The Trans Pacific Partnership ("TPP") is a free trade agreement which covers 40% of the world's economy, involving Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam. The deal, struck in Atlanta on 5 October 2015, was a culmination of more than half a decade of negotiations between the 12 TPP parties.
Singapore already has existing trade relationships with 9 of the 11 TPP countries, and the TPP Agreement creates new trade relationships for Singapore with Canada and Mexico. The 30 chapters of the TPP Agreement prescribe an ambitious and comprehensive plan to open markets and promote free trade and regional integration, which will have to be implemented into domestic laws.
Based on a summary of the TPP issued by Singapore's Ministry of Trade and Industry, the TPP Agreement includes the following features, amongst others:
- Trade in goods. The TPP parties agree to eliminate and reduce tariffs and non-tariff barriers on industrial goods, and to eliminate or reduce tariffs and other restrictive policies on agricultural goods. The TPP parties will publish all tariffs and other information related to goods trade to ensure that small and medium-sized businesses as well as large companies can take advantage of the TPP. If the TPP parties maintain import or export license requirements, they will notify each other about the procedures so as to increase transparency and facilitate trade flows. Upon entry into force of the TPP, Canada and Mexico will eliminate tariffs on 99% and 96% of Singapore’s exports respectively, including Singapore’s exports of pharmaceutical products to Mexico;
- Rules of origin. Importers of goods originating from within the TPP through regional supply chains will enjoy preferential tariff benefits. These rules establish a common TPP-wide system of showing and verifying that goods made in the TPP meet the rules of origin;
- Common regulatory approaches. The TPP includes annexes related to the regulation of specific sectors to promote common regulatory approaches across the TPP region. These sectors are cosmetics, medical devices, pharmaceuticals, information and communications technology products, wine and distilled spirits, proprietary formulas for pre-packaged foods and food additives, and organic agricultural products; Government procurement. Countries must open state procurement to competition from foreign companies within the TPP. They must agree to publish relevant information in a timely manner, to allow sufficient time for suppliers to obtain the tender documentation and submit a bid, to treat tenders fairly and impartially, and to maintain confidentiality of tenders;
- Data exclusivity periods for biologics. The exclusivity period for biologic drugs (i.e. drugs derived from biological organisms) prescribed under the TPP is likely to be a minimum of 5 years, and up to 8 years. This point was heavily negotiated between the United States and Australia, as the US grants an exclusivity period of 12 years for biologic drugs, whereas Australia, Singapore and Chile grant exclusivity periods of only 5 years for both small molecule and biologic drugs; and
- Investor-State Dispute Settlement. Foreign investors can bring claims against governments directly if their investments are affected by changes in laws or policies. As this could potentially undermine governmental sovereignty, countries have attempted to build in safeguards to protect legitimate government regulation in certain areas such as healthcare. Proceedings brought under the investorstate dispute settlement system will be heard by an independent tribunal.
Until the draft text is released and the TPP enters into force, the impact on existing regulatory regimes for cosmetics, medical devices, pharmaceuticals, foods and agricultural products remains to be seen.
The TPP Agreement will enter into force 60 days after all original signatories have notified completion of their domestic legal procedures. If this has not occurred within 2 years of signature, the TPP Agreement will require a critical mass (at least 6 original signatories accounting for 85% of the combined gross domestic product of the original signatories) to ratify the TPP Agreement, for it to come into force 60 days after the agreed two-year implementation deadline is up.
For more information on the TPP, please refer to the Ministry of Trade and Industry's primer here.