Vietnam, Malaysia stand in the way of Japan’s Trans-Pacific Partnership dream

TOSHIFUMI KITAMURA / AFP / Getty Images

Japanese Prime Minister Shinzo Abe next to a map of the original Trans-Pacific Partnership participating countries.

However, internal divisions are a key obstacle as some participants look to rework existing provisions in light of Washington’s absence.

“On the one hand, you have Japan, Australia and New Zealand who would like to push ahead with the agreement as is, just with some only technical modifications to allow it to come into force,” Andrew Staples, Southeast Asia director at Economist Corporate Network, told CNBC on Friday. “But countries such as Malaysia and Vietnam, on the other hand, are questioning whether a deal makes sense without getting access to the U.S. market.”

Before Washington pulled out from the TPP, Kuala Lumpur and Hanoi were seen as the pact’s top beneficiaries amid expected rises in foreign direct investment inflows and exports. Vietnam’s garment industry and Malaysian electronics, in particular, were seen strengthening from the removal of tariffs in the U.S. and other major importers.

To advance in the U.S. market, both Southeast Asian governments originally agreed to sweeping changes in their business environments, particularly regarding transparency, government movement of data as well as environmental and labor standards, Staples explained.

But now that broadened U.S. access is off the table, both nations are re-considering their commitments, he continued. “Malaysia, in particular, has said they would like to re-open negotiations on contentious issues, such as drug development data.”