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US TPP withdrawal has negative implication on Asian economies: Moody’s

26 January 2017 12:01 am - 0     - {{hitsCtrl.values.hits}}


US President Donald Trump’s decision to withdraw the US from the Trans-Pacific Partnership (TPP) would have an adverse effect on the income levels and structural reform programmes of its partners in Asia, international ratings agency Moody’s Investors Service said yesterday.
“The US’ withdrawal from the Trans-Pacific Partnership (TPP) trade deal implies that the agreement will not be implemented. We had anticipated the TPP to reduce the cost of trade and open up new investment opportunities for its 12 members and in particular, its Asian members,” Moody’s said.
It noted that among the 12 countries, Vietnam, Malaysia, Brunei and Mexico, which show the greatest exposure to exports, would not realize the significant income gains that were expected from the TPP.
“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,” Moody’s said.
The ratings agency added that the TPP negotiations had served as a catalyst for reforms, including in Japan, where measures were taken to reduce protectionism in the Japanese 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,” Moody’s said, but also noted that the reforms already implemented are not expected to be reversed.
Moody’s said that some countries have begun exploring other trade options bilaterally or with China through the Regional Comprehensive Economic Partnership (RCEP), but that the potential trade deals are unlikely to provide as big an economic benefit as the TPP, which would have accounted for 40 percent of global gross domestic product.

Moody’s said that Singapore will be one of the least affected by the abandonment of the TPP because it already has trade agreements in place with nine TPP countries. “Similarly, Japan and Australia are only modestly exposed to trade with the TPP countries and their export products maintain strong access to other global markets,” it added. 

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