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BERNAMA

BERNAMA

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): Trade in Goods - “An update on current progress"

• This chapter contains four sections: a) Definition and Scope; b) National Treatment and Market Access for Goods; c) Agriculture and d) Tariff-Rate Quota Administration. The ultimate outcome is to achieve a high level of trade liberalisation and market access among the CPTPP parties. 

Key salient points

• Each CPTPP parties shall commit to reduce or eliminate its customs duties on originating goods of other Parties according to Schedule in Annex 2-D (Tariff Commitments).

• For agriculture, Section C covers agricultural export subsidies, export credits, export credit guarantees or insurance programmes, agricultural export state trading enterprises, export restrictions or restriction, committee on agricultural trade, agricultural safeguards and trade of products of modern biotechnology.

• For tariff rate quota administration, Section D indicates that the parties shall publish all information such as size of quotas, eligibility requirements, or application procedures to the public.

• The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a new multilateral free trade agreement (FTA) between 11 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.

• The CPTPP was concluded on 23 January 2018 in Tokyo, Japan and signed on 8 March 2018 in Santiago, Chile. In 2020, CPTPP countries accounted around 6.6% of the worlds population (0.5 billion persons), 12.7% of global GDP (US$10.7 trillion), 14.9% of global trade (US$5.3 trillion), and 20.8% of global FDI flows (US$207.3 billion).

• It was an abridged version of the Trans-Pacific Partnership (TPP) Agreement (signed but not yet in force) which included the United States. The elected President Trump has withdrawn the US from the TPP Agreement while the remaining 11 countries remained in the trade block, which renamed as CPTPP.

• Currently, Malaysia is still on track to ratify the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). After ratifying and implementing CPTPP, it would expect to boost Malaysia’s GDP (additional 1% as indicated by World bank) and have positive effects on trade and income. As trade barriers reduce, trade is expected to increase leading to a greater specialisation of firms within participating countries. As firms specialise, capital and labour will be reallocated to the most competitive and productive activities in the economy leading to an overall change in the composition of economic output.

The Star

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南洋商报

• A year of recovery amid downside risks to the growth outlook. We concur with Bank Negara Malaysia’s assessment that Malaysia’s economic recovery remains on track in 2022, supported by continued global recovery, the full upliftment of containment measures and the reopening of international borders. 2022’s GDP growth estimate revised lower. Bank Negara Malaysia revises 2022’s GDP growth estimate lower to 5.3%-6.3% (mid-estimate at 5.8%) from the Treasury’s 5.5%-6.5% forecasted in October 2021. SERC’s estimate of 5.2% falls within the range.

• Stronger revival in domestic demand. The projected higher economic growth (5.3-6.3%) in 2022 is largely anchored by stronger domestic demand (estimated 6.7% in 2022 vs. 1.8% in 2021), especially private consumption growth (estimated 9.0% in 2022 vs. 1.9% in 2021) amid slowing exports (3.2% vs. 9.8% in 2021).SERC expects private consumption to increase by 6.5% in 2022. While we reckon that pent-up demand will support consumer spending, but the repairing of impaired households’ balance sheet and rebuilding of depleted savings as well as the pick-up in inflation will mean prudent discretionary spending. Higher inflation and cost of living concerns will crimp the households’ disposable income (purchasing power) and dampen consumer sentiments. In addition, the expected gradual improvement in the labour market condition (estimated unemployment rate at 4.0% in 2022 vs. 4.5% in 2021) and moderate increases in income would restrict spending.

• Headline and core inflation will move higher in 2022. Bank Negara Malaysia expects both headline inflation and core inflation to increase higher to 2.2%-3.2% and 2.0%-3.0% respectively in 2022 (+2.5% and 0.7% respectively in 2021).  Higher core inflation reflects the recovery in domestic demand.

• Policy rate adjustments will be gradual and measured. Bank Negara Malaysia indicates that the interest rate policy will be data dependent, and any adjustment in policy rate will be gradual and measured so as not to disrupt the recovery pace.

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