Trans Pacific Partnership concluded after 5 years of negotiations

The Trans Pacific Partnership (TPP) is a trade pact incorporating 12 Asian and Pacific nations -- Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States.  Negotiations for this ambitious pact started in Melbourne in 2010. They have finally concluded on 5 October 2015 in the US.

The pact, if ratified and implemented by the member nations, would eliminate many trade barriers, as well as open up markets for services. It would create new rules in “modern” economic aspects such as labour, the environment and e-commerce for nations which produce over 40% of the world’s economic output.

The TPP is unique from numerous other trade deals because:

1. It is more comprehensive.  It includes chapters covering goods, services, and investment.  It encompasses new regulations on intellectual property rights, freeing up government procurement markets, generating a common understandings for e-commerce trade, as well as food protection and many kinds of technical criteria.
2. It is more rooted.  While most FTAs focus on the opening up of trade in goods, the TPP has objectives of curbing barriers to trade further.  This implies opening up extremely sensitive agricultural markets which tend to be traditionally excluded from FTAs.
3. Focus on Equality. Different from other FTAs, the TPP regulations apply equally to all.  While the lesser developed nations will be permitted a longer time to enforce some of the commitments, the fundamental regulations will be applicable to all signatories, as well as countries that wish to accede to the pact in future.

Although the signatories to the TPP have themselves already many FTAs in place, the TPP expands product scope, possibilities for content cumulation, inclusion of services, standardization of approach, enhanced treatment of intellectual property etcetera. Hence additional value can be unlocked and created in international supply chains in the TPP.

With regard to market access for goods across the nations, the TPP eliminates duties to 0% for 90% of tariff lines on ratification of the agreement.  In a comparatively short timeline, most of the remaining duties will see a reduction to 0% as well. This goes well beyond traditional agreements and even other megapacks under negotiation, such as the Regional Comprehensive Economic Partnership (RCEP, between ASEAN and its six trading partners Australia, China, India, Japan, Korea and New Zealand), which are rife with exceptions and derogations.

The road ahead from here will not be easy. Legal scrubbing, translation and ratification are expected to take some time. Some optimistic estimates have entry into force as far away as 1 July 2017. So there is no reason to rush to conclusion, such as changing product sourcing, location of distribution centers or targeting new consumer markets. As the text becomes available, companies should carry out careful analysis to determine where the best opportunities lie for them, and prepare accordingly, be that in their business planning or in lobbying for the most appropriate and timely implementation of the TPP.