TPPA likely to be dumped: Economists

The Sun (Malaysia) - - SPEAK UP -

PE­TAL­ING JAYA: Don­ald Trump’s pres­i­dency is most likely to lead to the demise of the much-de­bated Tran­sPa­cific Part­ner­ship Agree­ment (TPPA), a pledge made by the US pres­i­dent-elect dur­ing his cam­paign trail, economists said.

Trump, who will as­sume of­fice on Jan 20, 2017, has said he will use all means avail­able to get a “bet­ter deal” for the US from its trad­ing part­ners, and this in­cluded op­pos­ing the TPPA.

Al­lianceDBS Re­search economist Manokaran Mot­tain said the TPPA may not ma­te­ri­alise due to Trump’s strong op­po­si­tion to the trade pact.

With­out the par­tic­i­pa­tion of the US, the TPPA will fall through, as it ac­counts for 20% of global out­put.

Twelve coun­tries – Aus­tralia, Brunei, Canada, Chile, Ja­pan, Mexico, New Zealand, Peru, Sin­ga­pore, the US, Viet­nam and Malaysia – con­cluded the TPPA ne­go­ti­a­tions in At­lanta on Oct 5 2015 and signed the deal in Auck­land on Feb 4 this year. Malaysia is com­mit­ted to com­plet­ing the rat­i­fi­ca­tion process of the trade pact by 2018 and has iden­ti­fied 18 laws that need to be amended.

Trump’s eco­nomic pro­pos­als fall into four broad cat­e­gories: trade and im­mi­gra­tion, tax re­form, spend­ing and reg­u­la­tory change.

No­mura said while these pro­pos­als at face value could af­fect the US econ­omy sig­nif­i­cantly, ex­actly how and to what de­gree they are im­ple­mented is an open ques­tion.

“That un­cer­tainty stems from sev­eral fac­tors, in­clud­ing the lack of speci­ficity that has been pro­vided, the lack of ex­pe­ri­ence Trump has as a pol­i­cy­maker, who will serve in Trump’s ad­min­is­tra­tion and the ex­tent to which Congress (part of the checks and bal­ances in the US gov­ern­ment) al­lows these poli­cies to be en­acted,” it noted.

No­mura said Trump has stated that he will be­gin de­por­ta­tion of il­le­gal im­mi­grants and es­tab­lish strong pro­tec­tion­ist trade poli­cies in the first days of his pres­i­dency.

“There­fore, the Trump vic­tory will likely hurt the econ­omy before he even en­ters the White House, as busi­nesses and house­holds will likely de­lay or re­duce spend­ing in the face of high un­cer­tainty,” it added.

No­mura said a Trump ad­min­is­tra­tion in the first year will boost eco­nomic growth with an ex­pan­sion­ary fis­cal pol­icy, pass­ing in­di­vid­ual and cor­po­rate tax cuts and boost­ing in­fra­struc­ture spend­ing.

Even though a Trump pres­i­dency may af­fect trade be­tween Malaysia and the US, Manokaran is of the view that it will not im­pact Malaysia’s gross do­mes­tic prod­uct sig­nif­i­cantly, with at least 4% growth in 2017. “If the US is not in the pic­ture, we still have China to help our econ­omy,” he said.

In 2015, North and South Amer­ica ac­counted for 16.4% of to­tal for­eign di­rect in­vest­ment in Malaysia.

Economists also be­lieve the US Fed­eral Re­serve will stop short of rais­ing in­ter­est ratse in De­cem­ber given the un­cer­tainty in the mar­kets in the wake of Trump’s win.

“Chances of rais­ing in­ter­est rate are get­ting slim­mer. It will prob­a­bly be de­layed to next year,” Manokaran said. - by Lee Weng Khuen

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.