The 11 members of the Trans-Pacific Partnership (TPP) wrapped up the final negotiations on the trade agreement this week in Tokyo. The TPP11 or Comprehensive and Progressive TPP (CPTPP) is set for formal signature on March 8 in Chile.
Most businesses will not be prepared.
Many firms expected the agreement to fade away. Hence, few have made contingency plans for implementation. Now, the clock is ticking before the agreement takes effect starting in late 2018 or early 2019.
Nearly all of TPP11 begins on the very first day (entry into force or EIF), including all market opening for services, investment, most changes in customs procedures, the majority of tariff cuts and more.
Most of TPP11 is identical to what was negotiated originally. The majority of the deal remains intact.
New Zealand is the official repository country for TPP and has the original texts and market access schedules posted here. ATC will inform readers when the revised texts are available.
Just 22 specific commitments have been “suspended” for now—the entire rest of the text is unchanged in CPTPP. For more details, see our Policy Brief 17-11 “TPP11: Unpacking the Suspended Provisions” here at www.asiantradecentre.org
During the Tokyo meetings this week, two additional items were added to the suspensions list (Brunei on coal and Malaysia on state-owned enterprises). These will be updated here shortly. Two new side letters were added (Vietnam on labor and Canada on culture).
Otherwise, all country commitments, including all market access schedules for goods, services, investment, government procurement, state-owned enterprises, business mobility and the like are unchanged from the original agreement.
The TPP “rulebook” has been cut down from 622 pages to something closer to 550 pages of legal commitments with the changes to the suspended lists and the removal of any specific language to the United States.
Companies can start to prepare now by carefully examining the outcomes of the original TPP agreement. Entry into force will happen once the 6th country completes domestic ratification procedures. This may happen quite rapidly after signature in March.
Suggested Actions
® Reassess your current markets and potential markets: TPP11 works only in member markets across the Asia Pacific. The benefits for goods, services, investment and more can be significant. Your business should assess the agreement carefully to avoid missing out on valuable opportunities and avoid downside risks.
® Reassess your supply chains and regional or global value chains: If you are sourcing from and selling to different countries across the Asia Pacific, the TPP11 is likely to affect your business. Whether this means more challenges or more opportunities, a careful assessment of your current business model, together with good understanding of the TPP11, is needed.
® Evaluate new opportunities, challenges, competition and advantages: If your business will be affected by the TPP11, you will need an in-depth evaluation on how your production costs, profits and profitability will be affected. This will lead to a more competitive pricing strategy and suitable business strategies for the short and long term.
The TPP broadly starts with tariff cuts on 90% of all tariff lines on the very first day of the agreement (entry into force or EIF). Many of the tariffs fall all the way to 0 or become duty free on EIF.
For those tariffs that do not fall to 0 on EIF, the majority of tariffs fall to become duty free in relatively short time periods. Often, this is within 5-7 years and most are gone within 10 years.
Even agricultural products, which are highly sensitive in most countries, are included in the TPP and are not simply “carved out” or ignored. Every single tariff line is included for tariff cuts in the TPP and nearly all become duty free over time.
Once a good meets the product-specific rules of origin (ROOs) for the TPP, it qualifies for entry into all 11 markets without changes needed. The TPP also allows for cumulation—or the “adding up” of content for many products of raw materials or intermediate goods from across TPP markets.
The TPP also promotes efficient and transparent customs procedures to make it easier to move goods in and out of TPP countries.
The agreement opens up nearly every single service and investment sector to TPP member firms. This includes important market access in areas not normally included in trade agreements.
For specific, practical examples of TPP benefits for food and other types of market access, please see the Asian Trade Centre booklets, Fresh and Frozen Food, Processed Food, Digital Trade and Market Access for Goods at www.asiantradecentre.org
The TPP text runs to hundreds of pages. In many areas, the agreement will be creating new rules for doing business. As an example, one new provision can be found in the intellectual property rights chapter with the protection of scent marks to help perfume or candle makers protect their inventions. Other new TPP rules help clear up the confusion when offline rules collide with an increasingly digital world.
The TPP11 has an [untouched] e-commerce chapter, intended to clarify the rules around movement of data between member countries and keep information flowing freely. This will help ensure that large and small firms continue to have access to critically important information needed to run their businesses.
The agreement also has chapters on standards for food (sanitary and phytosanitary) and other goods (technical barriers to trade) that includes increased transparency in crafting new regulations for the future. The agreement helps provide new input for business feedback prior to the imposition of new rules or regulations.
For some members, the extent of changes in a post-TPP11 world will be modest. In others, the domestic level reforms could be more significant. Businesses will need to keep an eye on how individual TPP countries implement the TPP rules at the domestic level and comply with the requirements of the agreement in the future.
The TPP11 is likely to change trading structures across the Asia Pacific. Companies with limited knowledge and understanding of trade often tend to underestimate or ignore these changes.
§ ATC research shows the benefits of the TPP11 that companies often fail to recognize and harness due to limited understanding of this complex agreement.
§ ATC corporate advisory customizes the benefits of TPP11 to your industry, your business and your supply chain scenarios.
§ To anticipate and plan for the future of businesses post TPP11, business leaders should focus on the following exercises:
o Identify: What are the key challenges and opportunities coming from TPP11 that will directly and indirectly affect the business?
o Prioritize: Which challenges and which opportunities are more important and more urgent?
o Plan: How can we plan ahead to take advantage and mitigate risks post-TPP11?
***Talking Trade was written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore***