With the TPP Agreement Dead, Malaysian Minister Calls RCEP the “Next Best Option”

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With the TPP Agreement Dead, Malaysian Minister Calls RCEP the “Next Best Option”

By Manik Mehta, Apparel Contributing Writer - 09/15/2017

Although the U.S. withdrawal from the Trans-Pacific Partnership (TPP) has sounded the death knell of the deal involving 12 member countries – in addition to the United States, the other 11 member countries that had signed the TPP deal are Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – some have still not given up hope that the TPP would be revived in the future when President Trump might re-think the deal’s worth in terms of global trade.

The TPP’s far-reaching impact becomes obvious when one considers that it is a group of countries whose combined GDP represents roughly 40 percent of the global GDP and more than a third of world trade.

Malaysia, which was disappointed by the U.S. withdrawal from the TPP, has come to terms with what many Asian dignitaries describe as the “ground realities.”

However, Malaysia’s Minister of International Trade and Industry Mustapa Mohamed said that although the TPP had been off the table, Malaysia was “in no hurry to bury it.”

President Trump’s “America First” policy, which also aims at getting U.S. companies back to American soil, has many foreign companies worried over the possible impact of this policy on global trade and their own exports to the United States.

“President Trump’s policy [of recalling U.S. companies to the United States] cannot be fully implemented. The main reason is that U.S. companies are well entrenched here [in Malaysia] and are a firm part of the supply chain,” Mustapa said.

With the TPP’s topicality on the decline, at least for now China has been pushing its own deal called the Regional Comprehensive Economic Partnership (RCEP) which involves 16 countries, namely the 10 ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam), and its six dialogue partners Japan, India, China, New Zealand, Australia and South Korea.

In 2016, the seven top leading investing nations in Malaysia were the United States, the Netherlands, China, Japan, Singapore, South Korea and the United Kingdom. These seven countries, according to the most recent figures compiled by the Malaysia Investment Development Authority (MID), together accounted for some 55.8 percent of the total foreign investments approved in Malaysia’s manufacturing, services and primary sectors.

The RCEP, many experts say, would provide China an unhindered access for its consumer goods industry, particularly textiles and apparel, to the markets of the other member states. China’s textile and apparel exports have slowed down and had been declining. The RCEP deal could prop up China’s heavily export-dependent textile and apparel industry, and open up new avenues of business opportunities for China’s textile industry through the borderless cooperation between partners.

“The RCEP is probably the second-best option as it will help fill the vacuum [created by TPP’s non-materialization] to a certain extent,” he said.

“Our domestic market need not fear China’s exports … RCEP will not affect us because we already have a FTA (free trade agreement) with China,” Mustapa replied when asked if RCEP would not primarily serve China’s interest and allow it to dump its products on the markets of the other member states.

Mustapa also pointed out that RCEP had an embedded mechanism aimed at checking dumping of products on other markets. “Besides, RCEP will also facilitate inflow of investments from China into Malaysia,” he said.

But Mustapa also underscored the importance of the United States as one of Malaysia’s leading trading partners, saying that TPP’s major attraction had been the promise it held out for Malaysia to tap the lucrative markets of North America.  

“The U.S. is the third-largest trading partner of Malaysia. Two-way trade between Malaysia and the U.S. amounted to nearly $50 billion in 2016,” the minister said. According to the U.S. Commerce Department, the United States runs an annual $22.9 billion trade deficit with Malaysia.

While Malaysia’s traditional textile exports may have been eclipsed by other low-cost supplying nations, particularly Bangladesh, Vietnam, Laos and Cambodia, it is in the arena of technical textiles that Malaysia can flex its muscles.

S. Siva, the Frankfurt-based director of the Malaysia Investment Development Authority (MIDA), which is charged with promoting foreign investments to Malaysia, said that Malaysia had made “huge progress” in using high technology in the textile sector. He pointed out that Malaysian companies specializing in technology used in production of technical textiles and nonwovens were well established in this field. He cited the example of the company Apparel Alliance Sdn. Bhd. of Kluang, Johor, which provides information technology as well as automation solutions for garment manufacturers.

Jordan Tang, the director of Apparel Alliance, feels that the 3D digitization was a “highly coveted” technology which strengthened the company’s operations. “We focus on customized solutions for our customers worldwide,” Tang said, adding that the efficiency achieved through 3D digitization enabled faster deliveries and time savings during material handling. Research and development contributed to further upgrading of digitization, although they did not offer an  alternative to the labor-intensive aspects of garment production, Tang maintained.

Malaysia is trying to get a slice of the global technical textile pie. According to a study commissioned by Messe Frankfurt, which organizes the Technical Textiles and Texprocess shows, the global trade in technical textiles amounts to a whopping $160 billion annually, with this volume poised to grow to some $193.16 billion by the year 2022.

 

Manik Mehta is a New York-based Apparel contributing writer.

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