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TPP brings vast benefits, and remaining members should keep it alive: Experts

SINGAPORE — Even without the United States, the Trans-Pacific Partnership (TPP) trade deal should be kept alive and the remaining 11 member countries — including Singapore — should look at renegotiating the pact to exclude the world’s economic superpower, several trade experts and business leaders said yesterday.

US Trade Representative Michael Froman (centre) speaks next to Japan's Economics Minister Akira Amari (centre left) and Singapore's Trade Minister Lim Hng Kiang (centre right), among trade ministers representing Canada, Peru, Malaysia and Mexico during a news conference at the end of a four-day Trans-Pacific Partnership (TPP) Ministerial meeting in Singapore on Feb 25, 2014. Photo: Reuters

US Trade Representative Michael Froman (centre) speaks next to Japan's Economics Minister Akira Amari (centre left) and Singapore's Trade Minister Lim Hng Kiang (centre right), among trade ministers representing Canada, Peru, Malaysia and Mexico during a news conference at the end of a four-day Trans-Pacific Partnership (TPP) Ministerial meeting in Singapore on Feb 25, 2014. Photo: Reuters

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SINGAPORE — Even without the United States, the Trans-Pacific Partnership (TPP) trade deal should be kept alive and the remaining 11 member countries — including Singapore — should look at renegotiating the pact to exclude the world’s economic superpower, several trade experts and business leaders said yesterday.

Citing the vast opportunities in investments, digital trade and the services sector which the TPP will bring, they argued that it will be a worthwhile endeavour to come up with a new deal even though the process could take anywhere from weeks to years, depending on how extensive the changes will be.

On Monday, newly-inaugurated US President Donald Trump signed an executive order to formally withdraw the US from the TPP trade pact, which took seven years of negotiations before it was signed in February last year.

Despite the setback for the ambitious trade pact, Singapore-based Asian Trade Centre executive director Deborah Elms said Singapore should ratify the TPP as soon as possible.

“The US is clearly out, (but) the agreement is still very important and very relevant, particularly for a trade-dependent country like Singapore ... Singapore should be ratifying TPP as, among other things, a signal that it remains open and committed to trade,” she said.

Assistant Professor Kaewkamol Pitakdumrongkit from Nanyang Technological University’s S Rajaratnam School of International Studies pointed out that beyond the access to the US market, there are other benefits Singapore can reap from the agreement. For example, the TPP’s investment chapter “not only pursues investment liberalisation but also has a strong investment protection mechanism” to protect Singapore’s overseas investment in the TPP nations, she said.

Singapore Business Federation chief executive officer Ho Meng Kit noted that investment opportunities remain available for TPP firms with or without the agreement, given that the American market is already quite open and it has relatively low tariffs across many sectors and services.

A mega-trade deal such as the TPP also eliminates the need for several bilateral trade agreements that could be very complicated for businesses, especially small companies, he added.

Article 30.5 of the TPP requires at least six countries, representing 85 per cent of the bloc’s combined gross domestic product, to ratify the agreement. This means that the agreement can only come into force when both the US and Japan ratify the pact. Without the US, the TPP as currently constructed is not viable, said Washington-based research organisation Centre for Strategic and International Studies (CSIS). It added: “While the US’ withdrawal from the agreement strikes a near-fatal blow to TPP, the agreement is technically still alive. All parties to the TPP, including the US, have officially signed the text, and none of the other 11 countries has signalled its intention to withdraw.”

To date, Japan is the only country to have fully ratified the agreement. CSIS noted that for the other 11 members to agree on a deal without the US would require “new negotiations to amend Article 30.5 and probably other provisions to ensure a new balance of benefits” among the remaining partners.

Dr Elms suggested that the article could be amended to allow countries to continue with the pact, without meeting the 85 per cent threshold, for instance. This could be quicker than renegotiating the entire agreement, she noted. CIMB private banking economist Song Seng Wun felt that a renegotiated pact could entail more drastic changes, such as the inclusion of other countries, which would require years for talks to complete.

Apart from pushing on with the TPP, the experts said Singapore should continue pursuing other regional initiatives such as the China-led Regional Comprehensive Economic Partnership (RCEP) as well as bilateral free-trade agreements.

UOB economist Francis Tan said that talks for bilateral trade agreements would be less time-consuming, “while the world argues about the pros and cons of freer trade”.

Mr Trump had previously called the TPP a “potential disaster” for his country and pledged instead to negotiate “fair bilateral trade deals that bring jobs and industry back onto American shores”.

As far as trade between the US and Singapore is concerned, Asst Prof Pitakdumrongkit questioned if it is worth investing resources to negotiate for enhancements to the existing free-trade agreement between the two countries.

“It also has to ponder the possibility of a bargaining failure, as the US might walk away from the table due to domestic backlash. Trump once accused some Singaporean companies of stealing American jobs. I’m not sure how well the negotiation would go,” she said. While the RCEP may not provide deep commitments such as those in the TPP, she added that it would consolidate the existing Asean+1 free trade agreements.

“(It would be) great for Singaporean companies, especially the SMEs which may lack resources, to go through and compare the terms of different trade agreements to figure out which one they should use,” she added.

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