Top trade officials from 12 Pacific Rim nations signed the Trans-Pacific Partnership (TPP) agreement in Auckland on Thursday despite continuing protesters in New Zealand and the United States.
The ambitious trade pact, when ratified by lawmakers in the participating countries, will liberalise trade in about 40 percent of the global economy and cut tariffs on as many as 18,000 goods.
Besides New Zealand, Malaysia, the United States, Canada, Australia, Japan, Mexico, Peru, Singapore, Vietnam and Brunei are signatories to the deal.
Critics have flayed the agreement saying there is no clarity over the impact of the substantive contents of the deal, and that negotiations were held behind closed doors.
Much of the opposition comes from small and medium scale businesses in various countries. In New Zealand, the Maori community has serious concerns and in Malaysia a radical Islamic opposition party is strongly against the deal.
In the US, President Barack Obama faces an uphill task to get the deal ratified by both the houses in Congress in his final year in office.
Malaysian parliament last week approved a motion to join the Trans-Pacific trade pact.
What is TPP?
- The pact aims at radically liberalizing trade between 12 Pacific rim countries.
- The Trans-Pacific Partnership (TPP) was finalized in October 2015 after five years of discussions and negotiations.
- The deal, which covers around 40 percent of the world economy, has to be ratified by all member countries.
- Under the pact some 90 percent of tariffs products such as dairy, beef, sugar, wine, rice, horticulture and seafood, manufactured products, resources and energy will be abolished.
- China, the world's second largest economy, has been left out of the deal, while countries in its sphere of influence have joined hands.
- While the US will make the most gains from the pact, Japan, Malaysia and Vietnam will also get substantial benefits. In US, some economists say the pact will lead to a $131 billion jump in real incomes annually.
Benefits for Singapore
Removal of tariffs on a wider basket of goods in the region will help exporters in a country that depends on exports.
For Singapore, which has already entered into 21 free trade agreements, the additional benefits from TPP maybe marginal.
However, TPP will further boost Singapore's economy since 30 percent of Singapore's trade and 30 percent of its foreign direct investments come from the TPP region.
More trade happening in the liberalized region will indirectly benefit Singapore, especially as increased economic activity in developing economies like Malaysia and Vietnam in the neighborhood will benefit the country.
TPP allows Singapore to have a free tare agreement with Canada and Mexico. It already has separate free trade agreements with all other TPP members.
TPP visualizes removal of tariffs on almost all goods Singapore is currently exporting to Canada and Mexico.
Singaporean investors will find it easier to raise their investment in counties such as Brunei, Malaysia and Vietnam as limits on foreign ownership of companies in the expanding markets will be liberalized.