Francisco A. Laguna & Amy Turner
The recent passage of the Trans-Pacific Partnership (TPP) has only resulted in additional questions and much political discussion. What were the negotiations like? What happens now? What does the TPP contain? How does this affect the passage of Transatlantic Trade & Investment Partnership (TTIP)?
This week, TransLegal begins a 5-part series on the TPP that explores what the TPP is (according to the Obama Administration), the approaches each of the presidential candidates to the TPP and trade in general, and the reactions of the international community to the agreement.
On October 4, 2015, negotiations for the TPP came to a successful conclusion. After five years of negotiations, twelve nations including Australia and the US reached agreement on how trade among the member states would be governed under the Trans-Pacific Partnership. The agreement was signed February 6, 2016.
What benefits does the TPP offer?
According to the United States Trade Representative, the TPP offers:
- “Comprehensive market access”. The elimination or reduction of tariffs. This includes goods and services and trade and investment.
- “Regional approach to commitments”. The development of production and supply chains, uniform trade, and the opening of domestic markets.
- “New trade challenges”. The support for the development of the global economy through the digital sector and state owned businesses.
- “Inclusive trade”. The commitment that small and medium businesses should have the understanding and ability to use the opportunities provided by the TTP.
- “A regional integration platform”. The intention is to use the TTP as a template and forerunner to design an economic plan for other non-included economies across Asia-Pacific.
What were the negotiations like?
The TPP involved negotiations in five major areas.
- The United States agreed to shorter patent terms for biologic drugs. Drug companies now have 5 to 7 years to keep secret their formulas as opposed to the original 12 years.
- Every state-owned company is required to adhere to the global trade standards.
- The reduction of diary, beef and poultry tariffs for the United States, Canada and Japan.
- Lower tariffs for cars and trucks in the United States, Canada and Japan.
- The Investor-State Dispute Settlement Mechanism makes it as easy (or difficult) for foreign companies to bring suit as domestic companies. In return, the United States will allow restrictions on tobacco companies who attempt to use arbitration panels in lawsuits on countries that tax cigarette advertising.
Now that the Trans-Pacific Partnership is a done deal, what’s next?
Each country’s legislature must ratify the agreement before it can go into effect. The US Congress had 90 days to review and debate the agreement. Since Congress gave the President the fast-track trade promotion authority on June 29, 2015, it can only vote “yes or “no”. No changes can be made to any of the terms of the agreement.
How does the TPP agreement affect the TTIP?
That is a hard question to answer. Trade deals are political documents and therefore need to be viewed in the context of the election season. Each party has candidates that approach trade differently. The next President will bring his or her own view on where the US stands on trade and how trade agreements are negotiated. We’ll discuss the views of each of the candidates on trade as part of this series.
Call TransLegal with your questions concerning the TPP or trade in general.