The Trans-Pacific Partnership (TPP) was signed overnight in the US after five intensive days of talks, and five years of overall negotiations.
12 parties were involved in the negotiations surrounding the TPP: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. These parties represented 36.4% of the world’s gross domestic product in 2014. Australian exports of goods and services to these countries was worth $109bn in 2014.
Coupled with the China-Australia Free Trade Agreement (ChAFTA), the TPP bolsters the Coalition’s economic narrative, bringing with it significant opportunities for Australian businesses. The bilateral trade deals with Japan, South Korea and China will still represent $30bn more to our economy than the TPP countries combined, however this gap is expected to shrink through provisions and tariff reductions included in the TPP.
Two-way trade with China was valued at over $150bn in 2014, which accounted for 23% of Australia’s total trade with the world. Both the TPP and ChAFTA are expected to be concluded by 2016, strategically positioning Australia to exploit the increasing economic competition across the Pacific.
Key overnight developments for the TPP
98% of tariffs on Australian exports in the region will be eliminated.
There has been a doubling of access to the US market for local sugar producers, starting with a base increase of 65,000t per year. This has been sticking point for The Nationals and the Canegrowers Association, with both originally wanting an increase of 615,000t.
There will be no increase to the cost of medicines in Australia under the Pharmaceutical Benefits Scheme, and reporting has focused on this. A compromise on biologics was successfully negotiated between the Minister for Trade Andrew Robb and the United States Trade Representative Mike Froman. A “two track” approach to data protections for pharmaceutical companies will be established. The two-track approach means firstly setting the Australian system as the model standard and providing for a five-year protection period, and secondly allowing TPP countries to voluntarily sign up to the option of having an eight-year monopoly period on biologics.
How does Australia benefit from the TPP?
- It will reduce red tape and regulations, thus streamlining a significant proportion of world trade contributing to the growth of the Australian economy.
- It will harmonise the rules for e-commerce facilitating business transactions and significantly improving the transparency of new laws and regulations within member countries.
- We will see the development of new rules regarding the conduct of state owned enterprises which will ensure Australian businesses compete in the region on a level playing field.
- Membership into the TPP will create opportunities for Australian businesses with new access to markets.
- It will eliminate tariffs and other barriers such as licensing procedures that restrain global trade in goods and services; and
- It will create regional value chains, ensuring a role for Australia as a supplier of goods and services in a regional chain of production.
Benefits for the region
The TPP will provide government’s necessary economic leverage to pursue many other foreign policy initiatives in the region. The benefits of preferential trade status of the TPP are contingent on domestic guarantees and reforms regarding freedom of association, strong environmental protections, and high labour standards. Australia is open to expanding membership in the future.
The liberalising of trade in environmental goods and services will promote compliance of environmental protection within the region. For example there exist new rules concerning subsidies on fishing, ensuring sustainability of fish stocks.
This deal fundamentally strengthens the United States’ economic presence in the Asia-Pacific.
Dynamic elements of the TPP
There exists an Investor-State Dispute Settlement (ISDS) clause, which could allow foreign corporations to sue the Australian Government if they can show their property was seized or they were targeted by or treated unfairly under new regulations.
Australia is understood to have played a lead role in backing a proposal that would prevent tobacco companies from taking action against TPP signatories for implementing cigarette-related health measures. This is a key element to follow closely.
New copyright protections, will raise the penalties for piracy, but protect creative industries.
The Productivity Commission has raised concerns about IP protections in the TPP, click here.
Five Nationals MPs from the Queensland “sugar belt” have threatened to cross the floor and vote against the TPP’s enabling legislation if the trade pact does not include a better access deal for local producers; and
The Trade deal will now be subject to scrutiny of process in the Joint Standing Committee on Treaties. Stakeholders such as unions and industry associations may yet stall its ratification.
You can see Andrew Robb AO MP’s full media release here.
CapitalHill Advisory has prepared a short, 20 minute presentation for executives interested in the significant opportunities the Trans-Pacific Partnership may open for your business. We would be pleased to offer our insights into both the policy and political dynamic.
