Trans-Pacific Partnership (TPP) pact to drive jobs, growth and innovation for Australia
6 October 2015
Negotiations on the biggest global trade deal in twenty years, which first commenced more than five years ago, have been successfully concluded in Atlanta.
The historic Trans-Pacific Partnership Agreement (TPP) will deliver enormous benefits to Australia, including unprecedented new opportunities in the rapidly growing Asia Pacific region, with its rising middle class, for our businesses, farmers, manufacturers and service providers.
The TPP will establish a more seamless trade and investment environment across 12 countries which represent around 40 per cent of global GDP.
In 2014, one third of Australia’s total goods and services exports – worth $109 billion – went to TPP countries, which also include Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States and Vietnam.
Combined with our landmark trade deals with Korea, Japan and China, the TPP forms part of the government’s microeconomic reform strategy to support the diversification of our economy in this critical post-mining boom phase.
TPP countries account for 24 per cent of the world’s trade in services. Australia’s services exports to TPP countries were worth $20 billion in 2014, almost 35 per cent of our total services exports.
The TPP will enhance our competitiveness, promote growth, job creation and higher living standards.
By setting common international trade and investment standards between member countries, the TPP will make doing business across the region easier, reducing red tape and business costs.
It will slash barriers to Australian goods exports, services and investment and eliminate 98 per cent of all tariffs across everything from beef, dairy, wine, sugar, rice, horticulture and seafood through to manufactured goods, resources and energy.
This deal will increase market access for Australian sugar into the United States for the first time in 20 years ¬— effectively doubling Australia’s entitlements.
Australia will have an additional quota of 65,000 tonnes base allocation, as well as a 23 per cent share of additional allocations into the U.S. market ¬— triple the previous amount.
This will take average annual exports of sugar from 107,000 tonnes to 207,421 tonnes. Based on USDA long-term projections, this could see Australia exporting over 400,000 tonnes of sugar to the U.S. by 2019-20.
The offer from the United States is the largest made to any FTA partner since NAFTA was signed into law in 1993, and gives Australia equal access with Brazil, which is the world’s largest sugar producer.
The agreement significantly liberalises beef exports to Japan, and eliminates tariffs for beef into Mexico, Canada and Peru.
The TPP provides a particularly good outcome for a broad range of Australian services including education, professional services, transport, financial services, and access for Australian goods and services exporters to government procurement markets in the region.
Australia’s world-class Mining Equipment, Technology and Services (METS) and oilfield services sectors in countries like Vietnam, Malaysia, Mexico, Chile and Peru will also gain strong benefits.
This 21st century agreement will address contemporary trade challenges and stand as a model for many other future trade agreements around the world. The TPP’s new rules on state-owned enterprises (SOEs) will help Australian businesses to compete on a more equal footing with government-owned commercial enterprises in TPP markets and ensure that SOEs do not unjustifiably discriminate against Australian suppliers of goods and services.
In regard to intellectual property, TPP will not require any changes to Australia’s patent system and copyright regime.
The TPP recognises the importance of new innovative biologic medicines. The government has delivered on its promise not to change Australia’s existing 5 years of data protection for biologic medicines or any other part of our health system, including our Pharmaceutical Benefits Scheme (PBS). Concerns that the price of medicines would increase have proven to be absolutely unfounded.
The TPP investment chapter provides a modern Investor State Dispute Settlement (ISDS) mechanism which contains safeguards to protect legitimate government regulation in the areas of health and the environment. Australia will be able to ensure that tobacco control measures are never open to challenge, an issue on which we have been a leading voice.
State of the art e-commerce provisions will promote a more liberal cross border environment for the flow and storage of data, while also ensuring appropriate consumer protections and retaining the right of governments to regulate in the public interest. It will also improve access for small and medium-sized enterprises to increasingly important global value chains, with an emphasis on moving to paperless trading, making customs and export delivery more effective and efficient, along with user-friendly websites targeted at SMEs.
For investment, the TPP will create new opportunities and provide a more predictable and transparent regulatory environment.
Australian investment in TPP countries has more than doubled in the last decade to reach $868 billion in 2014, a rise of 16 per cent over the previous year. It represents 45 per cent of all outward investment. Investment in Australia from TPP countries more than doubled in the last decade to reach $1.1 trillion in 2014, a rise of 10 per cent over the previous year. Investment from TPP countries is 40 per cent of all foreign investment in Australia.
Conclusion of the TPP negotiations is the first concrete step towards realising the long-term vision of a Free Trade Area of the Asia Pacific. Importantly, the agreement’s open architecture allows for other members to join in the future which will amplify its benefits.
