After nearly a decade of talks, the United States and eleven other negotiating partners announced on October 5, 2015 the conclusion of the Trans-Pacific Partnership (TPP) trade agreement, marking an important milestone toward the fulfillment of the Obama Administration’s economic policy in the Asia-Pacific region and overall trade strategy.
The twelve TPP countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – represent over half of global output and 40 percent of world trade. The agreement, therefore, will not only have far-reaching economic impacts throughout the region in terms of tariff reduction and business-enabling rules, but also aim to address non-tariff barriers through novel, modernized, and high standards for trade pacts going forward.
TPP’s Greater Significance
TPP’s influence is likely to be felt in the ongoing negotiations between the United States and Europe toward a Trans-Atlantic Trade and Investment Partnership (TTIP). TPP also serves to reinforce and upgrade free trade agreements (FTAs) the United States already has with six of the TPP partners, and to open markets for the first time with the other five, including countries such as Japan and Vietnam where the trading relationship had often been hindered by conflict.
The high standards and level of commitments set forth in TPP may also assist the United States Trade Representative’s (USTR’s) market-opening efforts when dealing with countries that do not have bilateral FTAs with the United States, such as China and India. Negotiators can, for example, point to TPP as the benchmark, or minimum expectation, of what other countries must meet to benefit from deeper trade with the U.S. In this way, TPP could give the U.S. greater leverage to persuade other countries to play by its rules.
TPP’s Nuts and Bolts
TPP lowers or eliminates tariffs in partner countries, granting new and enhanced market access for U.S. farmers, ranchers, manufacturers and service providers. Tariff reductions also mean that some industries will face increased competition at home, even if overall tariff gains off-set losses.
The agreement also addresses non-tariff barriers in numerous areas that have prevented or restricted U.S. goods from gaining access to partner country markets. These include technical standards and regulations that may have unnecessarily burdened or restricted trade. In the vast majority of these instances, TPP requires the other partner countries to adopt U.S.-compatible procedures or processes, for example by implementing “notice-and-comment” rulemakings and requiring decisions to be based on risk and science.
More specifically, TPP covers over two dozen substantive areas, which include the more “traditional” FTA chapters such as: Market Access (addressing over 18,000 tariff line items); Rules of Origin (determining product eligibility for preferential treatment); Textiles and Apparel; Trade in Services; Sanitary and Phytosanitary Measures; Technical Barriers to Trade; Intellectual Property; Labor; Environment; Government Procurement and Investment.
TPP also addresses novel areas, such as: E-Commerce; Financial Services, Telecommunications; Competition Policy (including consumer protection); Regulatory Coherence; Transparency; Anti-Corruption (good governance); and Trade Facilitation. Through the inclusion of these new areas, TPP invokes a more comprehensive and expansive view of trade in a modern world.
The full text of the agreement, including tariff schedules, issue- and country-specific side letters and separate bilateral outcomes (i.e., U.S.-Japan agreements on autos and agriculture), is available on USTR’s website.
The Road to Congressional Enactment
Although there is a deal in place, the road ahead remains uncertain. The Administration released the text of the agreement, annexes, and side letters on November 5, 2015, triggering a 90-day Congressional review period pursuant to the Trade Promotion Authority bill passed by Congress earlier this year, and making February 3, 2016 the earliest President Obama could sign TPP. The U.S. International Trade Commission (ITC) would then have 105 days, or until May 2016, to complete an analysis of the agreement’s impact on the U.S. economy. Each TPP country must also ratify the deal, and this includes a vote by Congress in the United States.
While the Administration intends to send implementing language to Congress to pass the agreement before the Presidential election, members of Congress are assessing whether TPP is a good deal for their constituents. Some have already expressed concerns about certain provisions (such as protection for biologics and the adequacy of addressing currency manipulation) that may push a vote beyond 2016 – and up against USTR Michael Froman’s position that the United States will not seek to renegotiate any part of the deal.
Actions to Take Now – Get Up To Speed on TPP
To prepare for the ensuing debate on TPP enactment, industries and individual companies with interests, plans, and aspirations related to TPP countries will need to undertake their own assessment of the deal. While the Administration has presented the agreement as a means of opening key markets for U.S.-made products, not every industry may benefit, nor all issues be resolved to the satisfaction of relevant stakeholders.
The breadth and scope of TPP make it nearly impossible to provide a detailed summary of how the agreement may affect every unique interest and industry. Issues may be more fact and product-specific for some, but cross-cutting for others. Stakeholders who want to assess the impact and/or relevance of the agreement should carefully review the final text, and may also wish to consult with trade and other relevant subject-matter experts.
Even assuming TPP wins Congressional approval, complex legal and regulatory implementation in the United States and partner countries means that significant adjustments and careful monitoring will be required to stay abreast of, and respond to, the changing landscape. Moreover, public scrutiny of TPP could expose technical and administrative issues or reveal conflicting provisions with other existing agreements, requiring administrative rulemakings or clarification through consultative mechanisms established in the TPP framework.