TPP positive deal for Asian economies, says Moody's

By P Prem Kumar

KUALA LUMPUR

The Trans-Pacific Partnership (TPP), for which negotiations ended last week, will be credit positive for all 12 participating sovereigns, especially those in the Asia region, according to a report published Monday.

In "Trans-Pacific Partnership to Bolster Trade and Growth, a Credit Positive," Moody's Investors Service outlines how the deal will reduce the cost of trade and open up new investment opportunities while supporting regional growth.

The trade pact will increase market access, lower or eliminate tariffs and set standards in areas including intellectual property rights, environmental and labour conditions, and government procurement, said Moody's. 

While the full text of the agreement has yet to be published, the TPP is understood to grant Asian companies greater access to the United States for their goods and should help make them the biggest beneficiaries in gross domestic product-relative terms.

"Vietnam's apparel and shoe manufacturers will profit from lower import duties with the U.S. and Japan," Monday's report said.

Likewise, Malaysia's palm oil, rubber and electronics exporters will see substantial value from the TPP deal.

Cars and auto-parts makers in Japan also stand to gain from the agreement, while farmers in Australia and New Zealand will benefit from increased market access and lower tariffs on their goods.

The TPP will also complement existing trade agreements between Singapore and the nine TPP participating countries.

Moody's said another positive aspect of the trade negotiations has been to act as a catalyst for reform in several countries in the region, such as Japan and Vietnam.

However, it cautioned that the TPP might hurt governments' fiscal balances by reducing their customs revenues over the longer term.

But additional receipts from an expected uptick in economic growth due to the TPP are likely to mitigate foregone tariff revenue, it said.

On Oct. 5, the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam reached broad agreement on the Partnership.

The deal, however, is still to be signed by participant countries and approved by the legislature of each nation before it will take effect.