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Economy

World Bank says Japan, Vietnam to gain significantly

TOKYO -- Japan is expected to benefit greatly from the Trans-Pacific Partnership trade liberalization pact and boost its gross domestic product by an additional 2.7%, more than twice the average expansion of all 12 members by 2030, according to the World Bank's latest estimate.

     With the projected benefits including not only an increase in exports of goods but also an acceleration of market advances by retailers and other services companies into Southeast Asia, Japan needs to act quickly through an early effectuation of the accord in order to meet the projection.

     The TPP will not only prompt an expansion of trade in goods by lifting tariffs but also enable businesses to promote cross-border operations through deregulation. The 12 member states are entering the final stages of negotiations and could possibly sign the agreement in New Zealand on Feb. 4.

     The World Bank estimated the effects of the TPP in 2030 based on the member states' GDP and export value in 2014. While the Japanese government's estimate, released last December, included the effects of related domestic countermeasures such as reinforcement of the agricultural sector, the bank did not include them in its projection.

     The bank forecast that the TPP will raise the 12 members' GDP by an additional 1.1% on average. Vietnam will be the biggest beneficiary with a gain of 10% in GDP, resulting largely from an increase in textile exports to the U.S. and the removal of restrictions on foreign capital.

     The pact will also spur growth in Malaysia and Brunei, which are second and third to Vietnam with respective GDP increases of 8% and 5%.

     Japan ranks sixth among the 12 countries with GDP growth of 2.7%, which is worth an estimated 13 trillion yen ($108 billion).

     The benefits of the TPP for the U.S., Canada and Mexico will be limited as trade among the three has already been liberalized under the North American Free Trade Agreement, according to the World Bank, which forecasts respective additional gains of 0.4% and 1.2% in GDP for the U.S. and Canada.

     Exports from the 12 members are forecast to increase an average 12% in value.  Vietnam is expected to log the biggest gain of 30.1%, followed by Japan at 23.2%.

     The bank expects Japan to benefit significantly from the TPP as advances in deregulation in Southeast Asia will expand business opportunities for Japanese companies. Convenience store operators and banks will be allowed to make new market entries or expand operations in the region.

     The bank concluded that the removal or lowering of nontariff barriers will generate greater economic effects than the elimination of tariffs.

     While the removal of tariffs will contribute to some 15% of the bloc's projected GDP growth, the remaining 85% will come from measures such as eliminating limits on foreign capital, removing complicated customs procedures and standardizing product specifications.

     The Japanese government's estimate forecast that the TPP will raise Japan's GDP by 14 trillion yen thanks to combined effects of both. Although analysts criticized the estimate as excessive, it is almost the same as that of the World Bank.

     The World Bank, however, maintains that the TPP's real effects remain unclear. The key to the accord is whether it can show actual benefits through its early effectuation, said Junichi Sugawara, a senior research officer at Mizuho Research Institute.

Adverse effects on Thailand, South Korea

While the TPP will exert no major effects on most non-member states, Thailand and South Korea stand to lose out significantly by not being part of the accord, the World Bank said, forecasting that the two countries' GDP growth will be pushed down by 0.9% and 0.34%, respectively.

     South Korea already has a free trade agreement with the U.S. and thus is currently in a more favorable position than Japan in terms of automobile and other exports to the American market. But the bank claims it will lose that position when the TPP, more liberal than the U.S.-South Korea FTA, takes effect.

     Thailand, which hosts Honda Motor, Nissan Motor and other major automakers' manufacturing plants, will lose its competitive edge if Malaysia and Vietnam become more attractive to foreign manufacturers under the TPP, the bank added.

     Not being members and potentially missing out on the economic benefits of the agreement has apparently prompted a sense of crisis within South Korea and Thailand.

     On Oct. 6, 2015, the day after the broad agreement on the TPP was reached, the South Korean government announced the start of earnest preparations for joining it.

     While Thailand had maintained a guarded stance on the TPP, Deputy Prime Minister Somkid Jatusripitak said last November that the Thai government would positively study its participation.

     Countries such as Indonesia and the Philippines have also declared their intention to join the TPP.

     To further increase the membership of the TPP, the accord needs to take effect as soon as possible and allow its member states to see tangible benefits from taking part.

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