- Beef: Improving on the outstanding results from the Japan-Australia Economic Partnership Agreement the TPP further will reduce tariffs on Australian exports of beef to 9 per cent; tariffs on beef into Mexico and Canada will be eliminated within 10 years and the AUSFTA beef safeguard into the US will be eliminated;
- Sugar: Australia has been granted an effective doubling of access into the US with an additional 65,000 tonnes from entry into force and additional future quota allocations which, based on USDA long-term projections, could see Australian sugar exports to the US climb above 400,000 tonnes by 2019-20; further levy reduction for high polarity sugar into Japan, adding further to the competitive advantage of JAEPA; elimination of the tariff on refined sugar into Canada; elimination of tariffs on raw sugar into Peru; and for the first time wholesale licencing arrangements for supply of refined sugar to the food and beverage industries in Malaysia will be liberalised.
- Rice: For the first time in over 20 years, Australia will be able to export more rice to Japan and we have reached agreement on new administrative arrangements to facilitate trade. Rice tariffs into Mexico will be eliminated;
- Dairy: With Japan: tariffs will be eliminated on a range of cheeses covering over $100 million in existing Australian trade, and we will be given new preferential access for a further estimated $100 million of trade, building substantially on JAEPA outcomes. There is also new quota access for Australia on butter and skim milk powder. Australian exports to Japan of mozzarella for processing use will be duty free when blended with Japanese cheese
With the US: We have won access for 9,000 more tonnes of cheese, as well as tariff elimination on milk powders and Swiss cheese.
Australia will also gain new preferential access into Mexico and the highly-protected Canadian market;
- Cereals: Tariffs will be eliminated on wheat and barley exports into Mexico (within 10 years) and Canada (upon entry into force). There will be reductions of the mark-ups applied to wheat and barley in Japan and the creation of new quota arrangements beyond JAEPA;
- Wine: Tariffs will be eliminated into Mexico (between 3 to 10 years), Canada (upon entry into force), Peru (within 5 years) and, for the first time, Malaysia and Vietnam; and
- Seafood: Tariffs into Canada and Peru will be eliminated on entry into force, Japan and Mexico within 15 years.
RESOURCES AND ENERGY
Australia’s exports of resources and energy products to TPP member countries were worth close to $47 billion in 2014, representing 30 per cent of Australia’s total exports of these products.
- The TPP will deliver immediate elimination of tariffs on iron ore, copper and nickel to Peru;
- Elimination of tariffs on butanes, propane and liquefied natural gas to Vietnam within seven years – Australian exports were valued at $9 million in 2014;
- Elimination of Vietnam’s 20 per cent tariffs on refined petroleum – Australia exports were valued at $11 million in 2014;
Australia’s exports of manufactured goods to TPP countries were worth an estimated $27 billion in 2014. New market access outcomes include:
- Immediate elimination of tariffs on iron and steel products exported to Canada, and to Vietnam within 10 years;
- Elimination of ship tariffs in Canada over 5 to 10 years;
- Elimination of tariffs on pharmaceutical, machinery, mechanical and electrical appliances, and automotive parts to Mexico within 10 years;
- Elimination of tariffs on pharmaceuticals to Peru over 10 years;
- Elimination of duties on paper and paperboard to Peru over 10 years; and
- Elimination of tariffs on automotive parts to Vietnam over 10 years.
- Australian businesses will now be able to bid for tenders to supply goods (such as drugs and pharmaceutical products, electronic components and supplies) used for government purposes in Brunei Darussalam, Canada, Malaysia, Mexico, Peru and Vietnam.
- Mining Equipment Services and Technologies (METS) and oilfield service providers: There will be major new commercial opportunities for our world class service providers, including through:
- Mexico’s historic liberalisation of its energy sector;
- Vietnam opening its mining investment regime;
- Brunei Darussalam and Vietnam locking in future reforms to local content regimes or otherwise committing to a level playing field between Australian and foreign suppliers providing goods and services in the mining, oil and gas sectors;
- New rules on large state-owned enterprises like CODELCO, PETRONAS, PEMEX, VINACOMIN and PETROVIETNAM, which will help ensure that Australian goods and service providers can compete fairly for contracts.
- Professional services: Malaysia has locked in recent reforms to the legal, architectural, engineering and surveying services sectors, removing a number of restrictions that have long been of concern to Australian SMEs;
- Financial services: New opportunities for Australian exporters to TPP countries, with guaranteed ability to provide the following cross-border services: (i) investment advice and portfolio management services to a collective investment scheme and (ii) insurance of risks relating to maritime shipping and international commercial aviation and freight, and related brokerage;
- Temporary entry of business people: Preferential temporary entry arrangements for Australian business people and their spouses into key TPP markets, including the waiving of work permits and provision of automatic work rights for spouses in Brunei Darussalam, Canada and Mexico;
- Education Services: Australian universities and vocational education providers will benefit from guaranteed access to a number of existing and growth markets in Brunei Darussalam, Japan, Malaysia, Mexico, Peru and Vietnam, including being able to offer a wider range of courses to Vietnamese students, our third largest export market. Australia will also be well placed to supply online education services.
