The 12 countries negotiating the TPP include the US, Canada, Mexico, Chile, Peru, Australia, New Zealand, Brunei, Malaysia, Japan, Singapore and Vietnam - together they make up about 40% of global GDP. The countries signed the agreement on February 4, 2016 in New Zealand. In order for TPP to take effect, each country needs to ratify the agreement internally, e.g. by a vote in Congress in the US. TPP can also take effect as long as countries representing 85% of combined GDP of partners ratify the agreement.
The key issues covered by TPP include:
Tariffs - reduction or elimination of 18,000 tariffs currently imposed on US exports in order to make US products more competitive. For example, today Japan taxes US beef from 38.5% to around 50% in a form of tariffs. TPP will reduce it to 9%. Vietnam and Malaysia will reduce it to 0%. During discussion, it was not clear however, what controls would be put in place to prevent these countries from turning around and applying new costs on companies whether in a form of income tax or other in order to make up for some of tariff loses - this is yet to be defined.
Customs Administration and Paperwork - TPP promises to reduce the customs paperwork to manageable and transparent level through the use of electronic technology. This includes simplification of testing, certification, and licensing requirements. This would be a huge benefit as companies who deal with international transactions know how complex and time consuming this process can get. For example, today phytosanitary requirements on US food and feed products are extensive and not necessarily based on science. The costs involved in completing the testing requirements in order to confirm products meet foreign country requirements are high, especially, for small shipments. TPP attempts to require all countries to base their requirements at least on science.
Small Business - unlike other major agreements, TPP ensured that it had a dedicated section for small businesses, which includes provisions on intellectual property, prohibitions against local data storage requirements, eliminating tariffs on e-commerce, and reduction of tariffs. The intent is to allow small businesses to enter markets directly without having to sell their products to larger re-sellers. Current burdensome documentation and other requirements make it cost prohibitive for small businesses to sell direct. TPP's goal is to reduce these burdens to allow freer access for them.
These are just some of the main aspects of TPP. The agreement is very large and needs to be reviewed carefully to fully assess its long-term effect on US and global economy. The implementation may take a while because it involves significant structural changes to be done by member countries. Overall, the briefing was beneficial as an introduction to better understanding this far-reaching agreement.
Posted by Nilufar Salama of www.salamatrade.com on 02/19/2016. SALAMA INTERNATIONAL - Providing Value in Growing Your International Business.
February 19, 2016.