The Trans-Pacific Partnership (TPP) should be expanded to new parties beyond the current 12 signatories when possible, which will multiply the benefits of the trade agreement, said the American Insurance Association (AIA). The TPP will create more economic growth in all of its markets, which in turn will generate more demand for insurance. For example, the World Bank predicts that the TPP alone – independent of other economic growth – will lead to 10% GDP gains in Vietnam and 8% GDP growth in Malaysia over the next 15 years. All of the businesses and middle class expansion behind that growth will need insurance.
The current parties to the TPP, agreement on which was reached last October, are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam.
The low insurance penetration rates and relatively high growth rates of many TPP countries demonstrate that there is enormous potential for US insurers in those countries, Mr Steve Simchak, Director, AIA International Affairs said in his testimony to the US International Trade Commission last month.
The US does not have existing free trade agreements with Malaysia, Brunei, New Zealand, Vietnam and Japan. Therefore, the most potential for US insurers comes from those markets. In those markets where the US has existing agreements, the TPP will create enhanced trade liberalisation through improvements on previous commitments and the introduction of new commitments. Such new commitments include requiring all state-owned enterprises (SOEs) to act in accordance with commercial considerations, meet strict transparency requirements, and other commitments that will create a more level-playing field between private enterprises and SOEs.
Many countries are keen to join TPP
Already, the TPP is demonstrating that it has the potential to set the rules for global commerce. Several countries that are not currently parties of the TPP have indicated that they intend to join the agreement, Mr Simchak said.
For example, Indonesian President Joko Widodo said recently that “Indonesia is an open economy. And with the largest population in Southeast Asia, we are the largest economy in Southeast Asia, and Indonesia intends to join the TPP.” South Korea, Taiwan, Thailand, the Philippines, and Costa Rica have also indicated that they are interested in joining the TPP.
However, newcomers to the TPP must be held to the highest standards, AIA said.
“I also note that there are some limited expressions of interest in the TPP from China. Assuming that no country will be permitted to join the TPP unless they accept the highest standard commitments, the inclusion of China in the TPP would obviously increase its economic importance immensely,” Mr Simchak added.