- Transport services: Australian freight and logistics providers stand to benefit from enhanced commitments that support integrated logistics supply chains. Australian providers of transport and logistics services in Malaysia and Vietnam will gain strong trade and investment protections for the first time. The TPP will capture future liberalisation of investment regulations in aviation in Vietnam and freight trucking in Malaysia and Vietnam, key markets for our airlines and logistics providers.
- Telecommunications services: Australian companies stand to benefit from the phasing out of foreign equity limits in Vietnam's telecommunications sector five years after the entry into force of the TPP and the ability to apply to wholly-owned telecommunications ventures in Malaysia.
- Health services: Australian providers of private health and allied services will benefit from greater certainty regarding access and operating conditions in Malaysia, Mexico and Vietnam.
- Hospitality and tourism services: Australian suppliers of travel agency and tour operator services will benefit from guaranteed access in Brunei Darussalam, Canada, Chile, Japan, Mexico and Peru; and greater certainty regarding access and operating conditions in Malaysia and Vietnam. Increased trade and investment among TPP countries will also increase demand for domestic tourism services and support the development of Australia’s tourism sector, particularly in rural Australia.
- Government procurement: New opportunities for Australian business to bid for government procurement services contracts, such as:
- Accounting, auditing and taxation services in Brunei Darussalam, Canada, Malaysia, Mexico, Peru and Vietnam;
- Management consulting services in Brunei Darussalam, Malaysia, Mexico and Peru;
- Computer and related services offered by all TPP Parties, along with maintenance of office machinery in Brunei Darussalam, Canada, Malaysia, Mexico, Peru and Vietnam;
- Architectural engineering and other technical services in Brunei Darussalam, Canada, Malaysia, Mexico and Peru;
- Land and water transport services in Brunei Darussalam, Malaysia and Peru;
- Telecommunication and related services in Brunei Darussalam, Canada, Malaysia and Peru;
- Environmental protection services in Brunei Darussalam, Canada, Malaysia, Mexico, Peru and Vietnam;
- Education services in Brunei Darussalam, Canada, Japan, Malaysia, Mexico and Peru; and
- Health and Social Services in Brunei Darussalam, Malaysia and Peru.
(Further details on the TPP services outcomes can be found in the following sector-specific fact sheets: Mining; Education; Professional Services; Transport and Logistics; Temporary Entry of Business Persons and Trade in the Digital Age).
The TPP will create new investment opportunities and provide a more predictable and transparent regulatory environment for investment.
The TPP will promote further growth and diversification of Australian outward investment by liberalising investment regimes in key sectors such as mining and resources, telecommunications and financial services.
Australian investors will also benefit from preferential investment screening thresholds. For example, Australian investments into Canada below CA$1.5 billion will not be screened.
Australian investors will also benefit from commitments offered by Japan, Vietnam and Brunei to only impose conditions on foreign investment on the initial sale of interests or assets owned by the government.
The TPP will promote further growth and diversification of foreign investment in Australia by liberalising the screening threshold at which private foreign investments in non-sensitive sectors are considered by the Foreign Investment Review Board (FIRB), increasing it from $252 million to $1,094 million for all TPP countries.
Under the TPP, Australia has retained the ability to screen investments in sensitive sectors to ensure they do not raise issues contrary to the national interest. All investments by foreign governments will continue to be examined and lower screening thresholds will apply to investment in agricultural land and agribusiness.
WORKER AND ENVIRONMENTAL PROTECTIONS
The TPP includes requirements for the highest labour and environmental standards including requiring TPP parties to combat wildlife trafficking and address illegal logging and illegal fishing, as well as reducing subsidies that cause the depletion of global fish stocks.
Detailed information on the TPP outcomes will be available progressively from 9:00 am AEST on Tuesday 6 October on the DFAT website at: http://dfat.gov.au/trade/agreements/tpp/
TPP negotiating parties are now finalising arrangements for the release of the TPP text, and it will be released well in advance of signature.
Each country will then undertake its domestic treaty-making process. For Australia, this will involve tabling the treaty text in parliament along with a National Interest Analysis and a review by the Joint Standing Committee on Treaties to which all interested parties can make submissions.
- Trade Minister's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555