On Monday October 5, 2015, at a press conference in Atlanta Georgia, the Ministers and representatives from the twelve (12) TPP negotiating partners, officially announced that they have concluded the five-year TPP negotiations.
The parties - Australia, Brunei Darussalam, Chile, Canada, Japan, Mexico, Malaysia, New Zealand, Peru, Singapore, the United States, and Vietnam - collectively represent nearly 40% of world GDP).
The TPP accord represents a 21st Century trade agreement among its members covering areas such as market access, supply chain management, intellectual property, free movement of information, labor standards, workers rights, and environmental protections. In particular, reduced tariffs will offer immense potential savings, which, when combined with harmonized supply chain provisions, will allow goods to flow much more quickly and easily across borders.
The TPP negotiators worked incredibly hard over more than five years to reach a new framework for international trade that goes well beyond the foundations of the WTO trading system. Not only has the TPP the potential to create millions of new jobs for workers in the TPP countries, it aims to do so in a manner that encourages attention to environmental and labor standards, making this new framework something sustainable for generations to come.
Public reports estimate that the TPP will potentially boost global exports by $305 billion, increase the size of the global economy by $223 billion a year by 2025, and provide goods and services to billions of new middle-class consumers over the coming decades.
As a forward-looking agreement, the TPP is open for any other country, including China, to join in the future so long as that country accepts the standards and the rules set forth in the TPP.
The TPP raises the bar for free trade agreements and potentially acts as a precedent for future agreements.
Below, we provide highlights on key provisions, with analysis from the press conference, and discuss the path forward.
The TPP provides an opportunity to promote the free flow of goods, information, capital, and investments (which will be free of performance requirements e.g., compulsory technology transfer, or minimum export requirements). The agreement, with its high standards, once spread, will contribute to global and regional economic stability.
United States Trade Representative, Ambassador Michael Froman, indicated that the TPP represents the elimination of 18,000 tariffs from U.S. trading partners with whom it does not already have a free trade agreement. Sectors that will benefit include manufacturing goods, agriculture, as well as services, particularly telecommunications, software, express delivery, e-payment, and the digital economy.
In the bigger picture, ratification of the pact agreed to in Atlanta is only the beginning for the TPP. As the New Zealand Minister mentioned, going forward "industry structures will change in response to the opportunities of this agreement, and in future years, we can be absolutely certain that the depth of achievement we’ve been able to reach at this point in our collective history will be deepened and broadened and other people will join this agreement."
Not surprisingly, biologics was a source of great contention through to the end in Atlanta. The United States and Australia were at odds in terms of the minimum data exclusivity period (with the United States pushing for eight years and Australia for five years). In the end, the agreement reached was for a minimum data exclusivity protection term for biologic products of five (5) years, "plus other government measures that can achieve a comparable outcome", as described by Ambassador Froman during the press conference.
The end goal behind this balanced approach to the ultimate agreement is to provide market protection to encourage innovation, while ensuring access to affordable medicines. He and Minister Andrew Robb of Australia agreed that the parties, in the end, did not need to come to a consensus to create a single, hybrid system or procedure applicable to each of the diverse economies. Rather they needed only to agree on a common element, or elements (here the 5-year minimum period), allowing individual governments to determine the best procedures to achieve innovation and access to medicines. This will allow flexibility, for example, for Chile to maintain its internal regulation in data protection, and keep the regulation already in place through an earlier FTA. Under the agreement reached, parties are free to rely on regulatory and administrative measures, whether it be through requirements for additional clinical trials or other measures the particular government sees fit to reach the end goal.
After months of bilateral and multilateral discussions on autos the negotiators reached an agreement, which, according to the Mexican representative is a balanced solution, recognizing the level of integration of the auto industry in the Asian region and in the North American region.
The dairy issue also remained contentious until the very end of the negotiations. The New Zealand representative stated that the TPP will help eliminate tariffs for all New Zealand exports, except for beef in Japan and certain dairy products. He noted that, although the TPP will not open new market access for New Zealand dairy exports, it will help reduce volatility.
With the strongest labor standards of any trade agreement yet, the parties have offered, through capacity building, to help less-developed countries with respect to compliance with international labor standards in the agreement, consistent with their membership in the International Labor Organization.
The TPP textile provisions represent a "win-win" situation, with the United States standing to gain the most in terms of an absolute quantitative boost to the economy, and Vietnam gaining the most in terms of the percentage increase over its baseline GDP.
Investor-State Dispute Settlement
The TPP provides for basic investment protections for investors, including minimum standard of treatment, national and most favored nation treatment and no expropriation without compensation. The TPP also includes an investor-state dispute settlement mechanism whereby investors may refer investment disputes to international arbitration.
The discussions over currency manipulation are being conducted in parallel with TPP, with a forum established by the finance ministries of the twelve countries.
The Path Forward
In the coming days and weeks, the TPP Ministers will be busy "selling" the agreement to their respective legislative bodies and general public.
In addition, the parties will continue to undertake technical work such as legal review, translation, drafting, and verification of the text, after which the TPP agreement can be finalized, released to the public, signed, and entered into domestic procedures for ratification in each TPP country.
In the United States, the President must publish the text of the TPP on the United States Trade Representative website at least 60 days before signing the agreement; at least 90 days before signing (i.e., at least 30 days before publishing the text), the President must notify the U.S. Congress of the intention to sign the agreement. At this point, we do not know when the clock will start ticking on these requirements.
Companies should take the opportunity in the days and weeks leading up to release of the TPP text to help their countries "sell" the benefits of a high-standard multilateral trade agreement to their respective legislative bodies and general public. Going forward, once the text of the agreement is made public, companies should be proactive in understanding the details to ensure they maximize potential benefits and avoid associated obstacles.