New economic opportunities with the Trans-Pacific Partnership

A big regional trade deal, the Trans-Pacific Partnership (TPP), is currently being negotiated in secret under growing criticism. David Coleman sees opportunities for Australian businesses.

The Transpacific Strategic Economic Partnership (“TPP”) has been under consideration since the Asia Pacific Economic Cooperation (“APEC”) leaders meeting in Los Cabos, Mexico in 2002. By 2006 Brunei, Chile, New Zealand and Singapore had signed the agreement and implemented it into their respective domestic legal systems.

The agreement covers a number of topics such as trade in goods, rules of origin, trade remedies, sanitary and phytosanitary measures, technical barriers to trade, trade in services, intellectual property, government procurement and economic policy. It requires all member nations to reduce their tariffs to zero by the year 2015. The agreement represents a major export opportunity for Australian companies and will give Australia greater access to imports, presumably resulting in efficiency gains for the economy of the Pacific region as a whole.

The agreement has also attracted interest from nations such as the United States, Australia, South Korea, Japan, Vietnam, Peru and Malaysia. They have all entered into formal negotiations to join the trade block which is governed by the agreement. Canada has become an observer to the talks. The negotiations have stalled to some extent because of the US’s opposition to Canada’s agricultural policies and Australia’s opposition to the United States position on copyright protection in relation to ISPs liability for infringement by users. Japan has also refused to liberalise its agricultural markets.

What is in the agreement?

The content of the treaty is at this stage secret, but from leaked documents and the statements of countries participating in the negotiations, it covers the topics of competition, cooperation, customs, services, e-commerce, environment, financial services, government procurement, intellectual property, investment, labour, legal issues, market access, rules of origin, technical trade barriers, textiles, trade remedies and telecommunications. The overall objectives of the agreement appears to be to:

• eliminate existing barriers to trade in the region
• create regional production and supply chains
• raise regional living standards
• encourage regulatory coherence
• encourage the participation of small and medium sized enterprises in regional trade
• effect comprehensive and robust market liberalisation across the region

Perhaps the most interesting of the new elements of the treaty is the rules in relation to investor-state arbitration. The new agreement is intended to create a body called the International Centre for Settlement of Investment Disputes which would allow private corporations to sue governments which are members of the treaty for lost profits when that country breaches a term of the treaty. This is one of the first examples of where private corporations have been given standing in international tribunals to sue nation states. The supporters of the provision argue that it supports the international rule of law because it allows the private enforcement of the terms of the treaty which is not possible in relation to other international trade treaties.

What opportunities will it create for Australian businesses?

The current or soon to be membership of the TPP represents an economic block with a GDP of US$28,046.1 billion and a population of 805 million people, or about 11% of the population of the world. As the region adopts the terms of the agreement, Australia will presumably benefit from the use of its products by the other member nations. The industries that are likely to benefit from it include the agricultural sector, mining, legal, financial services and education. These are industries where Australia already has strong positioning which can be leveraged to increase Australia’s competitive advantage in the provision of these goods and services. Certainty in relation to electronic commerce is also likely to be a benefit of the treaty which will make it easier to do business with security of entitlement and terms of trade with our nations that are members of the agreement.