IN a webinar held by the Institute for Democracy and Economic Affairs (IDEAS) recently concerning a progress update on the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the lead negotiator from the Ministry of International Trade and Industry (Miti) shared that their target for tabling the CPTPP to the cabinet is end-2021. The CPTPP could be a major catalyst to rejuvenating global trade and economies following the Covid-19 pandemic. Unlike other free trade agreements (FTAs) that solely focus on tariffs, the CPTPP extends its coverage to non-tariff measures, movement between member countries and many other provisions that further ease trade between members.
In such global conditions where many countries are hesitant to open their borders due to discrepancies of Covid-19 SOP, the CPTPP with its blanket coverage of quality standards could be a mitigating measure. With its current 11 members equivalent to 13.5% of total global trade, the CPTPP also further integrates the markets of its members with reduced trade barriers.
Market integration is key, because integrated markets ease production for the global value chains (GVC) that are vital to the manufacturing sectors of each member’s economy – a golden opportunity for recovery. IDEAS calculates that ratifying the CPTPP would boost our GDP by over RM14 billion (a 1% increase) and create 140,000 new jobs. Post-pandemic, this is a much-needed low-hanging fruit that Malaysia can immediately benefit from.
New market opportunities await
In fact, as more countries join the CPTPP, the amount of markets, trade networks and supply chains will increase. What started out as a more exclusive club among select countries is rapidly becoming more inclusive as more have applied for accession. With the United Kingdom, China, South Korea and Taiwan formally applying for accession, the potential gains increase even further.
While Malaysia has welcomed China’s bid to join the CPTPP, stating that it is confident that bilateral trade and investment ties between the two would grow, only member countries are able to make decisions over new applicants. Not having ratified means Malaysia’s opinion does not carry much weight. Yet, member countries such as Australia have signalled that China must convince its members of its track record of complying with existing trade agreements, and hence fully implement its commitments under the CPTPP’s high standards.
As well, the benefits to Malaysia for Taiwan joining the fray are also very apparent given the existing GVC integration between both economies. Malaysia and Taiwan already share a strong trade and investment relationship – Taiwan is Malaysia’s fifth-largest trading partner – and deep underlying industrial collaboration. Taiwan’s participation in the CPTPP would further liberalise trade in electronics, machinery and chemicals, in turn encouraging Malaysia’s efforts to upgrade and innovate in its Fourth Industrial Revolution (4IR) adoption. IDEAS’ research also found that Taiwan’s membership of the CPTPP would further increase Malaysia’s GDP by over RM2 billion and create 20,000 additional jobs. Taiwan has revised several domestic laws and regulations to meet the agreement’s high standards over the past five years, which would make accession smoother.