TPP and U.S. Exports – What’s Next?
Increase in U.S. Exports Will Vary by Industry
After several missed deadlines and multiple rounds of negotiations, the Trans-Pacific Partnership (TPP) ministerial meeting in Atlanta concluded on October 5 with the announcement of a final deal. If implemented, the agreement would cover 40 percent of global trade. While the full text of the 30-chapter deal is not expected to be available for several weeks, the Obama administration and the Office of the U.S. Trade Representative (USTR) recently released background information, which provides a general overview of the agreement. Supporters of the TPP agreement suggest that the deal will open markets for U.S. goods. However, whether the agreement will significantly increase U.S. exports will vary by industry.
For many industry stakeholders, the agreement will standardize the export process and open up new markets. A critical component of the agreement is that it eliminates or reduces tariffs on a broad range of industrial and agricultural goods. The agreement also addresses other non-tariff trade barriers, requiring restrictions on imports for safety or environmental reasons to have a scientific basis. This is a boon for many U.S. manufacturing businesses, which are currently locked-out of some Asia-Pacific markets due to tariff or non-tariff trade barriers.
On the other hand, some U.S. industries may find it difficult to compete with the products from other countries involved in the deal. If early reports are accurate, the agreement could have a significant impact on the automobile and the pharmaceuticals industries.
With respect to the automobile industry, the U.S. and Japan, along with Canada and Mexico, reportedly reached an agreement on market access and rules of origin. Under the agreement, the U.S. would phase out certain tariffs on trucks and automobiles, and immediately eliminate its tariffs on 80 percent of auto parts.
The agreement would also have a significant impact on the pharmaceuticals industry. Ambassador Michael Froman said the final deal would entail at least five years of exclusivity for data used to show the safety and efficacy of advanced drugs known as biologics. While this protection would be complemented by other mechanisms that TPP countries already have in place, it falls far short of the 12 years of market exclusivity sought by the U.S. brand-name pharmaceutical industry.
Trade among the so-called “sensitive products” became just that – highly sensitive and contentious. Ultimately, it appears that the TPP prescribes relatively mild changes for U.S. firms in these areas.
For many years, the U.S. has protected its domestic sugar market from lower-priced global suppliers. Despite congressional pressure demanding a “significant opening of access to sugar,” reports suggest that negotiators took a more measured stance, only moderately expanding US sugar quotas.
In a move viewed as favorable to US rice exporters, Japan has apparently provided the United States a country-specific quota and agreed to reallocate some of its World Trade Organization (WTO) import quota to medium-grain rice. This would allow the U.S. to sell over 100,000 tons of additional rice per year to Japan.
Under the Trade Promotion Authority (TPA) legislation signed into law earlier this year, the President must notify Congress of his intent to sign the agreement at least 90 days before doing so, and must publicly post the text of the agreement no less than 60 days before his signature. At this point, the timing for Congress’ vote on the agreement remains unclear. But with the impending Presidential election, the administration may wish to see the bill move through Capitol Hill as soon as possible, which would be in early 2016.
Meanwhile, negotiations for another major trade deal continue. The eleventh round of Transatlantic Trade and Investment Partnership (TTIP) negotiations between the U.S. and the European Union will convene in Miami on October 19. Moving forward, U.S. exporters should keep a close eye on future negotiations and work to promote market opening initiatives.
Frank Samolis is chair of the international trade practice at the law firm Squire Patton Boggs.
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