By Michael Dean, Director, Free Trade Agreement Outreach Section
The TPP-11 (also known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) is an historic and ambitious agreement.
It is a regional free trade agreement with a membership that includes some of our most important trading partners from the dynamic Indo-Pacific region.
The TPP-11 will enter into force sixty days after six countries have ratified the agreement. To date, Mexico, Japan and Singapore have ratified the TPP-11. It is important for Australia to be in the first group of six countries ratifying the agreement, as the TPP-11 will deliver greater economic growth and more jobs for our nation.
In no particular order, here are five reasons why the TPP-11 is a good deal for Australia.
1. Australian exporters and investors will benefit from new market access opportunities in other TPP-11 countries as a result of tariff reductions and other liberalisation.
The TPP-11 greatly expands on the preferential market access Australian exporters and investors already have through our existing free trade agreements, such as that with Japan. It also delivers new market access opportunities, effectively new free trade agreements, in relation to Mexico and Canada.
Significant TPP-11 wins for Australian exporters include:
- Going beyond commitments in the Japan-Australia Economic Partnership Agreement, Japan will accelerate reductions in its beef tariffs to 9 per cent 15 years after the TPP-11 entering into force (countries without an FTA with Japan will continue to face a 38.5 per cent tariff).
- Mexico and Canada will implement new quotas for cheese, milk powders and butter;
- TPP-11 countries will eliminate remaining tariffs on manufactured, resources and energy products; and
Australian services exports to TPP-11 countries will benefit from a wide range of commitments, which will guarantee levels of access, reduce some regulatory risks and improve transparency and predictability in cross-border trade and investment.
2. Australia will benefit from TPP-11 rules that are broader in scope than other free trade agreements.
The TPP-11 incorporates rules commonly found in other free trade agreements, such as customs rules that make goods trade at the border easier and more predictable. The TPP-11 also includes rules on issues that have not yet been incorporated into other trade agreements, such as rules relating to state-owned enterprises (SOE).
These SOE rules will help ensure large SOEs in other TPP-11 countries do not discriminate against Australian suppliers of goods or services, or benefit from unfair government-conferred advantages that could lead to market distortions when they compete with private businesses. The TPP SOE rules also provide flexibility so Australia can continue to use SOEs, like Australia Post, to deliver public services.
The broad scope of the TPP-11 rules will create more Australian export and investment opportunities, as the agreement will promote competition and encourage new market entrants in other TPP-11 countries. Australia is well placed to comply with TPP-11 rules as a result of the economic reforms we have undertaken over the last few decades.
3. Expanded TPP-11 membership will amplify the benefits for Australia.
The TPP-11 allows for an expanded membership in the future – beyond the initial 11 signatory countries. This aspect of the TPP-11 has the potential to enhance the benefits of the agreement for Australia and other founding members. This is because new members will need to make additional market access commitments to Australia and other members on goods, services and investment. New members must also comply with rules designed to reduce barriers and facilitate greater trade and investment between Australia and other existing TPP members.
4. TPP-11 delivers global value chain benefits to Australia.
Global value chains are an increasingly important element of international trade and investment, particularly with respect to several of Australia’s important partner countries in Asia (a global value chain is a series of interlinked production stages for a good and/or service that cut across international borders).
In addition to providing new market access opportunities, the TPP-11 establishes a common set of rules between the 11 countries. This includes one set of rules of origin and one standard set of documentation required to claim preferential tariff treatment on goods exported from Australia to other TPP-11 countries. This will make it easier for Australian businesses to participate in, and benefit from, global value chains. The global value chain benefits associated with the TPP-11 will also deliver a greater range of good and services offered at more competitive prices to Australian consumers.
The substantial global value chain benefits Australia obtains from the TPP-11 will expand as the membership of the agreement grows beyond the 11 countries that undertook the negotiations (For more information about global value chains, refer to the 2017 Foreign Policy White Paper).
5. Contrary to some public commentary, Australian compliance with the TPP-11 will not restrict our capacity to regulate in the public interest, including with respect to: national security; food standards and labelling; quarantine measures to protect human, animal and plant health; consumer protection; public health; and the environment.
Australian compliance with the TPP-11 will not:
- require changes to Australia’s intellectual property or health policies or laws;
- have any impact on Australia’s Pharmaceutical Benefits Scheme or timely access to affordable medicines;
- increase the price of medicines for Australians;
- change arrangements for regulating foreign investment in sensitive sectors; or
- change the requirement for Australian employers to comply with labour, employment and taxation laws.