What is Trans-Pacific Partnership Agreement and its Impacts towards Southeast Asia’s Economy?

TPPA (Trans-Pacific Partnership Agreement) has been the talk of the South East Asia (SEA) in the past few years and yet not many people have given a glance onto it though there are a lot of summaries made by the news out of 6000 pages long of TPP document. Despite the proposal of TPPA began in 2005 and the negotiations were supposed to bring a close in 2012 after a series of sleepless nights, there is some disagreement on the contentious issues which could not reach the consensus amongst the involved parties.

What is TPPA or Trans-Pacific Partnership Agreement?

It is a free trade deal between 12 Asia-Pacific countries including Malaysia, New Zealand, Australia, Brunei, Japan, Peru, Singapore, United States, Vietnam, Mexico and Canada. It will create a fair global trading environment for the above mentioned countries to carry out trading conveniently across the region.

Although it liberalizes the trade and some rules, it actually serves the objectives of developing transparent and regulatory environment, facilitate the development of production and supply chains which contributes innovation, productivity and competitiveness to ensure the relevant parties can benefit from trade. In addition, it reduces the cost of trading whereby tariff and non-tariff barriers will be eliminated through TPPA. Such initiative will offer the accessibility and opportunity for more businesses, workers and consumers.

What are the Impacts of TPPA towards Southeast Asia Region (Brunei, Malaysia, Singapore and Vietnam)?

TPP will probably the game-changing initiatives for the Southeast Asia Region amongst Brunei, Singapore, Vietnam and Malaysia.

About Singapore, it is recognized as the most prosperous economy within Southeast Asia through its effort in building a combination of free trade in financial services and export-oriented manufacturing. The benefit of TPPA towards Singapore might be marginal as it already embraced with all TPP trading partners except Canada and Mexico. It remains unclear that whether the existence of TPPA will lead to greater immigration from cheaper labor countries.

For Vietnam, it would be an opportunity for Vietnam to build its manufacturing kingdom by beating its adjacent opponents, Myanmar and Cambodia that are growing rapidly recent years. Other than this, the rise of wages and the shifting development from manufacturing to service in China have been driving its manufacturers to produce goods in other countries with inexpensive labor force such as Vietnam, Myanmar, Cambodia, India and Indonesia.

Reading on Brunei’s Department of Economic Planning and Development, it tells total net trade was down 52% year-to-year (comparing 2015 to 2014). The worse is that there is no improvement to its net trade to-date compared to the year 2015 which is worse than 2014. The concentration of TPP on cross-border trading indeed an impetus to improve Brunei’s business where less expensive of goods imported will be exempted from the tariff, goods exported can access to non-ASEAN markets and attract foreign direct investment. It is notable that the ranking of “doing business” in Brunei has improved from 105th to 84th place through the provision of online procedures and easing business registration. Perhaps, TPPA will be a threat to its state-owned enterprises due to the low barriers of entry increases competitiveness. Since Brunei has accepted to be part of TPPA, it has to strategically position itself to gain benefit from TPPA.

For Malaysia, manufacturing sector such as electronics, apparel, textiles and commodities are expected to benefit the most from TPPA as they imports cheaper raw materials and able to export to other new countries. It remains controversial in the interest of small and medium enterprises (SMEs) as the removal of tariffs could bring benefit to local producers and forced them to compete with other TPPA countries though they are able to explore to foreign markets. Despite that, it is secured with the words delivered by Minister for International Trade and Industry, Datuk Seri Mustapa Mohamed on the priorities will be given to the Malaysian (SMEs). As similar to Brunei’s case, the local government could lose to multinational corporations (MNCs) which the latter is given to operate under TPPA regulations rather than local regulations. It will send threats to state-owned enterprises that are in monopoly business. Also, TPPA would be Malaysia’s open immigration policy which will attract less expensive labor and lead to intense competition in labor force. Last but not least, Malaysian will be forced to “upgrade its living standard” by paying higher medical cost derived from the tightening rules for copyright to protect intellectual property (IR).

When would TPPA Takes Effect?

The TPPA is expected to take effect in 2018 with 3 years of rectification from 2015.

Is TPPA after a Series of Negotiations Going to Town?

The late participation of the United States had resulted in its dominant role in the negotiations of the partnership and its primary role in its agenda setting. Its alone participation has constitutes about 60% of the total TPP Members’ GDP. Although TPPA is an important strategy under President Obama towards Asian region, TPPA is most likely not going to be implemented under Donald Trump’s era, who is the newly elected president of United States. Donald Trump had given his words that promoting TPPA would only lead to more production abroad and weaken domestic jobs before he gets elected.

Conclusion

With or without TPPA, Malaysia will still continue to expand and diversify its trade with the world as Malaysia relies on its export very much. Malaysia could have its own free trade agreement with United States, Canada, Mexico and Peru. Perhaps, TPPA could be materialized after the consensus of other TPPA countries without the United States. However, the game will be altered with its main protagonist leaving. While Singapore remains intact, Brunei is expected to be a loser if TPPA is not implemented.

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