This week negotiators in the US announced, after eight years of negotiations, an historic agreement had been reached as to the terms of the Trans Pacific Partnership.
WHAT IS IT?
The TPP is a web of agreements between the involved countries designed to boost trade and economic growth. It spans everything from jeans to lobsters to intellectual property.The TPP is designed to create major changes in the economies of the 12 signatories and will be the world’s largest FTA covering 40% of global GDP.
WHO IS INVOLVED?
The final agreement was signed by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. The countries involved make up 40 per cent of the world economy.
The agreement began as almost casual negotiations between New Zealand, Brunei, Singapore and Chile but rapidly expanded.
While one of the Australia’s largest trading partners, China, is not involved in the deal, several other countries have indicated they are hoping to be covered in the new system of trade rules. These include South Korea, the Philippines, Taiwan and Colombia.
The TPP addresses a variety of trade topics including trade in goods, services, investment, Government procurement, intellectual property, environmental laws, labour laws and intellectual property. The details of the trade outcomes are yet to be released. However, the following is significant for Australian trade:
- This will be Australia’s first significant FTA with Canada, Mexico and Peru (but this only represents less than 2% of Australia’s trade).
- Agricultural access to the US and Japan is likely to be improved beyond our existing FTAs.
- Country-of-Origin labelling will be based on TPP regional content. As such, goods can include content from multiple TPP partners and still qualify for preferential treatment. This could be important for goods of US or Japanese origin that undergo some further process (such as repacking) in Singapore or Malaysia. Certificate of origin details are yet to be released. However, it is unlikely formal certificates of origin will be required. Both the US and NZ do not traditionally require such documents and other TPP countries have shown a preference for self-certification.
- The TPP is drafted in a way to allow inclusion of other countries in the future. It is not unrealistic to foresee a future where the TPP will be the primary trade agreement governing Asia Pacific trade.
- In recent presentations, DFAT suggested that change in tariff classification will be the primary rule of origin for goods that are not wholly originating. It also includes timelines to cut tariffs and financial levies on all goods, but it is unlikely to include the complete abolition of many tariffs.
- The TPP also provides for a range of agreements to make cross-border investing easier and therefore more frequent by reducing regulatory hurdles.
- The agreement includes commitments to help small- and medium-sized businesses understand the agreement, take advantage of its opportunities, and bring their unique challenges to the attention of the TPP governments.
- A chapter entitled “Trade Remedies” includes a series of agreements designed to clarify key details in exporting and importing a wide range of products.
Usually it takes 9-12 months from the conclusion of negotiations to the implementation of an FTA. However, each country will need to pass and ratify associated legislation for the partnership to begin. Given this includes the US parliamentary process in an election year; we expect 2017 is a more realistic commencement date.
With the implementation time-frame uncertain and few details on specific outcome, the best advice is for parties to stay informed and keep the TPP in mind when making long term strategic trade decisions.
Read the Prime Minister’s media release here