TPP Agreement Represents Major Changes in International Trade

Date: October 9,2015
Subject: TPP Agreement Represents Major Changes in International Trade
On Oct 5, 2015, twelve countries making up the Trans-Pacific Partnership (TPP) announced they had successfully concluded trade negotiations. The twelve countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Together, these nations represent 40% of the global trade with a market of nearly 800 million people and a gross domestic product (GDP) of $28.5 trillion. The TPP represents largest trade agreement since the establishment of the World Trade Organization (WTO).

Few specific, working details are known at this time with the formal text of the agreement yet to be released. Negotiations were largely confidential with outside parties having very limited access to the negotiations. Additional details surrounding the agreement are expected to be released in the coming weeks and months.

Some information already shared by TPP participating countries include:

  • The TPP parties agreed on a single set of rules of origin that define whether a particular good is originating and therefore eligible to receive preferential tariff benefits. The product-specific rules of origin are attached to the text of the Agreement. The TPP provides for accumulation, so that in general, inputs from one participating country are treated in the same manner as materials from any other participating country – if used to produce a product in a participating country.
  • The TPP will include a standalone chapter on textiles and apparel. This chapter will include rules of origin and origin procedures provisions, along with an annex of product-specific rules of origin based on the “yarn-forward” concept found in NAFTA and other Canadian FTAs. The Agreement also includes a short supply list that will allow for the use of certain yarns and fabrics not widely available in the TPP region
  • Japan will immediately eliminate the 32% duty rate on 90% of their agricultural products. North American beef and pork producers are among the big winners under the TPP deal as within 10 years, Japan is promising to eliminate its tariffs on a wide range of agricultural products, including the current 50% tariffs on beef being reduced to 9% within 15 years. Vietnam will move more quickly, eliminating tariffs of up to 31% on fresh and frozen beef within two years.

Once the TPP is ratified, the current North America Free Trade Agreement (NAFTA) is expected to end given all three NAFTA countries are TPP participants. However, with many TPP participants facing domestic challenges related to ratification, NAFTA should remain in place for the foreseeable future.

Additional information is available through these U.S. and Canadian government websites. Delmar International will continue to monitor and share information related to the TPP, its expected ratification and future implementation.

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