For Brunei, does the TPP make economic sense?

opinion July 31, 2013 00:00

By Arno Maierbrugger
The Brunei

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Brunei will again stand in the limelight when the next talks on the Trans-Pacific Partnership (TPP), the "trade accord of the 21st century" as US president Barack Obama puts it, will be held in Bandar Seri Begawan in late August, the 19th round of TPP neg

Brunei, one of the countries that joined negotiations with the US early on, will also welcome a delegation from Japan, which for the first time is joining the talks. Other countries involved are Australia, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The TPP is an ambitious project that wants to define a new trade axis across the Pacific and move away from the traditional trade streams between Europe and the US. It aims to extend to all members common trade agreements to reduce distortions in the market caused by overlapping tariff treatments and other trade regulations.
Harmonising rules of origin, which determine where a product originates for the purposes of applying duties – a complicated exercise in the era of frequent transhipment – is planned to reduce transactions costs. This move is especially beneficial in Southeast Asia, an important hub for global supply chains.
The TPP could liberalise trade even further for all signatories and improve on the trade relationships already established.
However, these advantages must be weighed against some negative aspects or at least unanswered questions that have been repeatedly addressed by the public and advocacy groups, as well as politicians. They touch on unified labour rights; labour standards and their enforcement; the nature of investment provisions for corporations in the light of environmental issues; consumer and other public interest policies; future methods of public procurement under the TPP to ensure that taxpayers’ money is kept circulating in local economies; access to affordable, generic medicines; as well as on compensation for agricultural industries and farmers (a huge issue in the negotiations with Japan, for example).
What about Brunei? How will Brunei benefit from the TPP?
When we look at the facts at first sight, Brunei exports mainly oil and petroleum products, which account for more than 95 per cent of its total exports. Almost half of this goes to Japan, and other sizeable parts to South Korea and Australia. Brunei is not a source of oil for the US, as it does not import any oil or related products from Brunei. Therefore, TPP membership for Brunei, at present, only makes economic sense when Japan joins the group.
In terms of open access to TPP markets for Brunei companies other than oil businesses, small and medium enterprises might especially find it convenient in the future to be able to venture into other countries with no trade barriers or other obstacles.
However, the current non-oil trade of Brunei is so low that it will be hard to measure a positive effect of TPP membership in the mid-term.