Officials from the 12 countries in the Trans-Pacific Partnership (TPP) trade agreement concluded talks on October 5, after years of heated negotiations.
The deal must now be ratified by various individual governments before it takes effect.
Nevertheless, the accord is one of the greatest accomplishments in the history of free trade agreements, gathering together countries whose gross domestic product (GDP) accounts for two-fifths of the global economy and potentially serving as the stepping stone to a larger free trade agreement for the Asia Pacific.
But the TPP will surely bring about economic and institutional repercussions in a number of member economies.
TPP is openly discussed on social media and among the country’s intellectuals
In Vietnam, good news about the TPP is openly discussed on social media and among the country’s intellectuals. Vietnam is in a position of getting more gains than losses from participating in the TPP.
In economic terms, Vietnam will arguably be one of the biggest beneficiaries of the trade deal.
Vietnam’s exports in apparel and footwear are expected to increase by about 50 percent. Reduction in export tariffs on Vietnamese-made products (to zero in some areas) will motivate growing foreign investment.
For instance, foreign investors have bought $41.8 million in Vietnamese stocks in a few days after the signing. In general, Vietnam’s GDP and exports are anticipated to grow in the double-digits (11 percent and 28 percent, respectively) within a decade.
The TPP will reduce Vietnam’s economic dependence on China
From a strategic standpoint, the TPP will reduce Vietnam’s economic dependence on China, which Hanoi fears Beijing may seek to exploit for political gains in the case of a conflict between the two countries.However, the TPP will likely result in many challenges for Vietnam.
Vietnam’s agricultural and pharmaceutical sectors will be vulnerable to foreign competition because the TPP will increase patent protection and be amenable to regulations that favor western-oriented business models.
Dr. Nguyen Duc Thanh, director of the Hanoi-based Centre for Economic and Policy Research (VEPR), predicted in a report that Vietnam’s exports will suffer a net loss of $3.5 billion dollars, since its processed food and electronics industries will not be able to compete with those from other TPP countries such as the United States and Japan.
The investor-state dispute settlement (ISDS) mechanism
A central concern for most TPP members, including Vietnam, is the establishment of the investor-state dispute settlement (ISDS) mechanism consisting of an independent panel of three judges, who would have the authority to rule on disputes in accordance with the TPP’s terms without being subject to any appeal within a member country’ judicial process. While this may increase foreign investors’ confidence in Vietnam’s business environment by protecting them from arbitrary intervention by Vietnamese authorities, it remains to be seen whether Vietnam’s relatively weak legal system can slowly undergo a major revamp.
Thai Exports fell for fifth straight month, down 2.65% in 2019
Thia Exports fell for the fifth straight month in December, resulting in a full-year contraction of 2.65% in 2019
Trade in Asia-Pacific declines for the first time since 2009
For the first time since the 2009 global economic crisis, the value and volume of trade in the region is declining. But the region is expected to bounce back in 2020 with positive trade growth.
Bangkok (ESCAP news) – Asia-Pacific economies may see positive trade growth in 2020 but are still facing downside risks from the adverse impacts of the United States – China trade tensions, two new trade briefs by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) released today have revealed.
Trade in the Asia-Pacific region contracted during 2019
For the first time since the 2009 global economic crisis, the value and volume of trade in the region is declining. Total export volume fell by 2.5 per cent, while import volume decreased by 3.5 per cent.
Oil exporting economies such as Islamic Republic of Iran and Indonesia, as well as Japan, Singapore and Hong Kong, China registered some of the largest declines in export volume.
Merchandise trade in the region also faced strong headwinds in 2018-2019 caused by the worldwide economic growth slowdown and heightened trade tensions.
These have had an adverse effect on trade, particularly in the case of economies closely integrated with China through Global Value Chains (GVCs). Integration of smaller traders into the global and regional economy through GVCs is becoming more difficult. New import barriers increase the cost of production and reduce the competitiveness of companies participating in regional production networks.
Tariff war-related toll could reach $117 billion in the Asia-Pacific region
ESCAP earlier estimated the tariff war-related toll on gross domestic product (GDP) could reach as much as $400 billion worldwide and $117 billion in the Asia-Pacific region. These projections are materializing and could increase unless current efforts to reduce trade tensions are successful.
“For the Asia-Pacific region, the challenge is to increase trade and deepen economic integration to support sustainable development. Looking ahead to 2020, the agreement reached between China and the United States is welcome and should reduce policy uncertainty,”United Nations Under-Secretary-General and Executive Secretary of ESCAP Armida Salsiah Alisjahbana.
She further underscored the importance of the multilateral trading system to underpin future trade growth.
The new guarantees provided by the implementation of the Phase-I deal reached between China and the United States might boost investor and consumer confidence enough for trade in the region to grow by about 1.5 per cent in 2020.
This growth would be felt more in developing economies, which could see a 1.9 per cent and 2.7 per cent growth in exports and imports respectively in 2020. However, country-level forecasts vary widely and uncertainties are high.
In trade in commercial services, the region again outperformed the rest of the world in 2019.
Relatively slower growth is expected in 2020, with transport services, other business services and goods-related services expected to be the most affected sectors.
The mid to long-term prospects for trade in services – in particular ICT and business services – remain bright, supported by technological advances.
Commercial services trade in Asia and the Pacific continue to be dominated by a relatively small number of economies, namely China, Japan, India, Singapore, Republic of Korea and Hong Kong, China – accounting for over 70 per cent of total commercial services trade in the region.
Increasing business opportunities associated with digital technologies may lead to a further concentration of trade opportunities in those economies.
The ESCAP trade briefs serve as a complement to the Asia-Pacific Trade and Investment Report 2019. They provide in-depth analysis of performance and trends in 2018-2019, and the outlook for 2020 at regional and country levels, with a special emphasis on the impact of escalating trade tensions within and outside the region.
Read the Asia-Pacific Trade in Goods Trends and Outlooks: https://www.unescap.org/resources/trade-goods-outlook-asia-and-pacific-20192020
Read the Asia-Pacific Trade in Services Trends and Outlooks: https://www.unescap.org/resources/trade-commercial-services-outlook-asia-and-pacific-20192020
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