Trans-Pacific Partnership – Highlights
Earlier this week, Australia agreed to become part of a historic trade agreement, including countries that account for nearly 36% of global GDP and one quarter of global trade. This document provides a summary of the key measures, reported benefits and what we know so far about contentious issues.
- Earlier this week, Australia agreed to become part of a historic trade agreement, including countries that account for nearly 36% of global GDP and one quarter of global trade. The Trans-Pacific Partnership (TPP) includes twelve Asia-Pacific countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam).
- The full details of the TPP are yet to be released, and hence a comprehensive assessment of the benefits/costs to business and the Australian economy is not yet possible. At this stage, there is little clarity around any concessions made. This document provides a summary of the key measures, reported benefits and what we know so far about contentious issues (largely based on official material).
- From an Australian perspective, TPP economies accounted for around one-third of our total trade in 2014 (with Japan accounting for almost half this share). In conjunction with the recent stand-alone free trade agreements with China and Korea, over 70% of our 2-way trade will be covered. That said, Australia has had a trade deficit with the TPP region since 2002 – with this deficit totalling $7.6 billion in 2014 (reflecting the substantial trade deficit with the United States at almost $22 billion).
- The agreement aims to reduce trade barriers, which could provide significant benefits to Australian goods exporters across a range of industries. However, in certain agricultural sectors, such as beef, the agreement will see lower tariffs overall, but less preferential access as tariffs will fall for other beef exporters in the TPP region. Perhaps more importantly, the TPP will address some of the constraints that have restricted services trade such as promoting mutual recognition of professional qualifications, faster approval processes for cross-border movements of business people and greater access for professional and technical providers in TPP markets.
- Greater uniformity and transparency around rules and regulations are key aims and will reportedly reduce costs and red tape for businesses. These include common standards for intellectual property, labour and environmental laws and a framework for investor-state dispute settlement.
- The TPP aims to facilitate an increase in investment flows throughout the region. In 2014, TPP members accounted for almost 40% of the total stock of foreign investment in Australia, along with two-thirds of investment flows into Australia. Investor safeguards could lower risk premiums, particularly for investment in less developed economies.
- Australia already has free trade agreements in place with 8 out of the 11 TPP partners. Greater benefit may flow from other countries joining. 5 countries (Colombia, Indonesia, the Philippines, South Korea and Thailand) have already entered negotiations with the original TPP signatories (although Australia already has stand-alone free trade agreements with many of these) and others may seek to join in time.
- In economic theory, much of the benefit and cost of trade liberalisation stems from lowering domestic trade barriers. While Australia has already undertaken much of this reform, there is still potential benefit from greater access to foreign markets and the removal of distortions offshore which should improve allocative efficiency and productivity, and better integrate Australia into global supply chains.
- While negotiations are now complete, the TPP must be ratified by all member states, with areas of contention likely. The TPP would then come into force 60 days later.
For more information please refer to the attached report.