KUALA LUMPUR, Oct 8 — With tariffs expected to be removed, the controversial Trans-Pacific Partnership (TPP) agreement could boost Malaysian exports by almost 12 per cent by 2025, a US-based think tank said.
According to the Wall Street Journal (WSJ), the Peterson Institute for International Economics said the mammoth trade agreement is seen as a game-changer for economies in countries like Malaysia and Vietnam, which currently do not have any free-trade agreements with the US, a major consumer of both raw materials and manufactured products.
Currently, exporters from these economies to the US must pay taxes on every product that arrives on American soil, the report pointed out.
“We have been long waiting for this. Over a number of years I believe the whole landscape of sourcing will change," said Tang Chong Chin, managing director of Malaysian apparel firm United Sweethearts Garment Bhd, which makes a variety of clothing like sportswear, children’s and outdoor clothing.
According to the report, United Sweethearts is already planning a second factory in Vietnam, and the TPP will accelerate its plans.
Tang, who is also the president of the Malaysian Knitting Manufacturers Association, said revenue could double within five years if tariffs are removed.
The manufacturer currently exports more than two-thirds of the clothing it makes to the US.
Countries without free trade agreements with the US face tariffs that could go up 10 per cent or higher, depending on the type of apparel.
The report said manufacturers of apparel, rubber gloves and bikes are among those considering increasing production in Southeast Asia to capitalise on export growth expected from the agreement.
The TPP would give member economies preferential treatment, eliminating or reducing those tariffs across most industries, giving them a leg up over rivals such as China, Thailand and Indonesia that aren’t part of the deal.
Malaysia, one of the world’s largest exporters of rubber and palm oil, which also manufactures auto and electronics parts, exported more than US$30 billion (RM127 billion) worth of goods and services to the US in 2014, the report noted.
Meanwhile, Supermax Corporation Bhd, Malaysia’s second-largest producer of rubber gloves by volume, said it is anticipating a surge in sales of its products to major new markets.
Group managing director Datuk Seri Stanley Thai told WSJ that he expects import duties of around 16 per cent for its medical glove exports to Canada, another TPP member, to be eliminated.
Deborah Elms, co-founder and executive director of the Asian Trade Centre said the final agreement looks likely to be “the best trade liberalisation we’ve seen in 20 years", adding that she expects there "to be quite a stampede" of foreign investment in Southeast Asia when the final text of the agreement is published.
Although the TPP currently has 12 members, encompassing 40 per cent of the world’s economic output, the smaller members are likely to be standout performers, the report said.
Yesterday, Malaysia’s International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the federal government is looking at presenting its case for the TPP to Parliament in January next year.
He said they still need to confirm the exact date that the official TPP text will be released to the public, but noted that it will likely only be tabled in Parliament for debate and a vote next year.
Mustapa explained that the text will likely be released by the end of this month, after which all 12 of the TPP member countries will have 60 days for public consultation before they will need to decide whether or not they will sign on with the trade pact.