Reassessing Malaysia’s Export Opportunities in the TPP

Abstract

The main economic motivation for forging bilateral, regional and multilateral agreements for Malaysia is to enhance the export opportunities for its firms as it is relatively dependent on trade for supporting growth. There is an extensive literature on the Trans-Pacific Partnership (TPP) since negotiations were started five years ago and this literature continues to grow after the agreement was signed in February 2016. The literature identifies some overall gains for Malaysia and some sectoral gains, especially in textiles and apparel. The objective of this paper is to re-assess these export opportunities, using a comparative country perspective since the TPP has 12 founding members. It uses three main trade indicators, namely differences in exports shares, extensive and intensive margins to compare Malaysia with Vietnam, Malaysia’s main competitor for the US market as Vietnam, like Malaysia, also does not have an existing Free Trade Agreement (FTA) with the US. All three indicators show that Malaysia is rapidly losing grounds against Vietnam in textile and apparel but maintains an advantage in the information technology and communication (ICT) sector. The paper also discusses the implications of these findings on the export opportunities for Malaysia’s firms under tariff liberalization in the TPP and closes with some policy suggestions.