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International Trade, Trans-Pacific Partnership Agreement

TPP Country Profile: Malaysia and Brunei

Malaysia is a country with two land masses and a huge amount of biodiversity as well as plurality in cultures and ethnicities. In 1957, Malaysia gained its independence from the British and its economy has made gains ever since, with GDP growing steadily for more than 50 years. This unique country is one of the 12 partners in the Trans-Pacific Partnership, and has much to gain from working closely with Pacific Rim neighbors.

Malaysia is the United States’ 20th largest trading partner. Total trade between the two countries totaled $42 billion in 2012. The United States biggest exports to Malaysia are machinery, medical equipment, aircraft, and plastic while the top import the US receives from the country is machinery, along with rubber and palm oil.  Agricultural goods from Malaysia are what many people have come to expect from such a tropical climate: tropical oils, cocoa paste and cocoa butter, and rubber. The US in return exports soybeans, prepared foods, dairy, and fresh fruit. Tourism is also a huge money maker for the megadiverse country with visitors coming from all over to see endemic species and amazing natural sites – and spending money on local businesses while they are visiting.

Because of Malaysia’s culture, some of the hardest parts of negotiating entry into the TPP surrounded labor, the environment, intellectual property rights, and the prominence of State Owned Enterprises. These topics were set aside for further deliberation, thus allowing Malaysia to benefit from the TPP before tackling the big issues. The country has also promised to combat its human trafficking problem. It is projected that the TPP will allows Malaysia’s GDP to jump from $107 billion to $220 billion over the 2018-2027 time period.

The TPP will give Malaysia an economic boost, expanding the country’s reach in the Pacific and inviting in foreign investment. Malaysia will also be able to participate as an important link in the supply chain in the Pacific region, which will generate more business Malaysian firms that focus on export trade. Several TPP countries had never signed trade agreements with Malaysia before, including the US, Canada, and Mexico. These markets being easier to access will enable the country to make greater economic strides via trade in goods and services. For Malaysia, the TPP and economic prosperity go hand in hand.

Brunei Darussalam is the only nation fully located on the island of Borneo. It’s a Muslim country, surrounded on three sides by Malaysia – on the fourth side is the sea. The country only gained independence from the UK 32 years ago, and has been growing and industrializing at a rapid rate. Today it is one of the fifth wealthiest countries, thanks in part to large amount of natural resources. Brunei may be small, with a population around 408,000, but it is an important Trans-Pacific Partnership country. In fact, Brunei was one of the four founding countries of the TPP.

In 2012, Brunei exported about $559 million worth of US goods – this marked an increase of %1,389 from 2003. Yes, you read that right. Brunei’s main US goods were machinery and aircraft ($17 million), while the US imported things like organic chemicals ($7 million) and knit apparel ($3 million). There were no agricultural imports from the Brunei to the States in 2013. During that same time period, the US had a trade surplus with Brunei of about $451 million. The nation has the smallest GDP of all the TPP partners, estimated at $16.11 billion in 2013.

As a TPP partner, Brunei’s small businesses can expand into new markets without having to consider high tariffs. More importantly, Brunei will benefit by the lowered or terminated tariffs with TPP nations with which it already trades. About 64%, or $10 billion, of the country’s existing trade in 2014 was with TPP countries. Brunei was one of the countries that already had a rather liberal trade agenda, and had already eliminated many tariffs even before the TPP took effect – therefore, businesses in the country do not have to worry about cheaper goods flooding the market.

The TPP is not only great for Brunei’s trade in goods, it will also boost in-house innovation as well as foreign direct investment. Brunei’s entry into the TPP will allow foreign investors to feel at ease, knowing that the country is following 21st century standards when it comes to labor and the environment. Brunei will also gain a more diverse economy – and that is something which it truly needs, instead of depending solely on natural gas and petroleum to move the economy

The United States also values Brunei as a launch pad into ASEAN markets. But despite the nation’s value to the US, Brunei will still have to make changes in order to be part of the TPP. American representatives want assurances that Brunei will roll back recent conservative laws that have been put in place; these laws take harsh aim at gay rights as well as pregnancy outside of marriage. Whether or not the repressive laws will be addressed is yet to be seen, but negotiators on the US side wield plenty of power because Brunei’s GDP is the smallest of all TPP nations. Like its Southeast Asia TPP neighbors Vietnam and Malaysia, Brunei stands to gain much more from this huge trade agreement than it does to lose from social reform and modernization of culture.

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