12 January 2016
by Greg Earl
TPP benefits only modest for Australia, World Bank finds
Australia will reap fewer benefits from the planned Trans-Pacific Partnership (TPP) trade deal than most of the members, according to the first comprehensive research on the economic impact of the deal since it was agreed last October.
The findings on the main beneficiaries come as the prospects of the deal being implemented appear to have been improved significantly in the new year, with key US business groups endorsing it after earlier equivocation.
New Zealand is also reported to be planning to host a signing ceremony in early February to maintain the momentum towards full implementation, after opposition in the US Congress threatened to delay ratification in the US until after the November presidential election.
US President Barack Obama is expected to push for US ratification before he leaves office in his final State of the Union address on Tuesday, drawing on the new official statements of support from three peak business groups.
Low GDP increase
But research by the World Bank shows that Australia is likely to experience a gross domestic product increase of less than two percentage points by 2030 as a result of the increased business flowing from the trade deal among 12 countries.
This compares with GDP increases of about 10 per cent for Vietnam and 8 per cent for Malaysia. They benefit from getting new access to larger markets in the US and Japan, which Australia already has.
Australia will also have one of the smallest overall increases in exports by 2030 of about 5 per cent, compared with about 30 per cent for Vietnam and 10 per cent for the US.
The US-led TPP was agreed between trade ministers from the 12 members in October after seven years of negotiations, but still needs to be ratified by the parliaments of most member countries. It covers 25 per cent of world trade and 36 per cent of the global economy.
World Bank findings
While the World Bank study released last week underlined how Australia's already open trade regime makes it one of the lesser beneficiaries, it welcomed the agreement as a potentially important offset to declining world trade growth.
"As a new-generation, deep and comprehensive trade agreement, TPP addresses a wide range of complex trade policy issues that go beyond the scope of traditional trade agreements.
"The agreement will reduce tariffs and restrictiveness of non-tariff measures as well as harmonise a range of regulations to encourage the integration of supply chains and cross-border investment."
The World Bank study's findings on the beneficiaries from the final agreement are broadly in line with earlier academic forecasts about the deal.
However the Australian government argues that Australia may reap other longer-term benefits by being on the inside of what might become the main framework for business rule-making across the Asia Pacific region.
The World Bank lends weight to this argument by saying: "Against the background of slowing trade growth,rising non-tariff impediments to trade, and insufficient progress in global negotiations, the TPP represents an important milestone.
"The TPP stands out among FTAs (free trade agreements) for its size, diversity and rulemaking."
It says: "Much will depend on whether the TPP is quickly adopted and effectively implemented, and whether it triggers productive reforms in developing and developed countries.
"Broader systemic effects, in turn, will require expanding such reforms to global trade, whether through TPP enlargement, competitive effects on other trade agreements, or new global rules."
Last week a Chilean official revealed that the New Zealand government was planning a signing ceremony in early February, even though many legislatures are yet to ratify the deal. However, New Zealand has not confirmed the event.
While the US has led the TPP negotiations in recent years, New Zealand claims original ownership of the initiative as the sponsor of the four-member trade deal at the heart of the group.