MOODY’S: REVISED TRANS-PACIFIC PARTNERSHIP BENEFITS ALL MEMBERS, BUT LESS WITHOUT THE US; MALAYSIA WILL BE THE BIGGEST WINNER

by | Apr 23, 2018

PNWA’s Southeast Asia representative Casey Chin brings us a Moody’s Investors Service report that economic gains for members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the TPP without the U.S.) will prove smaller without US participation, but the trade deal will still boost exports and incomes for all members and help sustain reform efforts in a number of countries. Moody’s analysis is contained in its just-released report titled “Sovereigns — Asia Pacific and Americas: Revised Trans-Pacific Partnership benefits all members, but less so without the US”.

Moody’s report explains that on March 8, 2018, the 11 remaining members of the TPP signed a revised free trade agreement (FTA) without the US. The new deal was renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), with members consisting of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Moody’s says that, compared with TPP, lost trade opportunities will be felt most in Vietnam, Malaysia, and Japan, because these countries stood to gain the most from greater access to the US market, given the scope of current trade agreements. Nevertheless, Malaysia will prove the biggest winner from the revised agreement, because the deal will provide export access into new markets, including Canada, Peru and Mexico; benefiting palm oil, rubber and electronics exporters. Meanwhile, real incomes in Singapore, Brunei, Vietnam and Peru will also rise compared to a case without the CPTPP.

On the issue of reform, Moody’s says that because the lower trade and non-trade barriers under CPTPP are conditional on country-specific reforms, the agreement will help sustain domestic reform momentum. The ongoing reform efforts should boost competitiveness and investment and strengthen institutional quality over time for member nations. Benefits will be greatest for sovereigns with relatively low governance and competitiveness scores, such as Peru, Vietnam, Mexico and Brunei.

Moody’s adds that if the CPTPP expands its membership to include other large Asian economies which have expressed interest in joining the deal, including Indonesia, Korea, the Philippines, Taiwan and Thailand, real income gains for members would be much greater than the current CPTPP deal and higher than the original TPP pact, according to estimates from the Peterson Institute for International Economics.