Moody’s: TPPA failure will means lost opportunity and access to major markets

PETALING JAYA: The US’ withdrawal from the Trans-Pacific Partnership Agreement (TPPA) trade deal implies that the agreement will not be implemented and could slow impetus for further structural change in member countries that would boost competitiveness and investment.

Moody’s Investors Service associate managing director Marie Diron said it had anticipated TPPA to reduce the cost of trade and open up new investment opportunities for its 12 members, and in particular, its Asian members.

“ The failure to implement the deal represents a lost opportunity for exporters aiming to gain greater access to major markets. Among the 12 member countries, the economies of Vietnam, Malaysia, Brunei and Mexico are reliant on exports and show the greatest exposure to trade with TPPA countries.

“With this lost opportunity, prospects for significant large gains in incomes, for instance in Vietnam or Malaysia over the medium term — on the back of higher trade — will be reassessed,” Marie said in a statement.

On Monday, US President Donald Trump signed the executive order withdrawing the US from the TPPA. Trump’s action was not totally surprising as he had many times in the past vowed to withdraw U.S. from the TPPA, referring the deal as a “potential disaster” to the American economy.

Some countries have begun exploring other trade options, bilaterally or with China through the Regional Comprehensive Economic Partnership (RCEP). However, the potential trade deals currently envisaged are unlikely to provide as big an economic benefit as the TPPA, where member countries accounted for 40% of global GDP.

Moody’s said in recent years, TPPA trade negotiations served as a catalyst for reform, such as the reduction of protectionist policies in Japan’s agricultural sector.

“The abolishment of the deal could slow impetus for further structural change in member countries that would boost competitiveness and investment and improve institutional quality. We do not expect the reform measures that have been implemented in anticipation of TPPA to be reversed,” it added.

The agency noted that Singapore would be one of the least affected by the abandonment of the TPPA, because it already has trade agreements in place with nine TPPA countries.

Similarly, Japan and Australia are only modestly exposed to trade with TPPA countries, and their export products maintain strong access to other global markets.