The Multiplicative Effects of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

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 The elected President Trump has withdrawn the US from the TPP Agreement while the remaining 11 countries remained in the trade block, which renamed as CPTPP.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.