Thursday, 28 January 2016

TPP the road to bigger export marts


Trans-Pacific Partnership Agreement, or TPPA, is currently being debated in Parliament and all parties are paying particular interest on the eventual decision at end of the Parliamentary process on the agreement, in particularly the business community.
A lot has been said about the TPPA in most communication media on the advantages and the disadvantages in Malaysia joining the trade pack.
Undeniably there were parties whom have express neutral opinions but in general opinions were expressed, albeit by individual or by group, were centred mainly on their respective areas of interest, business or otherwise.
On a similar accord, there are splits in opinions amongst populace in other member nations whose governments are in favour of joining the TPPA.
The US administration and the Canadian government too are not short of opposing criticisms by those who perceived TTPA may affect their business unfavourably.
In 2014, the USA produced some total of 11.8 million passenger vehicles while Japan produced some 9.9 million. In the same year, the total industry volume (TIV), or total sales, in the USA was 16.6 million and Japan's TIV was 4.7 million, while Malaysia’s TIV was a mere 0.66 million units.
The above statistics portrait the trade imbalance that exist between the two biggest automotive producing nations and most opinions amongst industry players of both countries are centred on neutralising this automotive trade imbalance.
Although it can argued that great numbers of the Japanese total production volume were manufactured in the USA as their direct investment, the same cannot be said of USA producing their vehicles in Japan.
The agenda of the TPPA is therefore to create a "level playing field" so as provide wider opportunities for TPPA member nations' automakers.
US automakers have in pass attempted to penetrate the Japanese market but to no avail not due to trade barriers, which was non, but because Japanese customers prefers small and more fuel efficient vehicles. Perhaps Japanese patriotism is also at play where customers preference were skewed towards Japanese made cars.
Another aspect of discontentment amongst US automakers is the existence of the “non-tariff barriers”, in particular the imposition of arbitrary standards on US cars that keep them out of some major markets.
Several countries in the TPPA negotiation have in the past, using currency manipulation to gain an unfair trade advantage. Automakers are in contention that TPPA must address the potential to use currency manipulation to drive up the costs of cars.
Another point of contention, especially expressed by the Canadian automakers, is the amount of local content in vehicles produced by a TPPA member country to qualify for import tariff-free has been lowered to 45 per cent.
This may imply that automakers can incorporate parts that are sourced from low-cost non TPPA member country, such as Thailand and China, in their vehicles and still export them tariff-free into Canada whose annual TIV ranges about 2.3 million.
The relevance of the above discussion is to portrait the level of arguments amongst the automakers in USA, Japan and Canada who see the formation of TPPA as a strategic means of expanding their business both domestically and amongst member countries.
Their arguments are insistence on using TPPA as a platform to remove trade barriers and to infiltrate the bigger markets that exist in the member countries, outweighing the fear of losing their respective home market.
Being a country having a small TIV, Malaysian automakers and vendors should see in the same light trying to explore the advantage of a bigger export market TTPA has to offer, especially the local parts and components manufacturers whom are desperately require bigger order volume to prosper.

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