Following on from last year’s trifecta of North Asian Free Trade Agreements the Export Council of Australia (ECA), applauds the announcement last night that negotiations for the Agreement to establish the Trans-Pacific Partnership (TPP) have concluded in Atlanta delivering a deal allowing for further integration of the Australian economy into the world’s fastest growing region.
Chief Executive Officer of the ECA Lisa McAuley said Australia’s ongoing pursuit of trade liberalisation is to be commended as it helps facilitate greater trade and investment flows. This is vital to the Australian economy as trade is a key driver of jobs, innovation and long term prosperity.”
“By creating commonly agreed rules to trade in goods and services and promoting transparency, the TPP opens up new trade and investment opportunities for Australian businesses in the region, which is a key driver of global economic growth.”
The nations who are parties to the TPP Agreement comprise 11.2 per cent of the world’s population, 25.5 per cent of total world trade, and approximately 70 per cent of Australia’s trade flows through the Asia-Pacific region.
There are 12 countries who are parties to the TPP Agreement; Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
Five of which were among Australia’s top 10 trading partners for goods and services in 2013-14.
Australia already has FTAs with a number of those countries but the TPP Agreement will improve the outcomes from those FTAs. Importantly the TPP Agreement now provides for new trade deals with Canada, Peru and Mexico with whom Australia has not previously had FTAs.
Some of the highlights of the TPP Agreement can be summarised as follows.
- Improving current levels of benefits occasioned under our current FTAs with parties who will also be parties to the TPP Agreement. There has been some criticism that our current FTAs have not “gone far enough” and the TPP Agreement provides a welcome opportunity for Australia to negotiate improved outcomes for some of those parties who believe that better outcomes can be achieved.
- Advantages to Australian consumers with reduction in levels of customs duties hopefully being passed on to those consumers and, presumably, more ready access to a wider variety of goods in a more efficient manner.
- It could assist in improving trade facilitation and reducing red tape and undue regulation in parties to the TPP Agreement without needing to wait for the completion of the WTO Trade Facilitation Agreement.
- It could set the agenda and the framework for further FTAs such as the RCEP and an Asia–Pacific Agreement.
- Improving the confidence of traders and consumers in Australia and in other TPP negotiating parties.
Key takeaways for Australian companies include:
- For Services: TPP countries account for 24 per cent of the world’s trade in services, with Australian services exports to TPP countries worth over $20 billion in 2014 (almost 35 per cent of total Australian services exports). The TPP will contribute to a significant expansion and diversification of Australian services exports to Asia-Pacific countries by liberalising key barriers, providing more transparent and predictable operating conditions in TPP countries, and capturing future services sector reforms.
- For Goods exporters: The TPP will eliminate 98 per cent of tariffs in the TPP region. Tariffs on US$9 billion of Australia’s dutiable exports to TPP countries will be eliminated. These outcomes build on the strong trading relationships Australia already has with many TPP countries, underpinned by FTA arrangements with Brunei Darussalam, Chile, Japan, Malaysia, New Zealand, Singapore, the United States and Vietnam.
“Increasing trade and investment is absolutely crucial to unlocking Australia’s future economic growth and the TPP Agreement will help achieve this by providing Australian businesses with greater certainty and transparency when competing in TPP markets. It will also level the playing field with local competitors in those markets,” Ms McAuley said.
Preparing for the new relationship with Mexico: In anticipation of the TPP Agreement, the ECA has in the background been working on a research report and business app entitled ” Mexico: Reform and Opportunity”. Mexico is the second largest and most interconnected economy on the continent, as well as Australia’s second largest trading partner in Latin America. Reforms by the current Mexican administration are opening new sectors and new opportunities to Australian businesses, while Mexico’s network of FTAs with North and South America make the country an exceptional gateway to the Americas.
“The report, to be launched in December, now provides a practical and timely examination of the opportunities for greater engagement by Australian businesses in a reforming Mexico. It examines the current business environment and Australian experience in the country, discusses the ongoing economic reforms and clarifies what they mean for Australian businesses on sector-by-sector basis.” Ms McAuley said.
Getting the deal through: The ECA now looks forward to the release of the text of the TPP for close review and also looks forward to the domestic adoption of the TPP by the TPP countries which could create some issues in light of forthcoming elections in Canada and the US
ECA director and Chair of the ECA’s Trade Policy Committee Andrew Hudson said the ECA recognises that this process will not be easy.
“There is a long and potentially rocky path to secure all necessary approvals from the TPP countries, the ECA hopes that those approvals will be secured to allow for implementation of the TPP and the commencement of its benefits at the earliest opportunity,” Mr Hudson said.