TPP Still Controversial – But is Your Business Ready?

The Trans-Pacific Partnership (TPP) is controversial not only in the US during a politically heated election year, but in all countries involved in the negotiations. 

If the TPP becomes a reality soon, how will this affect manufacturers in TPP countries? While the exact impact is debatable, manufacturers should brace for one certainty – they will have more competition from global players than they currently do. This means they need to begin preparing now for the inevitable increase in this global competition or deal with the consequences. If they haven’t already they need to increasingly think global and focus on expanding to new export markets to remain competitive. 

TPP in a nutshell

It involves 12 countries: the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.

The pact aims to deepen economic ties between these nations, slashing tariffs and fostering trade to boost growth. Member countries are also hoping to foster a closer relationship between economic policies and regulation.

The agreement could create a new single market something like that of the EU.

Which goods and services are affected?

Most goods and services are involved, but not all tariffs – which are taxes on imports – are going to be removed and some will take longer than others. In all, some 18,000 tariffs are affected.

For example, the signatories have said they will either eliminate or reduce tariffs and other restrictive policies from agricultural products and industrial goods.

Tariffs on US manufactured goods and almost all US farm products will go almost immediately once the deal is ratified.

On textiles and clothing, they will be removing all tariffs, but while the US Trade Representatives says most tariffs will be removed immediately after the deal is ratified, “tariffs on some sensitive products will be eliminated over longer timeframes as agreed by the TPP Parties”.

On trade in services, they have agreed that free trade would be quite a good thing, and in some areas, they are going to liberalise trade.

The full text of the TPP agreement – which runs to 30 chapters – has now been published, if you have a lot of time available to read (and understand) it. 

When did it start?

It began with the P4 Trade Agreement between just four nations – Brunei, Chile, New Zealand and Singapore – that came into effect in 2006.

That deal removed tariffs on most goods traded between the countries, promised to cut more and also to co-operate on wider issues such as employment practices, intellectual property and competition policies.

How big a deal is the TPP?

Pretty big indeed. The 12 countries have a collective population of about 800 million – almost double that of the European Union’s single market. The 12-nation would-be bloc is already responsible for 40% of world trade.

The deal is a remarkable achievement given the very different approaches and standards within the member countries, including environmental protection, workers’ rights and regulatory coherence – not to mention the special protections that some countries have for certain industries.

What do critics say?

They argue it has been a not-so-secret gambit to keep China at bay – which is not part of the TPP. For its part, China has given it the TPP a cautious welcome.

Others claim it paves the way for companies to sue governments that change policy on, say, health and education to favour state-provided services.

The TPP will also intensify competition between countries’ labour forces.

But the biggest criticism has been of what the campaigners allege were secretive negotiations, in which governments were said to be seeking to bring in sweeping changes without voters’ knowledge.

Defenders say the reason the negotiations were not made public was that there was no formal agreement on them.

Is this the same thing as TTIP?

No. The Transatlantic Trade and Investment Partnership, now generally known as TTIP, is a deal to cut tariffs and regulatory barriers to trade between the US and member states of the EU. Negotiations here are at an earlier stage.

What happens next?

The text of the agreement will have to be signed and then ratified by all 12 signatories. Details of how the deal will be implemented will be argued out in individual countries’ legislatures.

In the US, it comes before Congress in the midst of a presidential election year, which is likely to turn it into a major political football within both parties.

However, Congress has granted President Obama “fast-track” authority over the deal, which only allows lawmakers to either reject it or ratify it.

To take effect, the deal has to be ratified by February 2018 by at least six countries that account for 85% of the group’s economic output. And this means that Japan and the US will need to be on board! (The BBC is responsible for much of this TPP content).