The Trans Pacific Partnership includes twelve nations on both sides of the Pacific. Image: USTR.

A Perspective from the Region: TPP Promises Huge Gains in Southeast Asia for the US

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Four Southeast Asian countries – Brunei Darussalam, Malaysia, Singapore and Vietnam – are represented in the Trans-Pacific Partnership (TPP) Agreement which the United States has concluded with 11 Asia-Pacific countries, also including Australia, Canada, Chile, Japan, Mexico, New Zealand and Peru. The benefits that the United States will derive from the TPP, once it is ratified, should deepen its gains in Southeast Asia in particular and the Asia-Pacific in general.

The primary benefit to the United States is strategic. Traditionally, statecraft and warfare belonged to the aristocratic sphere of “high politics” among nations; economic relations were consigned to the plebeian level of “low politics”. Globalization has inverted that condescending hierarchy. While “guns” – the ability to go to war – are still important in international relations, “butter” – peaceful relations woven around trade and investment relations – has moved to the forefront of international engagement. In this context, the TPP is a strategic instrument. It should help the United States write the economic rules of the emerging Asian order during a transitional era marked by the ascendancy of regional countries.

China has already embarked on its own initiatives. Witness its success in establishing the Asian Infrastructure Investment Bank; its Silk Road initiatives covering land and maritime links with Eurasian countries; and the Regional Comprehensive Economic Partnership that seeks closer integration with other Asian countries.

The TPP will anchor the United States in the economically and strategically important Asia-Pacific region, and stop America from being shut out by a plethora of Asians-only initiatives. Furthermore, the TPP will strengthen links between the two sides of the Pacific. The partnership will keep access to the United States open even as nations in the region respond to the more globalized role that China now plays. In that way, the TPP can allay fears of occasional American apathy towards the region; instead, the entrenchment of America’s economic engagement and its political profile will enable it to be prominent in ways other than through military power.

Ideally, the World Trade Organization would have provided a global framework for the 21st century, but its stymied deliberations have made other arrangements necessary. The TPP upholds collaborative American interests in the Asia-Pacific, and its ambit encompasses nearly 40 per cent of global GDP.

As a group, the TPP countries are the largest goods and services export market for the United States. US goods exports to those countries totalled US$698 billion in 2013, representing 44 per cent of total US goods exports. US exports of agricultural products to TPP countries amounted to US$63 billion in 2013, 42 per cent of total US agricultural exports. US private services exports to these same countries came to US$172 billion in 2012, 27 per cent of such exports to the world, according to figures released by the Office of the United States Trade Representative (USTR).

Several American agencies, including the USTR, point to the benefits that American workers and businesses would make under the partnership. The TPP will make it easier for American entrepreneurs, farmers, and small business owners to sell their products abroad by eliminating more than 18,000 taxes on, and other trade barriers to, American products. Beneficiaries include producers of industrial goods, food and agricultural products, and textiles.

American gains would be pronounced in Southeast Asia as well. For example, certain American auto parts now face a 27 per cent tariff in entering Vietnam. By contrast, other countries that have a free-trade agreement with Vietnam – such as China, Thailand and Indonesia – can export their auto parts to Vietnam free of duty. The TPP would level the playing field for the United States, increasing its competitiveness in the Vietnamese market in the process. In the same vein, American poultry, which currently faces a 40 per cent tariff in Malaysia, would attract more Malaysian customers under a TPP agreement.

Overall, passage of the TPP will signal American commitment to region in a concrete way, which will benefit both the United States and its regional partners. For the former, there will be more access to market sectors in the region; for the region, there will be stronger reasons to welcome the American presence because of the resulting opportunities for enhanced trade relations with the United States.

The partnership, while rooted in dollars and cents, is important beyond them. It will serve to sustain and entrench America’s interests in Southeast Asia and position it as an Asia-Pacific power for the foreseeable future.

The opinions expressed herein are the views of the author. Asad Latif is with ISEAS - Yusof Ishak Institute, Singapore.