After many failed attempts, the Trans-Pacific Partnership (TTP) has been resurrected, with 11 countries agreeing to sign the multinational trade pact without the US.
What does this mean for Australia? SM brings you the ins and outs of the deal.
After president Trump officially withdrew the US from the TPP shortly after he was elected president, the 11 remaining countries, including Australia, continued negotiations.
Last year these countries’ leaders attempted to meet in Vietnam to sign the newly named TPP 11 trade pact. However, this fell flat after Canadian prime minister Justin Trudeau failed to show up.
Last week, after two days of negotiations in Tokyo, consensus was reached on several remaining core elements of the latest version of the deal, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
The 11 countries are set to sign the deal in Chile in March.
What is the deal?
The 11 nations have agreed on new trade rules that make it cheaper and easier to export to and invest in each other’s countries. The main aim is to cut tariffs and introduce common laws and regulations between the countries.
The 11 members combined account for about 13% of global GDP – a little over half the US share of 24.5%.
The deal is yet to be made public as it is undergoing a legal review and translation before the signing, but a joint statement from the nations said “the agreement would deliver 18 new free trade agreements between the TPP parties”.
What does it mean for Australia?
Australian prime minister Malcolm Turnbull said the deal will improve export opportunities for local companies, leading to job creation.
“The TPP will eliminate more than 98% of tariffs in a trade zone with a combined GDP of $13.7tn,” he said.
“For Australia, that means new trade agreements with Canada and Mexico and greater market access to Japan, Chile, Singapore, Malaysia, Vietnam and Brunei.”
Speaking at the World Economic Forum (WEF) in Davos, trade minister Steve Ciobo said a third of Australian exports went to the 10 other countries involved with the deal.
However, Paul Dales and Katie Hickie, from economics research consultancy Capital Economics, have questioned the scale of the benefits promised by Turnbull.
In an online post, they said the boost to Australia’s economy would be “very small” and that of the 11 countries Australia would receive the smallest increase in national income.
They wrote: “The prime minister used data from the Peterson Institute to declare that the TPP will boost Australia’s real national income by $12bn by 2030. But it amounts to just 0.5% of real national income – that’s smaller than the projected boost to the incomes of the other 10 nations [involved in the trade deal]. When spread over 12 year, the TPP may boost Australia’s economy by just 0.04% per year.”
Who in Australia will benefit the most?
The Australian agriculture and farming industry is expected to gain the most benefits from the deal.
Don Mackay, chair of the Red Meat Advisory Council, said improved market access through the TPP would flow in key markets, including Japan, Mexico and Canada.
“The implementation of the agreement will help ensure that the Australian red meat supply chain remains internationally competitive, with more seamless trade rules, reduced costs and less red tape making it easier for our sector to respond to the growing consumer demand across much of the Asia-Pacific region,” he said.
The deal should also help Australia sell more sugar, rice, dairy, wine and seafood, but Australian farmers will have to compete against the other 10 nations who will also be hoping to capitalise on more open trade.
John Droppert, a senior analyst at Dairy Australia, said the removal of tariffs on cheese products into Japan would be a highlight, given Australia exports about 80,000 tonnes of cheese to Japan every year.
Japan is also one of the biggest buyers of Australian wheat for noodle making.
What happens if the US wants to re-join?
In an interview at Davos with CNBC, president Donald Trump said the US would consider staying in the TPP if American negotiators were able to create a better agreement for the US.
If that happens, the deal would cover around 40% of global GDP and a quarter of world trade. The Australia Industry Group said the deal would naturally be stronger with the participation of the US.
However, Droppet said the absence of the US from the deal is positive for the Australian dairy industry.
“The US has in the past been a real cost competitor into Japan,” he said. “They tend to compete on price, so of course the more tariffs and barriers they face, the more difficult it is for them to do that.
“It’s only a good thing for us that the US has excluded themselves from that agreement.”
Any criticisms over the new TPP?
The big criticism of the TPP trade deal is that it takes power away from individual governments.
Specifically, it is over the inclusion of the investor-statement-dispute-settlement mechanism (ISDS), which allows foreign companies to sue governments if they argue they were denied access to the country’s market.
The most famous example in Australia was when tobacco company Philip Morris sued the Australian government for introducing plain packaging of cigarettes in 2011. It was ultimately unsuccessful.
Critics argue that with the mechanism in place, governments cannot make policy without fear of facing a lengthy and costly legal case.
However, Ciobo has dismissed critics’ concerns over the inclusion of the mechanism as an “absurd scare campaign” and said governments can still make their own regulations.