After nearly a decade of talks, the United States and eleven other negotiating partners announced on October 5, 2015 the conclusion of the Trans-Pacific Partnership (TPP) trade agreement, marking an important milestone toward the fulfillment of the Obama Administration’s economic policy in the Asia-Pacific region and overall trade strategy.
The twelve TPP countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – represent over half of global output and 40 percent of world trade. The agreement, therefore, will not only have far-reaching economic impacts throughout the region in terms of tariff reduction and business-enabling rules, but also aim to address non-tariff barriers through novel, modernized, and high standards for trade pacts going forward.
TPP’s Greater Significance
TPP’s influence is likely to be felt in the ongoing negotiations between the United States and Europe toward a Trans-Atlantic Trade and Investment Partnership (TTIP). TPP also serves to reinforce and upgrade free trade agreements (FTAs) the United States already has with six of the TPP partners, and to open markets for the first time with the other five, including countries such as Japan and Vietnam where the trading relationship had often been hindered by conflict.
The high standards and level of commitments set forth in TPP may also assist the United States Trade Representative’s (USTR’s) market-opening efforts when dealing with countries that do not have bilateral FTAs with the United States, such as China and India. Negotiators can, for example, point to TPP as the benchmark, or minimum expectation, of what other countries must meet to benefit from deeper trade with the U.S. In this way, TPP could give the U.S. greater leverage to persuade other countries to play by its rules.
TPP’s Nuts and Bolts
TPP lowers or eliminates tariffs in partner countries, granting new and enhanced market access for U.S. farmers, ranchers, manufacturers and service providers. Tariff reductions also mean that some industries will face increased competition at home, even if overall tariff gains off-set losses.
The agreement also addresses non-tariff barriers in numerous areas that have prevented or restricted U.S. goods from gaining access to partner country markets. These include technical standards and regulations that may have unnecessarily burdened or restricted trade. In the vast majority of these instances, TPP requires the other partner countries to adopt U.S.-compatible procedures or processes, for example by implementing “notice-and-comment” rulemakings and requiring decisions to be based on risk and science.
More specifically, TPP covers over two dozen substantive areas, which include the more “traditional” FTA chapters such as: Market Access (addressing over 18,000 tariff line items); Rules of Origin (determining product eligibility for preferential treatment); Textiles and Apparel; Trade in Services; Sanitary and Phytosanitary Measures; Technical Barriers to Trade; Intellectual Property; Labor; Environment; Government Procurement and Investment.
TPP also addresses novel areas, such as: E-Commerce; Financial Services, Telecommunications; Competition Policy (including consumer protection); Regulatory Coherence; Transparency; Anti-Corruption (good governance); and Trade Facilitation. Through the inclusion of these new areas, TPP invokes a more comprehensive and expansive view of trade in a modern world.
The full text of the agreement, including tariff schedules, issue- and country-specific side letters and separate bilateral outcomes (i.e., U.S.-Japan agreements on autos and agriculture), is available on USTR’s website.
