Trans-Pacific Partnership to begin in 2018 – are you ready?

Russell Wiese

The Trans-Pacific Partnership (TPP) is famous for being a major issue in the 2016 US election. One of the first acts of the new President Trump was to withdraw the US from the agreement.
Fast forward two years and the TPP (without the US) is set to commence on 30 December 2018. This free trade agreement (FTA) is a major reply to the protectionist trade policies of the US and also offers major benefits for Australian traders.
What is the TPP?
The TPP is a comprehensive FTA between Australia and 10 other countries: Japan, Canada, Mexico, New Zealand, Singapore, Peru, Chile, Vietnam, Malaysia and Brunei. It reduces customs tariffs on a range of goods, but also has comprehensive trade liberalisation provisions concerning trade in services, investment, the environment and labour laws.
Initially, the benefits of the TPP will only extend to Australian trade with Japan, Canada, Mexico, New Zealand and Singapore. This is because the other TPP members are yet to pass domestic legislation ratifying the agreement.
What are the benefits?
While Australia already has FTA with 7 of the 10 other countries, the TPP will bring immediate benefits. Those benefits are:

  • For the first time, wide-ranging duty-free entry of goods into Australia from Canada and Mexico (saving of 5%).
  • Increased access generally to Canada and Mexico.
  • Significantly improved access to the Japanese agriculture market.
  • Once ratified, generally improved access to Peru.
  • Slightly improved access to Vietnam and Malaysia (once ratified by those countries).

With the TPP set to commence in late December 2018, there will be one round of tariff reductions on commencement and a second round on 1 January 2019, when year two of the agreement begins.
There are thousands of different outcomes depending on the particular product. Exporters need to be speaking to their trade advisors to find out the new duty rates for their products.
How do I use it?
If you are an exporter, you use the TPP to help your overseas clients import the goods at a lower duty rate. Like most FTA, under the TPP you will need to provide a certificate of origin. However, unlike other FTA, the certificates of origin under the TPP are much easier. There is no set form, the document can be electronic and the documents can be created by the producer, exporter or even the importer. This flexibility will increase the ease of using the TPP and for some exporters, reduce the costs.
This ease of use may mean that some exporters will use the TPP for trade that is currently covered by other FTA, such as the ASEAN FTA, which required government issued certificates of origin.
Be careful
The ease of the TPP is appealing. However, the simplicity of the TPP could be its greatest risk for some traders. The benefits of the TPP only appeal if the goods satisfy the rules of origin. These are the rules that determine whether a good has sufficient connection to the TPP countries to qualify. In a self-assessment system the exporter takes a big risk unless it fully understands how rules of origin work. This risk can be managed, but it first needs to recognised.
If you plan on using  the TPP you need to have a compliance e plan in place to avoid an unpleasant customs duty liability and potential penalties.
While there is no specific form that the certificate of origin must take, there are nine requirements that it must meet such as the inclusion of an HS Code of the goods and details of the parties (including their telephone number if known). These are mandatory requirements and the non-inclusion of one of these requirements will mean the TPP does not apply. The risk of missing a data field is normally low as the parties are using a prescribed template document. Again, there is no prescribed template with the TPP.
If you are planning on using the TPP, you need to ensure you are aware of all of the certificate of origin data requirements. We recommend either using a template created by a trade professional or having your own documents reviewed by a trade professional. We will be creating a template TPP certificate of origin for use by our clients.
The future
The TPP is an agreement that businesses need to build into their long term strategy. While the current benefits will work for some traders, the future potential cannot be ignored. The countries that have expressed an interest in the TPP include the UK, Taiwan, Indonesian, the Philippines, Thailand and South Korea. The future of international trade is uncertain. However, for those countries that are looking to pursue an open trade agenda, the TPP will be a welcome home.
The TPP is an exciting opportunity and represents a reduction in the red tape associated with other FTAs. However, that lack of red tape does not mean there is no legal risk. The same obligations remain, however, it is for the traders to fully self-assess compliance with those obligations. This will mean that the need to work with specialist trade advisors and customs brokers will be heightened.
Russell Wiese is a customs and global trade specialist with a strong focus on helping clients proactively manage customs risks and opportunities. Russell helps importers, exporters, customs brokers and freight forwarders with customs concessions (including Free Trade Agreements), customs compliance, commercial agreements and resolving disputes between parties involved in international trade.

