Negotiators in the US announced an agreement had been reached as to the terms of the Trans Pacific Partnership. The TPP involves Australia, the US, Japan, Canada, Mexico, Vietnam, New Zealand, Chile, Peru, Singapore and Brunei. It will be the world’s largest FTA covering 40% of global GDP.
Key outcomes
The TPP addresses a variety of trade topics including trade in goods, services, investment, Government procurement, intellectual property, environmental laws, labor laws and intellectual property. The details of the trade outcomes are yet to be released. However, the following is significant for Australian trade:
• This will be the first significant FTA with Canada, Mexico and Peru (however, this is less than 2% of Australia’s trade)
• Agricultural access to the US and Japan is likely to be improved beyond our existing FTAs
• Origin will be based on TPP regional content. As such, goods can include content from multiple TPP partners and still qualify for preferential treatment. This could be important for goods of US or Japanese origin that undergo some further process (such as repacking) in Singapore or Malaysia
• Certificate of origin details are yet to be released. However, it is unlikely formal certificates of origin will be required. Both the US and NZ do not traditionally require such documents and other TPP countries have shown a preference for self-certification
• In recent presentations, DFAT suggested that change in tariff classification will be the primary rule of origin for goods that are not wholly originating
• The TPP is drafted in a way to allow inclusion of other countries in the future. Korea, Thailand, Indonesia and the Philippines have all expressed interest in joining the TPP. It is not unrealistic to foresee a future where the TPP will be the primary trade agreement governing Asia Pacific trade.
Normally it takes 9-12 months from the conclusion of negotiations to the implementation of an FTA. However, given this FTA has to navigate the US parliamentary process in a US election year, we expect 2017 is a more realistic commencement date.
With the implementation time frame uncertain and few details on specific outcome, the best advice is for parties to stay informed and keep the TPP in mind when making long term strategic trade decisions.
Further updates on the TPP will follow in due course.
Source credit: Hunt and Hunt via FTA
