TPP

Economy: What you need to know about the TPP
The US, Singapore and 10 other nations have successfully concluded negotiations for the Trans-Pacific Partnership on 5 Oct in Atlanta.

Here’s what you should know:
1) What is it? The TPP is a comprehensive regional Free Trade Agreement which is aimed to break down trade barriers among member countries over time to catalyse growth. The agreement also promotes stronger labour and environmental standards.

2) Who are the member nations? Member nations include US, Japan, Canada, Australia, Brunei, Chile, Malaysia, Mexico, Peru, Vietnam, New Zealand, and Singapore.

3) How will TPP benefit Singapore? The size of the TPP market is 40% of the world economy, and it opens up like Canada and Mexico, where Singapore does not yet have bilateral free trade agreements. Breaking down trade barriers over time will also be boon for Singapore, as these countries accounted for 30% of Singapore’s trade and FDI respectively in 2013.

Higher value-add industries could benefit structurally, given Singapore’s stringent intellectual property laws and strong talent pool. Meanwhile, lower-value industries could lose market share to cheaper countries like Malaysia, which shares overlapping exports/capabilities.

4) What’s next? Final details still need to be worked on, and domestic approval needs to be ratified in each of the participating countries.

5) Other takeaways?
a. The Obama administration sees this as a big win to check China’s rising economic influence. He was quoted saying America should still “write the rules” for the global economy, referring to how the TPP would benefit American products, as well as promote stronger labour and environmental standards.

b. Interestingly, China adopted an open attitude towards the TPP. Wary that its corporates might lose market share to US and Japan in developing nations like Vietnam, it indicated it will push the "One Belt One Road” initiative, and hopes that TPP trade partners will not close their doors to China.

c. Japan is also seen as a big beneficiary. For instance, its automakers like Toyota could source cheaper input materials from Asia.

d. State procurement will see increased foreign competition, meaning state-owned enterprises will not receive undue preference. This could see the gradual phasing out of preferential bumiputera policies in the Malaysian corporate scene.

e. Biologics patents now have a 5-8 year protection window compared to the 12 year that US drug makers enjoy. US pharmaceutical firms oppose the TPP for this reason.

f. Standards will be put in place to govern cross-border issues for e-commerce and financial services, including forcing companies to place data storage servers within the country, or demanding access to a company’s software code.