VIDEO: The Trans-Pacific Partnership Trade Agreement
In this video alert Paul Davies, C&M International Director, breaks down the individual elements of the Trans-Pacific Partnership Trade Agreement and what the potential benefits are to both domestic and foreign companies.
Part 1: What the TPP Does
Part 2: Timing for the TPP
What is the TPP?
TPP is the twelve country agreement, with eleven Asia pacific economies, and the United States. TPP, among many other things, is a free trade agreement between the U.S. and Japan.
What are the major elements of the TPP?
There are four major components to TPP. One is basically the elimination of market access barriers to trade and exports. The second is improvement to rules the way governments administer foreign company operations. The third is opening up of foreign governments’ procurement markets, and the fourth is intellectual property.
1. Elimination of market access barriers
Market access matters because it will be eliminating tariffs on 99 percent of trade in this region within 15 years, and most of that elimination is going to happen within the first five years. For major American service companies, people in banking, finance, insurance, express delivery, communications, computing, they gain benefits from eliminating restrictions on establishment, branching, and government policies requiring localization.
2. Improve rules for foreign company operations
In terms of rules, one of the principal benefits is going to be reforms to the way governments administer investments by foreign companies. In particular, the right to challenge discriminatory practices in front of neutral arbitrators. That's a particularly major reform that helps level the playing field for foreign companies doing business in the region.
3. Open up government procurement
One of the underestimated benefits of TPP will be the reforms to government procurement, in particular, giving open access and fair processes for foreign companies wanting to access government procurement in many of the economies in the TPP region. The government is the biggest buyer of goods and services. So, essentially companies are gaining access to that market in a way they’ve never had before.
4. Intellectual property protections
And in terms of intellectual property, the agreement will produce better patent, trademark, copyright protection standards in developing economies in Asia. Particularly in Malaysia and Vietnam that will be a major benefit for American innovative companies that are bringing in new technology and new innovations to market.
What is the timing for the TPP?
Timing is a very interesting question. The TPP agreement is being concluded so the next steps are governments have to ratify it through their legislatures. The main action now sort of shifts to the discussion between the administration and Congress. That's expected to dominate, I think, the trade discussion this year. The eleven other countries also have to put the agreement to their parliaments, or their legislatures. But, we are seeing a little bit more confidence in countries like Japan, Australia, Singapore – that they will be able to ratify this year.
What will happen next in the U.S. on the TPP?
In the United States there’s already very active discussion between the administration and Congress about when the agreement is going to be presented for ratification through the House and Senate. The same discussion is also happening in the other eleven capitals of the TPP countries. We are seeing a little bit more confidence that those legislatures will be able to act reasonably quickly.
What are the odds the TPP will pass in the U.S. in 2016?
It is very, very open to all sorts of possibilities at the moment. The presidential election is going to have conditioning influence over the debate. And while trade is always a contentious topic in Congress, there normally has been able to be a bipartisan coalition to support agreements in the past, and there is obviously an effort already underway to try to form that coalition.
How important is the TPP to U.S. trade policy in 2016?
In 2016, the Obama Administration, in its final year, will be attempting to secure its international legacy and trade is going to be an important component of that. There’s two major elements that they will be prioritizing. One is getting the Asia Pacific Agreement, that it negotiated last year, the Transpacific Partnership, through Congress and the second major thing that it will be focusing on is trying to conclude the agreement with the European Union – the Circle of Transatlantic Trade and Investment Partnership.
For the TPP specifically, what should U.S. businesses be doing to prepare?
TPP in particular is a very complicated agreement. Its eleven countries have set forth the way in which they are going to eliminate trade barriers. So, it's a lot of detailed research [that] needs to be done to work out precisely what the benefits are for each individual company. So, we are seeing a lot of requests from companies to find out exactly what/how the rules will apply in their particular industry, where the tariffs are going to be eliminated, where service barriers are going to be reduced.
How is the TPP good for U.S. business?
One of the particularly interesting and novel elements of it is a protection for trade secrets. This is sort of confidential business information that is not really protected by intellectual property rules. The TPP agreement, actually for the first time in a major trade agreement, includes protections for confidential business information and provides for right of actions where those confidential business secrets are misappropriated.
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