Trans-Pacific trade deal to eliminate 98% of tariffs

After more than five years of negotiations, much of them shrouded in secrecy, a 12-country trade deal has been finalised.

The federal government says the Trans-Pacific Partnership Agreement (TPP) will deliver enormous benefits to Australia, including new opportunities in the rapidly growing Asia-Pacific region for businesses, farmers, manufacturers and service providers.

TPP countries, which collectively represent 40% of global GDP, will benefit from a more seamless trade and investment environment. The agreement will eliminate 98% of all tariffs across products ranging from beef, dairy, wine, sugar, rice, horticulture and seafood through to manufactured goods, resources and energy.

Australian investment in TPP countries has more than doubled in the last decade to reach $868 billion in 2014 — a rise of 16% over the previous year — while investment in Australia from TPP countries more than doubled in the last decade to reach $1.1 trillion in 2014 — a rise of 10% over the previous year

TPP highlights

Agriculture

Beef: The TPP will reduce tariffs on Australian exports of beef to 9%; tariffs on beef into Mexico and Canada will be eliminated within 10 years; and the AUSFTA beef safeguard into the US will be eliminated.

Sugar: Australia has been granted: an effective doubling of access into the US, with an additional 65,000 tonnes from entry into force and additional future quota allocations which, based on USDA long-term projections, could see Australian sugar exports to the US climb above 400,000 tonnes by 2019–20; further levy reduction for high-polarity sugar into Japan; an elimination of the tariff on refined sugar into Canada; the elimination of tariffs on raw sugar into Peru; and, for the first time, wholesale licencing arrangements for the supply of refined sugar to the food and beverage industries in Malaysia will be liberalised.

Rice: For the first time in over 20 years, Australia will be able to export more rice to Japan and an agreement has been reached on new administrative arrangements to facilitate trade. Rice tariffs into Mexico will be eliminated.

Dairy: With Japan, tariffs will be eliminated on a range of cheeses covering over $100 million in existing Australian trade, and new preferential access will be given for a further estimated $100 million of trade. There is also new quota access for Australia on butter and skim milk powder. Australian exports to Japan of mozzarella for processing use will be duty-free when blended with Japanese cheese. With the US, the agreement will enable access for 9000 more tonnes of cheese, as well as tariff elimination on milk powders and Swiss cheese. Australia will also gain new preferential access into Mexico and the highly protected Canadian market.

Cereals: Tariffs will be eliminated on wheat and barley exports into Mexico (within 10 years) and Canada (upon entry into force). There will be reductions of the mark-ups applied to wheat and barley in Japan and the creation of new quota arrangements beyond JAEPA.

Wine: Tariffs will be eliminated into Mexico (between three and 10 years), Canada (upon entry into force), Peru (within six years) and, for the first time, Malaysia and Vietnam.

Seafood: Tariffs into Canada and Peru will be eliminated on entry into force, into Japan within 16 years and into Mexico within 15 years.

Australian freight and logistics providers also stand to benefit from enhanced commitments that support integrated logistics supply chains. Australian providers of transport and logistics services in Malaysia and Vietnam will gain strong trade and investment protections for the first time. The TPP will capture future liberalisation of investment regulations in aviation in Vietnam and freight trucking in Malaysia and Vietnam, key markets for Australian airlines and logistics providers.

Investment

The federal government says the TPP will create new investment opportunities and provide a more predictable and transparent regulatory environment for investment.

The TPP will promote further growth and diversification of Australian outward investment by liberalising investment regimes in key sectors such as mining and resources, telecommunications and financial services.

Under the TPP, Australia has retained the ability to screen investments in sensitive sectors to ensure they do not raise issues contrary to the national interest. All investments by foreign governments will continue to be examined and lower screening thresholds will apply to investment in agricultural land and agribusiness.

Worker and environmental protections

The TPP includes requirements for labour and environmental standards, including requiring TPP parties to combat wildlife trafficking and address illegal logging and illegal fishing, as well as reducing subsidies that cause the depletion of global fish stocks.

TPP negotiating parties are now finalising arrangements for the release of the TPP text, and it will be released well in advance of signature. Each country will then undertake its domestic treaty-making process. For Australia, this will involve tabling the treaty text in parliament along with a National Interest Analysis and a review by the Joint Standing Committee on Treaties to which all interested parties can make submissions.

Image credit: ©iStockphoto.com/violetkaipa