Malaysia will prove the biggest winner from revised CPTPP, says Moody’s

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KUALA LUMPUR (March 9): Malaysia will prove the biggest winner from the revised Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreement, because the deal will provide export access into new markets, including Canada, Peru and Mexico; benefiting palm oil, rubber and electronics exporters, according to Moody’s Investors Service.

In a statement today, Moody's said that economic gains for members of the CPTPP will prove smaller without the participation of the US (Aaa stable), but the trade deal will still boost exports and incomes for all members and help sustain reform efforts in a number of countries.

It said this in a report titled "Sovereigns -- Asia Pacific and Americas: Revised Trans-Pacific Partnership benefits all members, but less so without the US".

On March 8, the 11 remaining members of the TPP signed a revised free trade agreement (FTA) without the US.

The new deal was renamed the CPTPP, with members consisting 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).

Moody's said that, compared with 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.

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

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

It said the ongoing reform efforts should boost competitiveness and investment, and strengthen institutional quality over time for member nations.

“And, the benefits would be greatest for sovereigns with relatively low governance and competitiveness scores, such as Peru, Vietnam, Mexico and Brunei,” it said.

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, citing estimates from the Peterson Institute for International Economics.