The controversial and long-gestating Trans-Pacific Partnership (TPP) is now moving ahead, with 11 countries—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam—agreeing on 23 January 2018 as to the final terms of the agreement that is to be officially signed by these countries in March in Chile.
What is it?
The TPP is a free-trade agreement designed to make exportation and investment both cheaper and simpler. It aims to do this by cutting tariffs and creating common laws and regulations between member countries.
Notably, the agreement was originally set to include the United States, in which case it would have comprised about 40% of the world market. However, Donald Trump campaigned strongly on the idea of a nationalist, closed "America First" policy, saying that he would withdraw the country if elected—which he did by executive order on his third day in office. While initially there was much confusion as to whether the agreement would (or even could) continue without the US, the remaining 11 countries persisted with negotiations and spent much of 2017 salvaging the TPP. These countries have made some modifications to the original agreement that have ultimately made it stronger and more beneficial, such as a redaction of some of the onerous intellectual property and patent protections pushed by the US. While the US' absence is unfortunate (signalling the country's withdrawal from the Asia-Pacific region and the world in general) and results in a very different dynamic, the TPP is still a very big deal for businesses.
What are the benefits?
The TPP is expected to lower a lot of the barriers to trade and investment. This will allow competitive players to enter into new markets, hire workers at better wages, and lower prices while also opening up the range and quality of goods and services.
For the member countries, the key selling point is that the TPP will mean increased trade and exportation, which in turn will create new jobs. While it is true that there are some negative factors to the agreement (most notably, the possibility that certain medicines will see price increases because of the patent protection clauses), the economic factors and benefits are generally seen to outweigh any adverse consequences.
Some other benefits include:
- Reduces regulatory complexity. Regulatory cohesion among TPP nations will help to ease the risks and costs of doing business abroad for small businesses. Easing customs administration and improving trade facilitation will help small businesses get their goods and services to market – or their customers – more quickly, which means reduced costs, quicker payment, better cash flow and greater certainty in doing business in TPP markets
- Intellectual property (IP) protection. TPP countries will be required to bolster or implement IP regimes that make it easier for small businesses to register their trademarks, patents, copyrights, trade secrets and other forms of IP. More importantly, strong enforcement systems in TPP countries are required.
- Electronic Commerce Improvements. The agreement addresses critical e-commerce concerns and barriers, which will vastly improve the opportunity for small businesses to do business in these countries. The TPP promotes open Internet policies, and countries cannot block the websites of companies that may compete with their own country's businesses. TPP countries cannot require companies to build data centers as a condition for doing business in these countries, and the agreement forbids customs duties on e-transmissions – for example, on software services and other digital products.
What does this mean for Australia?
A number of Australian industries are expected to particularly benefit from the TPP. The exportation of Australian beef, rice, dairy products, sugar, wheat, seafood, and wine is anticipated to rise under the TPP.
Under the TPP, companies will be able to establish themselves internationally much easier than previously
What is the expected timeline?
The TPP has deliberately been structured to allow a gradual introduction into each of the markets. With no formal start date, each signatory country must first ratify the treaty under its own law. The TPP will only come into force once it has been ratified by 50 percent of the signatories. For example, it is expected that a bill will be introduced to the Australian Parliament in the coming months. This should be seen as a positive thing as it allows the markets to tackle what will be potentially big changes at their own pace and timing.
What should my next steps be?
Given the long adjustment period that has been inbuilt into the agreement, now is the perfect time for entrepreneurs and business to begin exploring ways that they might be able to take advantage of the agreement. Visiting prospective customers and market research would be a good place to start.
While it is true that businesses and entities from the member states will have an advantage in comparison to non-members (most notably, against the US), it is important to also note that the other signatory countries will also gain these advantages. Therefore, it is a good idea to act quickly and gain an early foothold.
If you are already established in one of the signatory countries and are interested in taking advantage of the agreement to move into a new market, feel free to get in touch with our experienced team today. We have the experience and practical "know-how" to ensure that you get the edge over the competition.
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