Ratification of TPP will see winners and losers claims credit insurer

According to Mr Subran, the trade framework agreed between 12 Pacific Rim countries late last year that aims to reduce trade barriers and introduces an investor-state dispute resolution mechanism, will benefit Japan, New Zealand and Vietnam most. The road to the agreement has been long and hard and is still not complete. The participating nations tried to complete negotiations in 2012. But thorny matters such as agriculture, intellectual property and services and investments prolonged negotiations. The 12 countries finally reached agreement on 5 October last year. That day, Canadian Prime Minister Stephen Harper said he expects signatures on the finalised text and deal early this year and ratification during the next two years.hideThe TPP has been criticised by many because discussions have mainly been held in private. A version of the text of the treaty was finally made public on 5 November 2015 in the US, the same day President Obama notified Congress that he intends to sign it. Euler Hermes’ Mr Subran sees benefits and risks within the agreement. He said in a recent note on the implications of the agreement that consumers from cheaper goods exporters will benefit from lower trade barriers in new markets. “The knowing (American research and development), the doing (Vietnamese manufacturing) and the having (Canadian natural resources) countries will complement one another. Chemical, machinery and equipment and electronics supply chains will benefit the most; peer pressures will help improve business practices regionally,” said the economist. But Mr Subran warned there are risks attached to the TPP’s adoption. These stem from perceived currency manipulation, possible negative impacts on key national industries such as agrifood and automotive, and social discontent—mostly in the United States. He added that the TPP’s success will also be conditioned on outsiders’ trade policy response. “As for the possible losers, the EU and China come to mind. The latter is busy developing a very ambitious international trade development, dubbed ‘one belt, one road’, a so-called 21st century Silk Road. So it’s not all smiles when it comes to the TPP,” said Mr Subran. The TPP is open to new members. South Korea has shown interest and may join in future. Taiwan, the Philippines, Thailand and Laos, Indonesia, Cambodia, Bangladesh and India are all potential members but would need to change their protectionist trade policies to join. China could join but it is not clear that the benefits are large enough. Last October, Indonesian President Joko Widodo declared the country’s intention to join the TPP. Mr Subran added that the TPP and the establishment of an ASEAN Economic Community (AEC) could reshape trade worldwide and supply chains in the Asia Pacific region. “Or this, at least, is what the architects of these agreements would have you think,” he said. Mr Subran explained that the TPP is a ‘mega’ trade agreement. Negotiated and initialled in early October, it encompasses 12 countries with a combined GDP of $28tn. The 12 countries are the US, Australia, Canada, Japan, Brunei, Malaysia, Chile, Mexico, New Zealand, Peru, Singapore and Vietnam. “It could bring together more than 800 million consumers and affect the lives and livelihoods of workers almost everywhere. And most of all, it has a very ambitious—and contentious—goal: extensive trade liberalisation across the Pacific Rim. The stakes are high. So is the pressure,” he said. Meanwhile, the formal creation of the AEC at the end of 2015 is mostly seen as an opportunity to strengthen the ASEAN block. “Singapore, Thailand and Malaysia stand to gain the most, already acting as springboards to international value chains,” said Mr Subran. The economist added that companies affiliated with the AEC will benefit from peer pressure and synergies, access to new markets and trade opportunities (+$3.8bn in 2015 and +$9.9bn in 2016 overall), lower transaction costs (up to +$7bn in savings on export) and fresh financing from investors (+$8bn per year), all of which are “clear advantages”, he said. “An interesting (and favourable) reshuffling of regional value chains is yet to come, including those that include China. Electronics, chemical, automotive and agrifood will benefit the most while machinery and equipment, textile and energy may lag behind,” said Mr Subran. “So again, losers and winners, smiles and frowns and many trillions of dollars are at stake,” he concluded.

Ratification of TPP will see winners and losers claims credit insurer

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