TPP to boost trade, economy – WB

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DEVELOPING economies will benefit more from the Trans-Pacific Partnership (TPP) agreement than bigger economies, as it can enhance trade and industry.

The TPP would strengthen trade and gross domestic product (GDP) of TPP member countries, especially the developing economies.

“The model situations suggest that by 2030, the TPP will raise member country GDP by 0.4 percent to 10 percent, and 11 percent on a GDP-weighted average basis,” the World Bank Group said in the report “Global Economic Prospects January 2016: Spillovers amid Weak Growth.”

The Washington-based lender said “only 15 percent of the GDP increase would be due to tariff cuts. Whereas cuts in NTMs (non-tariff measures), goods and services, would account for 53 percent and 31 percent of the total increase in GDP, respectively.”


The TPP is a trade agreement forged by 12 member economies on October 4, 2015, and focuses on cutting tariffs, lowering the cost of trade, as well as reducing restrictions on policy measures or so called “non-tariff measures” to encourage free trade among its signatories.

The twelve member economies are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam.

“The benefits are likely to materialize slowly but should accelerate towards the end of the projection period,” the World Bank said.

“The slow start results from the gradual implementation of the agreement and the lag required for benefits to materialize utilization rises. The benefits of the TPP would mostly derive from reductions in non tariff-based measures (NTM or policy measures) and measures that benefit services,” it added.

Among the 12 member economies, the largest gains are expected in smaller, open economies like Vietnam and Malaysia which are expected to have 10 percent and 8 percent economic boost by 2030, respectively.

Given that TPP member economies account for 30 percent of global trade, the World Bank said non-TPP members may incur some losses, albeit minimal.

“Aggregate GDP losses to non-members could be of limited size – only 0.1 percent by 2030,” the bank said.

Impact on PH

In the case of the Philippines, Trade Secretary Adrian Cristobal said on Thursday that the country is keen on joining TPP.

A successful participant must relax certain policies and constitutional restrictions to enhance the performance of trade and industry.

If the Philippines would not make it, the World Bank report indicated that the country may incur a 0.2-percent GDP loss and 0.5 percent on exports.

Sectoral changes

The TPP can also change and impact focus of sectors in its member and non-member economies.

The World Bank noted that skilled labor-intensive sectors such as chemicals, vehicles and machinery are likely to expand faster in some advanced economies like the United States and Singapore.

“Although the TPP is unlikely to affect overall employment in the long run, it may accelerate structural shifts between industries based on comparative advantage and scale economies,” the report said.

“In advanced economies, these mechanisms favor traded services, advanced
manufacturing, and, for some resource-rich countries, primary products and investments,” it added.

It cited that the US is likely to increase its wages in 2030 by only 0.4 percent and 0.6 percent for unskilled and skilled workers, respectively.

Developing economies like Vietnam is seen to increase real wages of unskilled laborers by as much as 14 percent as Vietnam shifts to production intensive industries that needs more unskilled workers.

The 12 TPP member countries have a combined population of 800 million and are projected to account for 40 percent of the world’s gross domestic product and 30 percent of global trade.

South Korea, Taiwan, Colombia and Indonesia are also keen on joining the TPP.

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