The Trans-Pacific Partnership (TPP) is the biggest trade agreement in history, reducing tariffs and other forms of protectionism in a dozen countries making up about 40 percent of the global economy with a total economic output of almost US$30 trillion.
The White House estimates it is likely to eliminate 18,000 tariffs on US-manufactured goods, while giving everyone from Vietnamese shrimpers to New Zealand dairy farmers cheaper access to markets across the Pacific. Critics, particularly in the US, say it is likely to kill US manufacturing jobs, reduce environmental standards and raise drug prices.
The deal was sealed in Atlanta, Georgia, on Monday and came after more than five years of negotiations between the TPP nations — Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam.
The agreement must still be ratified by lawmakers in the TPP nations before it can take effect and US President Barack Obama is likely to face a fight to secure passage by the US Congress.
JAPAN
Japanese auto and auto-parts makers might be the biggest winners, as they get cheaper access to the US, the industry’s biggest export market. Japan was forced to reduce some of the protections granted to its rice farmers, creating a non-tariff import quota of 1 percent of its total consumption. Livestock farmers might be harder hit as tariffs on beef are likely to be cut to 9 percent over 16 years from 38.5 percent, while pork tariffs are also likely to be slashed
AUSTRALIA
The deal will remove about A$9 billion (US$6.4 billion) of import taxes from Australian trade, Australian Prime Minister Malcolm Turnbull said.
Australia would gain access to the US sugar market while Japan would also reduce levies on the product and the cut in the beef tariff would help Australian farmers. Seafood and most horticulture products would see tariffs dropped, while preferential quota access would be created for grains, cereals and rice. Australia and New Zealand successfully pressured the US to compromise on the amount of time pharmaceutical companies would get protection for new biotech drugs, granting companies a minimum of five years rather than the 12 years of protection pushed by the US. That could lead to cheaper drug prices and more competition. Reduced tariffs on everything from iron and steel products, to pharmaceuticals, machinery, paper and auto parts is likely to help Australian manufacturers
NEW ZEALAND
Tariffs due to be eliminated on 93 percent of New Zealand’s trade with its TPP partners representing annual savings of about NZ$259 million (US$171 million), New Zealand Minister of Trade Tim Groser said.
The dairy industry, which accounts for about a quarter of exports, would see savings of about NZ$102 million per year. Some tariffs to remain in key markets such as the US, Japan, Canada and Mexico, though New Zealand are to get preferential access to new quotas. Tariffs on beef exports are to be eliminated, with the exception of Japan where they will drop to 9 percent from 38.5 percent, he said.
Tariffs on all other exports including fruit, seafood, wine and sheep meat are to be eliminated.
“While I am very disappointed that the deal falls far short of TPP’s original ambition to eliminate all tariffs, there will be some useful gains for New Zealand dairy exporters in key TPP markets such as the US, Canada and Japan,” John Wilson, chairman of Fonterra Cooperative Group Ltd, the world’s biggest dairy exporter, said in a statement.
VIETNAM
Vietnam is to be among the biggest winners, according to the Eurasia Group, with the agreement potentially boosting GDP by 11 percent by 2025, with exports growing 28 percent in the period as companies move factories to the low-wage country, the report said.
Reduced import duties in the US and Japan would benefit the nation’s apparel manufacturers, whose low labor costs have enabled them to grab business from China. Still, impact might be limited as Vietnam is still to ace strict rules-of-origin on materials. The fishing industry is to benefit from elimination of import tax on shrimp, squid and tuna, now averaging 6.4 percent to 7.2 percent. Eliminating import taxes on pharmaceutical products from the current average of about 2.5 percent could lead to tougher competition between Vietnamese domestic companies and foreign companies. TPP is likely to increase patent protection, restricting Vietnam companies access to new products as well their ability to produce new drugs.
MALAYSIA
Malaysia’s state-owned enterprises might suffer from the deal which calls for equal access to government procurement. Electronics, chemical products, palm oil and rubber exporters are among the beneficiaries. Malaysia is the world’s second-largest palm oil producer and one of the largest rubber growers.
CHINA
The world’s second-largest economy might be among the biggest losers as it failed to join the TPP, allowing the US to tighten trade ties across the region and advance the Obama administration’s so-called pivot to Asia. After initially dismissing TPP, Chinese officials have now indicated some interest in possibly joining in the future.
“China has an open attitude towards system-building that complies with WTO rules and is conducive to economic integration in the Asia-Pacific region, and hopes the agreement and other free trade arrangements in the region can be mutually beneficial,” the Chinese Ministry of Foreign Affairs said in a statement.
Chinese exporters might lose some market share in the US and Japan to developing countries such as Vietnam, Bloomberg economist Fielding Chen said.
China is likely to push its “One Belt, One Road” strategy of resurrecting trade routes from Asia to Europe and its new development bank, and try to reach more free-trade deals with other countries, especially in Asia, Chen said.
“While opening up its own door, China doesn’t want to see other countries are closing their doors,” Chen said.
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