocked in Congress.
Second, and finally, tariffs are due to be lowered and market access increased only gradually, meaning the effects of the deal will be insignificant in the near future. However, the long-term significance of the deal still should not be downplayed.
According to the article, http://www.bbc.com/news/business-34444799, the Trans-Pacific Partnership (TPP), the biggest trade deal in decades, was struck on Monday after five years of bitter and tense negotiations. The TPP cuts trade tariffs and sets common standards in trade for 12 Pacific Rim countries and covers about 40% of the world economy. However, although negotiations have been finalized, the deal is yet to be ratified by law makers in all 12 countries.
For President Obama, the TPP trade deal is a major victory. He stated: “This partnership levels the playing field for our farmers, ranchers, and manufacturers by eliminating more than 18,000 taxes that various countries put on our products.” In opposition, however, US Senator and US Democratic presidential candidate hopeful Bernie Sanders argues that Wall Street and big business have “won again,” stating that the TPP deal will cost US jobs and hurt consumers.
Additionally, China was not involved in the TPP agreement, however the Obama administration is hoping that it will be forced to accept the majority of the standards outlined by the TPP. He was quoted: “When more than 95% of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”
Furthermore, the final round of TPP negotiations were delayed over how long pharmaceutical companies should be permitted to maintain a monopoly on their drugs. The US wanted twelve years of protection, while Australia and New Zealand argued for five. A compromise was reached, however the definitive protection period has yet to be confirmed.
Finally, the auto industry as well as the agriculture industry were also areas of intense negotiations. In regards to the auto industry, countries agonized over how much of a vehicle must be manufactured within a TPP country in order to qualify for duty-free status. Agriculture was another sticking point, as countries such as New Zealand wanted more access to markets in Canada, Mexico, Japan, and the US; Canada wanted to keep access to its dairy and poultry markets strictly limited, however.