Because the TPP will be a "living agreement", further countries will be able to join the deal in years to come. Image: Congressional Research Service.

Trans-Pacific Partnerships at a Crossroads


Across the Pacific, governments are scrambling both to finalize the Trans-Pacific Partnership (TPP) negotiations as well as to convince domestic constituencies of the regional trade deal’s advantages. For Southeast Asia, the greatest significance of the TPP is that it has brought a diverse set of countries, which vary greatly in terms of demography, geography and economic development, to the negotiating table with the world’s largest and most advanced economy, the United States. The participating countries from Southeast Asia are Brunei, Vietnam, Malaysia and Singapore, and their GDP per capita (PPP) ranges from just over $3,500 in Vietnam to over $60,000 in Singapore. The World Bank’s Ease of Doing Business Index ranks Singapore number 1 and Brunei number 101 out of 189 countries.

By establishing a rules-based high standard template, the TPP could play a strategic role in managing the region’s economic diversity, which will in turn profoundly impact US-Southeast Asia relations. Of the 12 negotiating states, Vietnam is set to be the biggest winner from the TPP with expected annual welfare gains of USD$33.5bn by 2025. A recent study has shown that far from stifling local production, the TPP could turn Vietnam into the world’s largest apparel exporter. Depending on how rules of origin requirements in the TPP are structured, Vietnam’s share of the global apparel market has the potential to increase from 4% currently to 11% in 2024.

On the other end of the GDP spectrum, the TPP will also benefit Singapore’s globally competitive economy, which is driven by the strategic imperative of continually seeking improved market access. Deborah Elms has pointed out that the US-led TPP can generate greater economic opportunities for ASEAN countries by providing for deeper and high-quality integration. Singapore may already be the third largest investor in Vietnam, with cumulative investments of over SGD $30 billion (USD$ 21.8bn) primarily in five Vietnam-Singapore industrial parks, but the TPP is expected to give Singaporean firms even more flexibility and improved local market access in Vietnam. There is ample room for growth in intra-regional trade in Southeast Asia, which reached its peak in 2007 when it accounted for 24.6% of total regional trade, and then declined slightly to 24.1% in 2012.

Critical voices in Malaysia contend that the TPP would encourage undue influence from foreign governments and multinational corporations in domestic markets. However, by stimulating on-going economic restructuring in Malaysia and Vietnam, and by redefining the commercial rules through which governments and businesses interact, the TPP will level the economic playing field between developing and developed economies in Southeast Asia.

Given its potential to accelerate development and to further break down barriers between closely linked markets in the region, the strategic implications of the TPP for US-Southeast Asia relations are significant. Ratifying the TPP would immediately expand the number of FTAs that the US has in Southeast Asia from one (US-Singapore FTA) to four, further integrating it into a region that has seen the steady proliferation of FTAs over the last 15 years: from just 3 FTAs region-wide in the year 2000 to over 40 FTAs currently in effect among TPP-negotiating countries alone. Notably, Malaysia’s primary motivation for joining the TPP was to reverse its failure to conclude a US-Malaysia FTA. Similarly, according to the US Bureau of Economic Analysis, from 2011 to 2013 US FDI flows to Singapore were 7 times higher than its FDI flows to the rest of Southeast Asia. However, the figures also point to growing US FDI flows to Vietnam and Malaysia, which increased by 75% and 39% respectively in the same period. The TPP would allow the US to capitalize on its rapidly burgeoning investment relationships in the region, to diversify its linkages within the region, and to deepen and expand its trade and political ties with Southeast Asia as a whole.

Since the TPP has been envisaged as a “living agreement” open to new members, it is also likely that countries like Thailand, Indonesia and the Philippines will face economic incentives to eventually come on board. The high standard rules and relationships established by the TPP would then place the US in a prime position within the on-going East Asian regional integration process.

From the time of Abraham Lincoln’s presidency, US officials have spoken about commerce as the agent through which the Pacific will rise, and the tool through which trans-Pacific ties will evolve. By successfully concluding and ratifying the TPP, the US will establish it as the pivot that will anchor its presence in the region.

Vandana Prakash Nair is a research officer at the Institute of Southeast Asian Studies (ISEAS), Singapore.