The Trans-Pacific Partnership (TPP) is a free trade agreement currently being negotiated between twelve countries around the Pacific Rim: the United States, Canada, Australia, New Zealand, Japan, Singapore, Malaysia, Vietnam, Mexico, Chile, Peru and Brunei. It is unrivalled in the breadth of its inter-regional scope, designed to bring together key Asia Pacific countries with North and South American countries and seeking to liberalise trade in nearly all goods and services. The states involved together constitute at least 40% of global GDP, and trade between these states amounts to more than 20% of global trade volume.
A number of other states have expressed an interest in signing up to the agreement once it is finalised, including Taiwan, South Korea, Thailand, India, Costa Rica, Bangladesh, Indonesia, the Philippines, Laos, Colombia and Uruguay.
While the draft agreement has not yet been disclosed, commentary from the negotiating parties about the scope of the commitments involved has indicated that the TPP is likely to be of enormous significance for the dynamics of global trade flows across almost every industry sector. Five draft chapters of the TPP have been leaked through Wikileaks during the negotiations, fuelling heated debate about the scope of the commitments required by the parties.
The US Congress has given President Obama trade promotion authority, sometimes called ‘fast track authority’. Trade promotion authority defines the US negotiating objectives and priorities for trade agreements and establishes consultation and notification requirements for the President to follow throughout the negotiation process. At the end of the negotiation and consultation process, Congress gives the agreement an up or down vote, without amendment.
The TPP is expected to result in the removal of the vast majority of tariffs and trade barriers around the Pacific, introducing measures to create a preferential trading environment between the signatory states. Importantly, the Agreement will cover not only trade in goods but also trade in services.
The agreement is relevant to almost every key sector in which our clients operate. It is aimed at reducing - and ultimately eliminating - trade barriers around the Pacific region, going far beyond the commitments made through membership of the World Trade Organisation. According to the negotiators, it is anticipated to increase opportunities for trade in new markets for goods and services, while tackling new trade issues arising from changes in the global economy. Particular impacts are expected to be felt by the energy & resources, agribusiness, TMT, consumer products, financial services, pharmaceuticals, construction and automotive sectors.
Beyond the anticipated economic impacts of the agreement, the TPP is expected to mark a geo-political reorientation towards the Pacific, operating as a framework for enhanced integration and cooperation between the signatory states. The breadth of the coverage of the agreement, connecting major Asia-Pacific economies with North American and Latin American powers, will create a regional bloc of unparalleled significance.
Legal and regulatory impacts
Arguably the most significant feature of the TPP is the substantial commitments made by the parties towards harmonising regulation across the region on a vast range of trade-related issues. These include investment protection mechanisms, labour and environmental standards, intellectual property regulations, data protection rules, government procurement regimes, sanitary and phytosanitary standards, and rules to regulate the behaviour of state-owned enterprises.
Creating a near uniform regulatory regime on particular issues amongst such significant economies may contribute to a new mode of global governance, establishing new, influential regulatory norms with impacts across the region and beyond.