The recent pact on the Trans-Pacific Partnership (TPP) trade agreement is credit positive for all 12 participating sovereigns, but especially for those in Asia, Moody’s Investors Service says.
The deal will reduce the cost of trade and open up new investment opportunities, supporting growth. While full details of the agreement have yet to be published, greater access to the U.S. for their goods should help to make Asian countries the biggest beneficiaries in GDP-relative terms, the credit rating agency said.
These findings are contained in its just-released report, entitled “Trans-Pacific Partnership to Bolster Trade and Growth, a Credit Positive.”
The free trade agreement (FTA)—between Australia (Aaa stable), Brunei (unrated), Canada (Aaa stable), Chile (Aa3 stable), Japan (A1 stable), Malaysia (A3 positive), Mexico (A3 stable), New Zealand (Aaa stable), Peru (A3 stable), Singapore (Aaa stable), the United States (Aaa stable) and Vietnam (B1 stable)—will increase market access, lower or eliminate tariffs and set standards in areas including intellectual property rights, environmental and labor conditions, and government procurement.
Moody’s said Vietnam’s apparel and shoe manufacturers will profit from lower import duties with the U.S. and Japan. Likewise, Malaysia’s palm oil, rubber, and electronics’ exporters will see substantial value from the TPP deal. In Japan, cars and auto parts makers in particular stand to do well out of the agreement.
Australia and New Zealand’s farmers will also benefit from increased market access and lower tariffs on their goods. For Singapore, which has trade agreements in place with nine TPP countries, the deal will complement these existing pacts and boost investment and trade flows with partner nations.
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, added the report.
One modestly credit-negative aspect to the trade deal is that it could 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 agreement are likely to offset foregone tariff revenue.
Photo: Lerdsuwa
