Trade in Goods
The TPP Parties have agreed to eliminate and reduce tariffs on industrial goods as well as eliminate or reduce tariffs on agricultural goods. It is understood that tariffs on many products will be phased out immediately, and those on more sensitive products over longer and varying periods. The specific tariff cuts are included in relevant schedules to the TPP. The TPP Parties have also agreed to publish all information in relation to tariffs.
Once available, it will be interesting to consider which products remain subject to tariffs and the phase-out period for such goods. For example, in respect of labour-intensive products such as textiles, apparel and footwear, there were ongoing debates regarding appropriate tariff levels as between the developed countries and some of the developing countries, such as Vietnam. The trade in agricultural products was an area of particular sensitivity. While the TPP has led to increased opportunities for agricultural trade for the region, restrictive policies will remain in place in certain agricultural sectors. Click here for our discussion on agricultural developments.
Current average Most Favoured Nation (MFN) tariff levels for TPP countries range from 0.2% (Singapore) to 9.5% (Vietnam)
As expected, the TPP has resulted in initiatives to increase efficiencies and cooperation in respect of trade facilitation. Common rules of origin (see Rules of Origin below) are an important development.
The parties have agreed to certain rules designed to improve customs, procedure, transparency and the integrity of customs administration. Requirements include the publishing of laws and regulations, rules providing for release of goods without unnecessary delay and the availability of advance rulings on customs valuation and other matters. As foreshadowed in various public statements, the TPP also includes rules which will allow for expedited customs procedures for express shipments.
The TPP also includes provisions regarding the exchange of customs information as between parties to assist in countering, smuggling and duty evasion.
Developments which will assist in making customs processes transparent, predictable and more timely are to be welcomed.
It will be interesting to see how these commitments are reflected in the final published agreement, and the extent to which they are then implemented by the signatories.
Rules of Origin
Rules of origin (ROO) are a key component of any trade agreement. The ROO define the goods that originate in the region covered by the agreement and, therefore, the goods that are eligible for preferential treatment.
The TPP includes a single set of ROO for the TPP countries to define whether a particular good is ‘originating’ and therefore eligible to receive TPP preferential tariffs. As expected, the TPP contains accumulation provisions which will allow inputs from various TPP parties to be used to produce a product within any TPP Party. There will be a common TPP wide system of evidencing that the TPP origin obligations have been met which should facilitate trade and reduce regulatory burdens.
Trade in Services
In respect of services, the TPP includes the core obligations found in the WTO agreement (ie national treatment; most-favoured nation treatment; market access and local presence obligations). As expected, the TPP’s obligations in respect of services are based on a 'negative list' approach (ie the relevant commitments will apply to all service types, unless they are specifically excluded by a partner country). This approach is generally considered to the best option from a trade liberalisation perspective and has the advantage that new types of services developed after the agreement comes into force will be automatically covered. There are two country-specific annexes attached to the TPP which set out:
- current measures on which a party accepts an obligation not to make its measures more restrictive in the future, and
- sectors and policies where a TPP country maintains full discretion in the future.
In addition to the general services chapter, there is a specific chapter on financial services which also adopts a negative list approach as well as chapters on telecommunication services and electronic commerce. As is the case with all trade agreements, the specific levels of services liberalisation will not be apparent until the relevant chapters and negative lists can be considered in detail.
In the context of the negotiations, the US had been asked to open up access to its market through temporary access of business personnel to provide services. There has been some progress in this respect. A chapter on temporary entry for business persons includes agreements regarding the transparency of temporary entry requirements, ongoing cooperation on issues such as visa processing and specific commitments on access by business persons by most, but not all, TPP parties as set out in country-specific annexes.