World Bank: US to see Smallest GDP Impact from TPP

World Bank: US to see Smallest GDP Impact from TPP

By Kaitlyn McAvoy in SpendMatters.com

Read the World Bank Report here.

The United States is expected to see the smallest impact on GDP from the Trans-Pacific Partnership among member countries, according to a new report. Vietnam and Malaysia will see the largest increase in GDP from the trade deal among the countries involved in it, with expected GDP rises of 10% and 8%, respectively, by 2030. For the U.S., however, the TPP will bring a 0.4% rise in GDP by 2030,according to the report, titled “Potential Macroeconomic Implications of the Trans-Pacific Partnership,” released by the World Bank.

Vietnam and Malaysia’s GDP TPP rises will mostly come from “lower tariffs and [non-tariff measures] in large export markets and at home and from stronger positions in regional supply chains through deeper integration,” the report said. Non-tariff measures, or NTMs, are factors that increase the complexity of trading, such as import licensing requirements, pre-shipment inspections and rules for custom valuations.

Countries like the U.S and Canada will experience less GDP growth from the trade deal because trade in those countries represents only a modest share of GDP, the report said. Also, trade barriers are already low in the U.S. and Canada for most traded commodities, the report added.

On average, GDP among all member countries will increase 1.1% thanks to the TPP, according to the report.

“The benefits are likely to materialize slowly but should accelerate towards the end of the projection period,” the report said. “The slow start results from the gradual implementation of the agreement and the lag required for benefits to materialize utilization rises.”

Vietnam, Japan and Malaysia will also be the top three countries to benefit from increases in exports as a result of the TPP, the report said. Vietnam will see a 30% increase in exports by 2030, Japan will experience a 25% increase and Malaysia will see a 20% increase in exports. The United States will experience a roughly 10% rise in exports and Canada about 7% jump, according to the report.

While the World Bank expects the impact of the TPP to be “negligible” for non-member countries’ exports, there are a number of East Asian countries not involved in the TPP that will see a decline in their exports. Thailand, for example, is expected to see a 0.2% drop in exports, the World Bank estimates. Kores will likely see a 1% drop in exports and the region of East Asia Pacific, which covers Cambodia, Myanmar, Timor-Leste and Laos, will experience a 3% drop.

The World Bank report pointed out its findings were consistent with other studies on the impacts of the TPP that find the deal will impact GDP on average between 0.8% and 1.8%. However, the report added that estimating the complete impact of such comprehensive trade agreements is “still very much a work in progress.”

“The TPP stands out among [free-trade agreements] for its size, diversity and rulemaking. Its ultimate implications, however, remain unclear,” the report concluded. “Much will depend on whether the TPP is quickly adopted and effectively implemented, and whether it triggers productive reforms in developing and developed countries. Broader systemic effects, in turn, will require expanding such reforms to global trade, whether through TPP enlargement, competitive effects on other trade agreements or new global rules.”