The withdrawal of the United States from the Trans-Pacific Partnership (TPP), formalized by President Donald Trump on Jan. 23, may have profound economic implications for some Asian Pacific countries, according to credit insurer Atradius. The trade agreement between 12 Pacific Rim countries remains in a kind of limbo with the loss of a major member. The U.S. by itself accounts for over 60% of the total GDP of the agreement’s signatories.
In Australia and New Zealand, food producers and exporters and service providers would have benefited from the increased market access provided by the TPP. Japanese auto manufacturers, currently facing barriers to long-term growth, would have gained better access to the U.S. market.
Decreased import tariffs from the TPP would have given Malaysia improved access to the U.S. and other TPP markets for palm oil exports. Access to the large duty-free market under the TPP would have provided significant increases in exports for Malaysian manufacturing and textile sectors.
Removal of duties on many types of goods would have benefited largely export-oriented Singapore. The TPP would also have allowed Singaporean IT, construction and consultancy companies to bid for projects in Malaysia, Mexico and Vietnam, which were previously closed to foreign bidders, Atradius said.
Vietnam’s GDP would have grown an additional 10% over the next 10 years under the TPP, according to estimates. The country was expected to be a major beneficiary of a U.S.-led TPP. Reduced tariffs would have helped growth in the country’s food, textiles, furniture and consumer electronics industries. Export growth by 50% over the next decade was predicted for its textile/footwear manufacturers alone, through better access to Japanese and U.S. markets. A failed TPP will leave Vietnam more dependent on China, Atradius said.
The U.S. exit from the TPP gives China the opportunity to shape trade policy in the region itself, though it was not a member of the TPP. The country is already promoting its own trade agreement known as the Regional Comprehensive Economic Partnership, which includes some TPP members such as Japan and Australia. While growth prospects in the region remain, opportunities for more rapid growth are now reduced, given the U.S. exit, Atradius said.
– Adam Fusco, editorial associate