Malaysia and Vietnam can take the lead in US-Asia trade deal
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Malaysia and Vietnam can take the lead in US-Asia trade deal

NO sooner had the ink dried on the final (and still classified) text of the 12-country Trans-Pacific Partnership (TPP), an avalanche of criticism was launched at the U.S.-led initiative to bind together the economies of the Pacific Rim. The ensuing cacophony straddled both sides of the political aisle and even pushed Hillary Clinton, one of the deal’s main architects, to fold and condemn the trade agreement. Asian politicians didn’t fare much better, weakened by a stronger than expected public backlash.

As always, such resistance is based upon suspicions that the treaty contains some hidden element that challenge the sovereignty of the state in question. There is also undoubtedly a large element of resistance that is directly related to TPP’s intellectual property protection (especially with pharmaceuticals), or lack thereof, and shaky environmental standards. There are, though, certain nations who have managed to put such petty concerns behind them in search of greater long-term returns. Of these, Vietnam and Malaysia stand prominently to the fore, having both got on board the TPP boat early and having outgrown the region – in terms of GDP and in terms of political maturity.

Indeed, multiple analyses have pointed out that Vietnam and Malaysia will be big winners of the TPP. According to Credit Suisse, Vietnam would see a 10 percent boost to its GDP over the next 10 years, while Malaysia would grow by an extra 5 percent. Meanwhile, the Peterson Institute estimates that Vietnamese exports from its key garment and footwear industry could jump by as much as 46 percent by 2025, helped by the gradual elimination of tariffs.

SEE ALSO: Jokowi says Indonesia will join Asia trade pact

To begin with, Vietnam has been hailed as an emergent ‘little dragon’ along the lines of Taiwan and South Korea in the 1990s. Far from hyperbole, the nation is proving able to compete on its own terms, reaching 6.81 percent GDP growth in the third quarter of this year in a context of decreasing economic fortunes accelerated by China’s slump. Much of this has to do with the country’s opportunistic eye for commercial progress. For example, when Thailand left a void in the world rice export market, Vietnam stepped in with an immediate and devastating effect. As a result, it is now in third place in rice export rankings, right behind giants Thailand and India.

More significantly however, especially regarding the potential gains to be had in joining the TPP, is the position Vietnam maintains as a major garment manufacturer. With an already extant and highly-developed garment production industry in place, Vietnam has set its sights on competing with China for the title of ‘King of Cloth’. Faced with China’s rising labor prices, Stratfor, a think tank, identified Vietnam back in 2013 as one of the 16 countries that could succeed China as the world’s go-to place for low-cost products. Indeed, buoyed by a labor cost per hour that is roughly half of China’s, Hanoi has been nipping at the Asian giant’s heels in the garment sector. With the TPP providing the fillip to an already very healthy manufacturing industry, some experts estimate that Vietnam could benefit from as much as a 28 percent leap in exports. Experts also estimate that the country could join Nigeria in becoming the world’s fastest-growing large economies between now and 2050 if the TPP goes through and barriers to trade are lifted. Hanoi’s single hurdle? Fulfilling the strict terms of the TPP’s labor chapter, which carry painful trade sanctions if breached.

In Malaysia, the situation is a little more complicated. The impetus evident in Vietnam is not readily available to a nation already firmly established as one of Southeast Asia’s true achievers. Plus, the nation is currently plagued by a scandal that is having an adverse effect on investor confidence. The focus on this scandal, however, is almost irrelevant compared to what is happening in the broader scheme of things. In a bid to diversify Malaysia’s trade partners away from China, Prime Minister Najib, who also doubles as finance minister, has made a long-term bet and hitched his wagon to the US via the TPP – a move that has been fervently rejected by the country’s father figure and former autocrat, Mahathir Mohamad. Forewarned by the example of so many others in the region who have suffered by failing to pursue the same course of action, Malaysia’s PM is keen to avoid being dragged along in the wake of China’s economic slowdown. Already a major exporter of electronics, rubber and palm oil, Malaysia’s accession to TPP would greatly increase access to a number of key markets. This is especially pertinent now, as Malaysian exports to the US have recently dropped from 11.1 percent to 8.1 percent. The Malaysian public is highly skeptical of the agreement, even if Trade Minister Mustapa Mohamed gave assurances that Malaysia had secured important concessions, namely “longer transition periods and differential treatment for Malaysia’s sensitive areas”.

SEE ALSO: Malaysia’s Najib pulls out a populist budget

However, obtaining trade concessions and signing a document does not a rich country make. An element overlooked by both sides of the TPP debate is that a trade deal’s worth does not lie solely in the text of the document. Through their very essence, trade deals create winners and losers. It’s up to individual governments to pass the right amount of complementary measures and ensure that the overall impact on their societies will be a beneficial one. The US, for example, has itself recently introduced plans for legislation that will provide training and support for those workers directly affected by the passage of the TPP.  Should the proper mechanisms be put in place, the losers in a freer trade treaty are only ever short term. What’s the point of growing your GDP if the net effect is a loss in jobs and growing economic inequalities? As such, pundits shouldn’t jump the gun just yet in hailing the TPP a success or a failure.

There are reasons for optimism though – both Vietnam and Malaysia have shown a strong appetite for structural reforms and long-term thinking, even in the face of short-term setbacks. It is no wonder that Malaysia and Vietnam became the poster children of the deal. And therein lies the rub – because of the heavy emphasis put on these two countries, TPP’s success will be judged according to their performance. What this means is that the world will be closely watching how Kuala Lumpur and Hanoi fare.