China, Korea and Taiwan likely to be immune to TPP

16 Apr '15

3 min read

The impact of the Trans-Pacific Partnership (TPP) agreement on China and non-TPP major Asian manufacturers South Korea and Taiwan will be minimal. However, other non-TPP Asian nations (particularly textile manufacturers) and small domestic producers in the TPP countries are likely to lose out significantly, according to BMI Research, a leading, independent provider of proprietary data, analysis, ratings, rankings and forecasts.

The TPP is a proposed regional regulatory and investment treaty. Opponents of the TPP have criticised it as a secretive, multinational trade agreement that threatens to extend restrictive intellectual property (IP) laws across the globe and rewrite international rules on its enforcement.

In a report, BMI says that while countries are expected to reap broad-based gains, domestic small and medium enterprises (SMEs) are more likely to lose out as they face increased competition and lack the resources to fully utilise the TPP provisions. Other Asian countries that have been excluded from the TPP will also face increased competition as members gain preferential access to key export markets.

Despite general opinion that China stands to lose the most when the TPP is signed, its losses from its exclusion will be largely economic and it will not be a significant blow to the region's largest economy, says BMI. It is possible that China will experience some trade diversion on a small scale as it is a net exporter to TPP countries (accounting for approximately 35 per cent of total Chinese exports).

The report says the impact of the TPP on South Korea is also likely to be minimal and its relationship with its largest trade partner, China, should be unaffected. As Seoul has trade agreements with TPP participants the US, Vietnam, Malaysia and other ASEAN states, the country is unlikely to experience a significant degree of trade diversion or a marked increase in transportation costs as goods cross borders as part of Asia’s Global Value Chains (GVCs).

As with South Korea, BMI believes the impact of the TPP on Taiwan will also be fairly minimal. Direct Taiwanese exports to the US are unlikely to face additional competition as a result of the TPP. Most of Taiwan’s trade with the US consists of electronics and machinery that have low tariff rates due to WTO agreements. With tariff rates already so low, border issues (such as tariffs and customs regulations) are unlikely to erode the competitiveness of Taiwanese products in the US.

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