After many years of negotiations, the 12 countries making up the Trans-Pacific Partnership (TPP) (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam) finally reached a trade agreement on October 4, 2015. Note that the deal still needs to be approved by Congress (after the President gives Congress a 90 day advance notice that he intends to sign it).
Why Does it Matter?
The deal opens up trade and promotes regional integration among 12 countries that collectively produce almost half of the world’s products and services. This can have a huge impact on the global economy.
The goals of the deal are to promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty; and promote transparency, good governance, and enhanced labor and environmental protections. Geopolitical reasons of establishing a strong partnership in Asia to challenge China’s stronghold in the region is also certainly a motivating factor.
Key Features Of The Deal
- Comprehensive market access. The TPP eliminates or reduces tariff and non-tariff barriers across substantially all trade in goods and services, to create new opportunities and benefits for businesses, workers, and consumers.
- Regional approach to commitments. The TPP facilitates the development of production and supply chains, and seamless trade, enhancing efficiency and supporting the goal of creating and supporting jobs, raising living standards, enhancing conservation efforts, and facilitating cross-border integration, as well as opening domestic markets.
- Addressing new trade challenges. The TPP promotes innovation, productivity, and competitiveness by addressing new issues, including the development of the digital economy, and the role of state-owned enterprises in the global economy.
- Inclusive trade. The TPP includes commitments to help small- and medium-sized businesses understand the Agreement and take advantage of its opportunities. It also includes commitments on trade capacity building, to ensure that all Parties are able to meet the commitments in the Agreement and take full advantage of its benefits.
- Platform for regional integration. The TPP is intended as a platform for regional economic integration and designed to include additional economies across the Asia-Pacific region.
What Does the Deal Mean for US Businesses?
- The deal reduces tariffs for American products traded in the TPP region and, therefore, opens up the TPP region for American products. It also makes it cheaper for American companies to purchase products from the TPP region.
- Expedited customs procedures for TPP members will ensure faster and easier shipment.
- More transparent, non-discriminatory rules for technical regulations will mean easier compliance with trade regulations for US companies.
- Investment in TPP countries will become easier and more transparent.
- E-commerce companies doing business in the TPP region will encounter fewer restrictions.