KUALA LUMPUR: The World Bank said the recently-concluded Trans Pacific Partnership (TPP) agreement between 12 Pacific Rim countries will see an eight per cent rise in Malaysia’s gross domestic product (GDP) by 2030.
Malaysia and Vietnam, which stands to gain a 10 per cent growth, would benefit from the lower tariffs and non-tariff measures in large export markets as well as from regional supply chains through deeper integration.
The World Bank, in its latest Global Economic Prospects report released yesterday, said the impact of the TPP on its North American members would be small due to the modest share of GDP and because existing barriers to their trade were already low for the most traded commodities.
The mega-regional trade agreement, if ratified, will be the 274th global regional trade agreement.
“Against the background of slowing trade growth, rising non-tariff impediments to trade, and insufficient progress in global negotiations, the TPP represents an important milestone — it stands out among free-trade agreements (FTAs) for its size, diversity and rule-making.”
Malaysia is one of the 12 member countries of the grouping, the rest being Australia, Brunei, Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States.
Negotiations for TPP were concluded in early October.
In a modelling exercise based on a preliminary assessment of the agreement, the World Bank said the TPP had the potential to lift the overall GDP of member countries by 1.1 per cent by 2030.
In countries that export labour intensive products, incomes of low-income and low-skilled households could expand strongly.
It also noted that the TPP could also lift member countries’ trade by 11 per cent by 2030.
“This would be an important counterweight to the trade slowdown under way since 2011.”
At the current 2011-2014 trends, member countries’ trade would fall 25 per cent below pre-crisis trend by 2030.
But the report also called for various areas that must be looked into to mitigate unfavourable effects on developing countries in the building block of TPP.
Like other regional FTAs, policy reforms are needed to enhance
the benefits in developing countries.
These include capacity building and technical assistance for developing country, liberal rules of origin, liberalised labour and resource intensive industries and multilateral framework.
The World Bank also said the detrimental effects of the agreement due to trade diversion and “preference erosion” on non-members would be limited.
Some Asian countries like South Korea and Thailand would see estimated GDP losses exceed 0.3 per cent since they would lose competitiveness.
“The global significance of the agreement depends on whether it gains broader international traction.”