Trans-Pacific Partnership supports continued growth in world trade: QNB
Therefore, he said trade agreements are important, but often involve multiple parties, resulting in a high level of complexity as well as the challenge of reaching consensus through negotiations.
The Trans-Pacific Partnership (TPP) was created with the vision to be the largest free trade agreement in the world, covering 40 percent of the global economy (see map). It was the centerpiece of US President Barack Obama’s strategic pivot for the Asia-Pacific region.
However, it was criticized during the 2016 presidential campaign and was never ratified by the US Congress. Then, on his first full day in office, US President Donald Trump officially pulled the US out of the TPP in January 2017.
Following the United States’ withdrawal from the TPP, the remaining eleven countries continued talks and accepted the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was signed and entered into force in 2018.
This week, QNB reviewed the benefits of CPTPP for Asia-Pacific economies. He distinguished between integrated economies and less integrated economies in world markets. In addition, he reviewed the advantages of countries that have already joined the CPTPP compared to those that have not yet joined.
First, while the economic effects of the CPTPP tend to be positive in different countries, the magnitude will vary considerably in each. Economies that are more integrated into the global economy and that already have extensive trade agreements with other CPTPP members will benefit less from the agreement than others.
This means that Asia-Pacific economies, such as Singapore, Brunei, New Zealand, Australia and Japan, will benefit to a lesser extent than countries, such as Vietnam and Malaysia, which are less integrated into the global economy.
In this sense, these latter economies stand to benefit greatly from the agreement, as they gain greater market access. In fact, Malaysia and Vietnam are already benefiting from CPTPP, and the World Bank expects a further boost to their exports in the coming years.
Additional market access will be particularly beneficial for the clothing, textiles and food and beverage sectors.
Second, the CPTPP was explicitly designed to facilitate expansion to other countries. In September 2021, China applied to join the agreement, which has the potential to increase the importance of the CPTPP for global trade. South Korea, Colombia, Taiwan, Thailand, Indonesia, the Philippines and the UK have also expressed interest in joining the deal. When it comes to the economies of Asia-Pacific, it is worth considering the potential benefits that may materialize for emerging Asia.
While countries that are already members of the CPTPP, for example Vietnam and Malaysia, others, like Indonesia, the Philippines and Thailand are not yet members of this agreement.
He sees significantly higher upside potential for new members, as they are yet to benefit from this important intra-Asian trade partnership. These partnerships translate into lower tariffs, import duties, more stable trade and investment flows, and better economic integration in the region.
“By bringing the two dimensions together, we are therefore arguing that countries which are less integrated and which are not yet members of the CPTPP will benefit most from membership. On the other hand, countries that are already more integrated and existing members will benefit to a lesser extent. In practice, this means that countries like Indonesia, the Philippines and Thailand are the biggest potential winners compared to Japan, Singapore, Brunei, Taiwan, Australia and New Zealand, where the added value is rather marginale, ”the bank said.