Moody’s: CPTPP benefits shortened without US

According to the credit rating agency, compared with the TPP, lost trade opportunities will be felt most in Vietnam, Malaysia, and Japan, because these countries stood to gain the most from greater access to the US market, given the scope of current trade agreements.

The CPTPP was signed on March 8 in Santiago, Chile

Nevertheless, Malaysia will prove the biggest winner from the revised agreement, because the deal will provide export access into new markets, including Canada, Peru, and Mexico, and will benefit palm oil, rubber, and electronics exporters.

Meanwhile, real incomes in Singapore, Brunei, Vietnam, and Peru will also rise compared to a case without the CPTPP.

On the issue of reforms, Moody’s noted that because the lower trade and non-trade barriers under the CPTPP are conditional on country-specific reforms, the agreement will help sustain domestic reform momentum.

The ongoing reform efforts should boost competitiveness and investment, and strengthen institutional quality over time for member nations. Also, the benefits would be greatest for sovereigns with relatively low governance and competitiveness scores, such as Peru, Vietnam, Mexico, and Brunei.

Moody’s added that if the CPTPP expands its membership to include other large Asian economies which have expressed interest in joining the deal, including Indonesia (Baa3 positive), Korea (Aa2 stable), the Philippines (Baa2 stable), Taiwan (Aa3 stable), and Thailand (Baa1 stable), real income gains for members would be much greater than the current CPTPP deal and higher than the original TPP pact, according to estimates from the Peterson Institute for International Economics.

The CPTPP’s members now consist of Australia (Aaa stable), Brunei (not rated), Canada (Aaa stable), Chile (Aa3 negative), Japan (A1 stable), Malaysia (A3 stable), Mexico (A3 negative), New Zealand (Aaa stable), Peru (A3 stable), Singapore (Aaa stable), and Vietnam (B1 positive).