TPP agreement reborn, without US

The Trans-Pacific Partnership (TPP), a major trade deal that has been almost a decade in the making, has been reborn as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Eleven of the original countries involved in the TPP negotiations are set to sign the agreement in Chile in March – Japan, Canada, Australia, Mexico, Malaysia, Singapore, Chile, Peru, Vietnam, New Zealand and Brunei.
The notable exception to the new agreement is the US, which pulled out of the agreement after Donald Trump’s election as President.
“This is a multibillion-dollar win for Australian jobs,” Prime Minister, Malcolm Turnbull and Minister for Trade, Tourism & Investment, Steven Ciobo said in a joint statement. “Australian workers, businesses, farmers and consumers will benefit.
“The Government took a leadership role and worked hard to deliver the TPP because it will generate more Australian exports and create new Australian jobs.”
“The TPP will eliminate more than 98 per cent of tariffs in a trade zone with a combined GDP of $13.7 trillion. The agreement will deliver 18 new free trade agreements between the TPP parties. For Australia, that means new trade agreements with Canada and Mexico, and greater market access to Japan, Chile, Singapore, Malaysia, Vietnam and Brunei.”
Significant wins for Australian exporters under the deal include:

  • accelerated reductions in Japan’s import tariffs on beef, where Australian exports were worth $2 billion in 2015–16 – under TPP-11, even better access;
  • elimination of a range of cheese tariffs into Japan, covering more than $100 million of trade not covered by the Japan-Australia Economic Partnership Agreement;
  • new quotas for wheat and rice to Japan, and for sugar into Japan, Canada and Mexico;
  • elimination of all tariffs on sheep meat, cotton, wool, seafood, horticulture, wine and industrial products (manufactured goods);
  • eleven separate deals – legally enforceable market access to all these countries; and
  • investment meaning strong, legally enforceable commitments on the way countries regulate foreign investment.

Trump withdraws from Trans-Pacific trade deal

In one of his first actions as US President, Donald Trump has officially stepped back from the Trans-Pacific Partnership (TPP) free trade deal with Australia, New Zealand, Japan and eight other Pacific nations.
Trump signed an executive order on Monday to withdraw the United States from the TPP, according to the Australian Associated Press (AAP).
While Trump said the move from free trade to what he called “fair trade” would be a”great thing for the American worker” – arguing it would bring back manufacturing to the US – some local commentators see it as a major setback for the Australian economy.
Opposition leader Bill Shorten, for example, declared the TPP “dead in the water” and said pursuing the deal was a waste of time.
Australian Trade Minister Steven Ciobo, meanwhile, insisted the pact was worth pursuing even without the US – adding Trump’s decision was disappointing, but not unexpected.
“It’s a great shame [but] it’s not unexpected,” he told Sky News on Tuesday – adding that no modelling had been commissioned on what a deal without the US would look like, or what the benefits – if any – to Australia would be under such an agreement.
Regardless of whether or not TTP will become a reality, real life implications for Australian businesses dealing with the US are likely to be moderate, according to Adam Lockyer, a Senior Lecturer in Security Studies at Macquarie University.
In an interview with last November, he said that the loss of the TPP would mean “business as usual” and that Australia already had important bilateral agreements in place with countries that make up the TPP, including the US, Japan and New Zealand.
Trump also used his first full day of business to reinforce his message of “massively” cutting regulations and taxes on companies that keep jobs in the US, claiming they could be reduced by as much as 75 per cent, “maybe more.”

Australia remains unconvinced on TPP’s imminent demise

The Australian government is not backing away from the Trans-Pacific Partnership (TPP) trade agreement despite US president Donald Trump making killing the agreement a first priority, according to 9News.
This statement follows a report stating that President Trump’s press secretary, Sean Spicer, said that President Trump would stick to his planned list of executive orders and that ditching the TPP is part of that list.
“He is going to make sure every deal he cuts, just like he did in business, puts American workers and American manufacturing, American services first,” Spicer added.
Australian trade minister Steve Ciobo told America’s CNN that the TPP was not ‘dead’.
“What I would encourage President-elect Trump to do, what we’d really encourage the Americans to do, is to consider that there may be aspects of the TPP that they don’t like, but this is not a deal to be junked,” Ciobo said.
President Trump has previously said that he is only interested in doing bilateral deals with other countries.
However, according to Dr Giovanni Di Lieto, lecturer at Monash Business School, Australia all is not lost, even with the TPP potentially never seeing the light of day. Australia has a number of other trans-pacific trade options which its industry, including manufacturers can exploit.
“Running alongside the crippled TPP, and potentially of more importance to Australian trade, has been the Regional Comprehensive Economic Partnership,” Dr Leto said.
“If, as seems likely, the RCEP is accomplished in the near future, it will be the world’s largest free-trade agreement, covering a population of 3.5 billion, or more than 50 per cent of the world total, and about 40 per cent of the world trade volumes.”

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