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After more than nine years, the Trans-Pacific Partnership (TPP) was signed in Atlanta, USA on 5th October 2015. Announced in Australasia during the early hours of Tuesday 6th October, the multilateral trade deal was signed by 12 Pacific-rim countries, including Australia, New Zealand, USA, Japan, Brunei, Canada, Chile, Malaysia, Mexico, Peru, Singapore and Vietnam.
The Trans-Pacific Partnership (TPP) creates the world’s largest free trade area, involving countries that account for 36.1% of the world’s GDP in 2014. Also, while bilateral trade agreements have monopolised the world stage of late, this is one of the first multilateral trade deals in decades. From an Australasian perspective, the TPP involves major Pacific trade partners for both Australia and New Zealand. In fact, for New Zealand alone, exports to TPP countries accounted for 39% of all exports in 2014. Similarly, exports to TPP partners accounted for 32% of all exports from Australia in 2014. Probably the most attractive feature, the TPP grants Australia and New Zealand preferential access to the US economy – a dream that successive Australasian governments have long chased. For New Zealand, this is in addition to preferential access to the economies of Canada and Japan.
The TPP includes several policies that seek to liberalise trade between its signatories, including reducing tariffs. Nonetheless, the agreement also addresses non-tariff barriers that will result in promoting investment and the trade in services between the 12 countries. However, the multilateral trade agreement may not be solely economic in nature and may also possess political objectives. When announcing the signing of the TPP, US President Barack Obama stated that “when more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products.” Indeed, some commentators have contended that the US aims to use the TPP to offset China’s rising global economic and diplomatic influence, a major facet of the Obama administration’s pivot to Asia strategy.
To learn more, download Euromonitor international’s white paper: “An Introduction to Regional FTAs in Australasian Markets: Business Perspectives from India and China”.