WASHINGTON – While the World Bank’s analysis on the macroeconomic impact of the 12-nation Trans-Pacific Partnership deal concluded that Vietnam would be the biggest winner in percentage gains in gross domestic product and exports, trade experts and fashion industry officials said there were positives for the U.S. as well.
Vietnam is expected to take some apparel, textile and footwear manufacturing share away from non-TPP countries and developing Asian nations such as Bangladesh and Cambodia, the World Bank said.
The organization’s flagship report on “Global Economic Prospects” devoted a chapter to the highly anticipated TPP agreement which, if enacted, would encompass 40 percent of the world’s GDP and aims to eliminate import duties, strengthen labor and environmental provisions, ease the flow of cross-border trade and bolster intellectual property protections.
Trade ministers reached a deal in October on TPP, which includes the U.S., Australia, Japan, Mexico, Canada, Vietnam, Malaysia, Peru, Singapore, Chile, Brunei and New Zealand. The governments must all sign the deal, which is expected in early February, and then send it to their legislatures for approval.
The Obama administration has gone on a full court press to garner support in Congress for TPP, arguing it will lower some 18,000 tariffs on U.S. exports and boost the economy and job growth in the U.S.
The World Bank surmised that, in GDP gains, Vietnam would outpace all other countries, with expected growth of 10 percent by 2030. Malaysia followed closely behind with an expected 8 percent increase in GDP by 2030.
“Both countries would benefit 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 World Bank said.
The U.S. ranked the lowest among the 12 TPP countries in percentage GDP gains, with estimated growth of under 1 percent by 2030, according to the report. But experts said in absolute dollar terms that kind of growth in the U.S. would still be significant, given the size of the economy.
Vietnam would also benefit the most by TPP in export percentage growth over the next 15 years, followed by Japan, Malaysia, New Zealand, Peru and the U.S., according to the World Bank.
Overall, TPP could raise GDP in the partner countries by an average of 1.1 percent and lift their trade by a combined 11 percent by 2030, the report said.
“This would be an important counterweight to the trade slowdown under way since 2011,” the report said. “At current 2011-2014 trends, member countries’ trade would fall 25 percent below pre-crisis trend by 2030.”
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, which is slated to release its own economic impact analysis of TPP in the coming days, said, “The takeaway for the U.S. is nothing but positive in this report.”
Hufbauer said while Vietnam and Malaysia are expected to see the biggest growth in percentages of GDP, it is because their economies are much smaller scale than those of the U.S. and Japan.
“The absolute numbers for the U.S. will be quite large, but it will be a small positive over a period of time,” Hufbauer said.
He said the biggest gains in TPP for the U.S. in new trade will be with Japan, Vietnam and Malaysia, three countries with which the U.S. does not currently have bilateral trade deals.
Julia Hughes, president at the U.S. Fashion Industry Association, said, “Vietnam is still considered a developing country and has the most to gain by being a part of the TPP with major developed countries in the world. They are going to have a free trade agreement with the U.S., Japan, Canada and Australia. If you look at the developed world, this is one of the first agreements that brings together the most developed countries and developing countries, so it’s not surprising that you see the fastest and largest bump up is for Vietnam and Malaysia is next.
“For both of them, they haven’t had the same access to developed economies, whereas if you are talking Mexico and Peru, we already have integrated economies [and free trade deals],” Hughes said. “It makes sense that the new Asian suppliers are likely to see the biggest positive impact.”
The U.S. fashion industry has a big stake in the agreement. The U.S. imports $22 billion in apparel, textiles and footwear from the TPP countries and exports around $14.25 billion. Vietnam is the second-largest apparel supplier to the U.S. after China and a big sourcing hub for companies.
TPP, if fully implemented, is expected to impact apparel sourcing strategies and Vietnam has long been considered the biggest beneficiary. The World Bank report briefly alluded to how TPP could impact non-TPP apparel producing countries such as Bangladesh and Cambodia.
“These countries with strong comparative advantage in sectors such as apparel, textiles and footwear could face greater competition by Vietnam in TPP markets,” the World Bank said.
“Vietnam would presumably take apparel and textile trade from other countries, particularly from Bangladesh,” Hufbauer said. “Vietnam will crowd in on its space because it is very efficient in producing apparel and wages are quite low as they are in Bangladesh.”
Stephen Lamar, executive vice president at the American Apparel & Footwear Association, said: “The prospect of increased trade between the U.S. and Vietnam ultimately benefits both the U.S. and Vietnamese economies. Whether other countries will lose market share is unclear because TPP apparel duty reductions are largely phased in over a long period of time, and those duty reductions are accessible only for garments that meet strict rule of origin requirements.”
“Another factor for consideration is the associated labor provisions which could further delay apparel duty reductions years into the agreement,” Lamar added.
Hughes said, “I’m not sure I agree as much about the concern in the apparel sector. They say they raise concerns for Bangladesh, Laos, Cambodia and Nepal. I would differentiate among those that Bangladesh remains one of the world’s largest apparel suppliers and I don’t think there will be a huge impact on Bangladesh in the apparel sector.”