KUALA LUMPUR: The Trans Pacific Partnership agreement is a “low hanging fruit” which can stimulate the global economy, and it pays for the United States to participate in it, says senior trade economist Dr Douglas Lippoldt of HSBC Bank plc.
The fate of the TPP, which was signed in Feb last year, hangs in the balance due to recent comments by US president-elect Donald Trump that US will withdraw from the pact on his first day in office.
"I am hopeful that if it withdraws on the first day of the Trump administration, the US will revisit (the TPP) in the coming months and find a way to reengage with the rest of the 11 partners," said Lippoldt in a teleconference on Asia's trade outlook in 2017.
Apart from the US, the TPP grouping includes Australia, Brunei, Canada, Chile, Japan, Mexico, Malaysia, New Zealand, Peru, Singapore and Vietnam.
Describing the 30-chapter document as a “remarkable standard”, Lippoldt, who was formerly with the OECD, said it would address many concerns arising from globalisation, including labour standards and the environment.
Negotiations over the past five years have yielded a high standard trade agreement involving a mix of six emerging market countries and six developed countries and spanning four continents.
According to studies undertaken by Peterson Institute, it was estimated that the 12 partners stood to gain 10 per growth in GDP from the TPP.
"That is an important development, as it would see the US gain in absolute terms, but in percentage terms, countries like Vietnam and Malaysia could stand to gain by 8 and 7.5 per cent respectively, with access to NAFTA (markets), Japan, Australia, New Zealand, Peru and Chile."
Lippoldt said that many representatives of the participating countries have expressed their views that it would not be feasible to proceed with the trade pact without the US anchoring the agreement.
This is because they had made deep concessions to liberalise their respective domestic markets because they had expected to gain market access into the US in exchange.
The Regional Comprehensive Economic Partnership (RCEP), which is currently being negotiated, is less ambitious and does not deal with the `trade plus' issues, although the countries will enjoy economic gains across the region, he noted.
Asia should continue to pursue for both multilateral trade agreements.
"Who knows, with the conclusion of the RCEP, it (may) prompt the TPP countries to reconsider the agreement, as there is an overlap of countries in both agreements."
Malaysia, Vietnam, Singapore, Brunei, New Zealand, Australia and Japan are participants in both agreements which, when concluded, could achieve US$1.9 trillion in GDP.
On the outlook for 2017, Lippoldt said while protectionist sentiment is rising in the US and some EU countries, Asia still broadly supports trade.
Other initiatives underway, such as the Belt and Road Initiative, regional infrastructure investment (the Asia Infrastructure Investment Bank and the Asian Development Bank), the Asean Economic Community Blueprint 2025, the WTO Information Technology and implementation of the WTO Trade Facilitation Agreement (cutting red tape at the border) will enable Asia to take a lead role in the global trade agenda.