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Trans-Pacific Partnership Countries Reach Landmark Agreement in Atlanta

The Trans-Pacific Partnership group of countries – the United States, Australia, Brunei-Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – on 5 October reached a landmark agreement in Atlanta after a week of intensive discussions that required the participating trade ministers to make a number of tough political decisions on sensitive issues, including in particular in the areas of intellectual property rights and dairy and automotive market access. Negotiators will continue technical work in the weeks ahead to prepare a complete text for public release, including a legal review and drafting, verification and translation of the text.

A statement by trade ministers read by U.S. Trade Representative Mike Froman at the conclusion of the Atlanta ministerial indicates that the agreement “achieves the goal we set forth of an ambitious, comprehensive, high standard and balanced agreement that will benefit our nations’ citizens.” The statement adds that the deal “brings higher standards to nearly 40 percent of the global economy” and “addresses the challenges our stakeholders face in the 21st century, while taking into account the diversity of our levels of development.” The ministers expect this ”historic” deal to “promote economic growth; support higher-paying jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and to promote transparency, good governance, and strong labour and environmental protection.” When asked about the significance of the agreement at a question-and-answer session at the closing press conference, USTR Froman and other ministers highlighted the fact that TPP will help define international trade rules in the Asia-Pacific region and globally.

According to a fact sheet released on 5 October by the Office of the U.S. Trade Representative, the agreement includes 30 chapters covering trade and trade-related issues, beginning with trade in goods and continuing through customs and trade facilitation; sanitary and phytosanitary measures; technical barriers to trade; trade remedies; investment; services; electronic commerce; government procurement; intellectual property; labour; environment; ‘horizontal’ chapters meant to ensure that TPP fulfils its potential for development, competitiveness and inclusiveness; dispute settlement; and exceptions and institutional provisions. The deal incorporates new and emerging trade issues and cross-cutting issues, including matters related to the Internet and the digital economy, the participation of state-owned enterprises in international trade and investment, and the ability of small businesses to take advantage of trade agreements.

Most tariffs on industrial goods will be eliminated immediately, with tariffs on a range of sensitive products phased out over longer timeframes. The parties agreed not to use performance requirements, which are conditions such as local production requirements that some countries impose on companies in order for them to obtain tariff benefits. In addition, the parties agreed not to impose WTO-inconsistent import and export restrictions and duties, including on re-manufactured goods. In addition to committing to substantial duty elimination or reductions on agricultural products, the parties agreed to promote policy reforms by eliminating agricultural export subsidies, working together in the WTO to develop disciplines on export state trading enterprises and limiting the timeframes allowed for restrictions on food exports.

The parties will eliminate most tariffs on textiles and apparel immediately, although tariffs on certain sensitive products will be eliminated over longer timeframes. As expected, the origin rule for these products requires the use of yarns and fabrics from the TPP region in an effort to promote regional supply chains. The agreement includes a “short supply” mechanism that will allow apparel to incorporate certain non-originating yarns and fabrics that are not commercially available in the TPP region. Although not specifically mentioned in the USTR fact sheet, the text is also expected to include additional flexibilities (such as a single transformation origin rule) for specific apparel products. Importantly, the parties agreed to a single set of rules of origin and will implement a common TPP-wide system of showing and verifying that goods made in the region meet the applicable origin rules. The agreement also provides for “accumulation,” so that, in general, inputs from one TPP party will be treated the same as materials from any other TPP party if used to make a product in any TPP party.

The investment chapter provides the basic protections found in other investment-related agreements, including national treatment; most-favoured-nation treatment; “minimum standard of treatment” for investments in accordance with customary international law principles; prohibition of expropriation that is not for public purpose, without due process or without compensation; prohibition on “performance requirements” such as local content or technology localisation requirements; free transfer of funds related to an investment, subject to exceptions to ensure that governments retain the flexibility to manage volatile capital flows, including through non-discriminatory temporary safeguard measures (such as capital controls) restricting investment-related transfers in the context of a balance of payments crisis or the threat thereof, and certain other economic crises or to protect the integrity and stability of the financial system; and freedom to appoint senior management positions of any nationality. The TPP markets will be fully open to foreign investors except where a party has taken an exception (non-conforming measure) in one of two country-specific annexes: (1) current measures on which a party accepts an obligation not to make its measures more restrictive in the future and to bind any future liberalisation, and (2) measures and policies on which a party retains full discretion in the future.

The parties also agreed to implement transparent, non-discriminatory rules for developing technical regulations, standards and conformity assessment procedures while preserving their ability to fulfil legitimate objectives. Additionally, the parties will co-operate to ensure that technical regulations and standards do not create unnecessary barriers to trade. To reduce costs for TPP businesses, especially small businesses, the parties agreed to rules that will facilitate the acceptance of the results of conformity assessment procedures from the conformity assessment bodies in the other parties, making it easier for companies to access TPP markets. Parties will be required to allow for the public to comment on proposed technical regulations, standards and conformity assessment procedures to inform their regulatory processes and to ensure traders understand the rules they will need to follow. They will also have to ensure a reasonable interval between publication of technical regulations and conformity assessment procedures and their entry into force so that businesses have sufficient time to meet the new requirements.

A separate White House fact sheet states that TPP “includes the strongest worker protections of any trade agreement in history,” requiring all countries to meet core, enforceable labour standards as stated in the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work. Labour standards falling within the scope of the agreement include the freedom to form unions and bargain collectively; prohibitions against child labour and forced labour; requirements for acceptable conditions of work such as minimum wage, hours of work and safe workplace conditions; and protections against employment discrimination. The agreement also ostensibly includes the strongest environmental protections of any trade agreement negotiated to date, including provisions requiring the parties to combat wildlife trafficking, illegal logging and illegal fishing while prohibiting some of the most harmful fisheries subsidies and promoting sustainable fisheries management practices.

In addition, the White House statement indicates that the deal includes the first-ever disciplines to ensure that SOEs compete on a commercial basis and the advantages SOEs receive from their governments, such as unfair subsidies, do not adversely impact U.S. workers and businesses. The parties agreed to ensure that their SOEs make commercial purchases and sales on the basis of commercial considerations, except when doing so would be inconsistent with any mandate under which an SOE is operating that would require it to provide public services. They also committed to ensure that their SOEs or designated monopolies do not discriminate against the enterprises, goods and services of other parties. In addition, the parties will provide their courts with jurisdiction over commercial activities of foreign SOEs in their territory and will ensure that administrative bodies regulating both SOEs and private companies do so in an impartial manner. Moreover, the parties will provide a list of their SOEs to the other parties and will furnish additional information upon request on the extent of government ownership or control and the non-commercial assistance they provide to SOEs.

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