RHTLaw Taylor Wessing Deputy Managing Partner Azman Jaafar published a post on LinkedIn titled “The Trans Pacific Partnership – 5 things you need to know”.
1. What is the Trans Pacific Partnership (TPP)?
It is a trade pact that aims to regulate trade amongst 12 countries, namely the United States, Japan, Canada, Australia, Mexico, New Zealand, Chile, Peru, Singapore, Brunei, Vietnam and Malaysia.
2. The TPP is important
If the TPP comes into force, it will be the biggest trade agreement struck since the North American Free Trade Agreement (NAFTA) signed in 1994 and the 1994 completion of the Uruguay round, which created the World Trade Organisation. It will account for 40% of the world’s economy but its footprint will very likely extend beyond that.
3. The immediate impact on trade
It will reduce trade barriers to the flow of everything from beef and dairy products to textiles and data, and with new standards and rules for investment, the environment and labour. It will set minimum standards to other factors such as labour rights, environmental care, intellectual property etc.
4. The biggest winners
Trade has undeniably increased global living standards and enabled many poorer countries to close the wealth-poverty gap. Consumers have gained access to a broader range of goods, and in wealthy nations cheap imports drove down the cost of basic items, such as clothes, thanks to manufacturing industries in less developed countries.
Vietnam, a low-wage economy heavily reliant on exports, may be the biggest winner from the trade deal. Its GDP is forecasted to gain 11%, or US$36 billion in 10 years. Its exports are predicted to increase by 28% during the same period, which could be attributed to companies moving production to Vietnam. Major Chinese textile giants are relocating to Vietnam to take advantage of this. (Source: John Boudreau, Bloomberg)
Singapore can boost trade and investment flows thanks to the TPP as well. In 2013, the TPP countries accounted for 30 per cent of Singapore’s total goods trade, worth S$300 billion, and 30 per cent of foreign direct investment in Singapore, amounting to S$240 billion. It can stand to gain by providing intermediary services that facilitate trade between partners. Trade needs to be facilitated by banking or legal services, which Singapore is arguably the best at amongst the Southeast Asian countries involved in the TPP. (Source: The Business Times, “Despite optimism over historic TPP, doubts persist”, 7 October 2015)
Japan probably stands to benefit more than most from higher inward FDI given the very low existing presence of foreign firms in the country. Perhaps most importantly, the wider economy should benefit as previously protected sectors are exposed to competition, albeit amidst howls of protest from sectors like agriculture.
5. Impact on Small Businesses
The TPP will set and enforce minimum standards on issues ranging from workers’ rights, environmental protection, investor-state dispute settlement (ISDS) to intellectual property. The TPP is a FTA that ensures SMEs flourishing along with other bigger commercial entities. It encourages fair competition. It levels the playing field between the public and private sectors.
To view it on LinkedIn, please click here