07 Nov You Down with TPP? An Overview of the Trans-Pacific Partnership and its U.S. Implications
The Trans-Pacific Partnership (TPP) is an expansive and comprehensive trade agreement, comprised of 6,000 pages, entered into between the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. If the TTP is ratified, the food industry can expect increased trade and food choices in each member nation. One challenge will therefore be to increase training of federal agencies that control the U.S. border, so that they can guard against importation of counterfeit or unsafe products.
After seven years of negotiation, the TPP was signed by the leaders of each member country in February. The TPP will not go into effect, however, until each signatory ratifies the deal in their respective countries. The TPP is expected to go to vote before Congress either in summer 2016 or just following the 2016 elections.
The TPP, as stated by the Office of the United States Trade Representative, aims to promote global trade, bring economic growth and social benefits, create new opportunities for workers and businesses, contribute to raising living standards, benefit consumers, reduce poverty and promote sustainable growth. Presidential candidates Bernie Sanders and Donald Trump voiced some skepticism towards this line of reasoning.
One of the most important issues for U.S. companies addressed in the TPP is the intellectual property framework. These provisions provide much needed support, and will be a vital tool, for U.S. companies to compete and expand into the Asia-Pacific region. The TPP provides strong intellectual property provisions, which cover trademarks, geographical indications, copyright, patents, trade secrets and information required for approval of certain regulated products.
Geographical Indicators and Common Names Are Eligible For Trademark Protection
Of particular note, the TPP provides, consistent with U.S. trademark law, that geographical indicators and common names are eligible for trademark protection. This marks a departure from the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which does not consider geographic indicators under its trademark provisions. This will be especially beneficial for agricultural companies who often use geographic indicators or common names for trademarks and tradenames.
Substantial focus has also been directed at the reductions and elimination of tariffs (approximately 18,000) on exports between the TPP countries. California will see near elimination of tariffs on their top agricultural exports, namely, vegetables, tree nuts, fruits, and dairy. In addition, wine and bourbon exports get a boost with an elimination and reduction of tariffs on wine and bourbon exported to Japan. To put it into perspective, currently, wine exported to Japan is taxed at levels up to 58% and bourbon faces taxes as high as 55%.
The objective is that these measures will help U.S. farmers and ranchers compete in the Asia Pacific region by providing these foreign customers with high-quality food and agricultural goods; without the burdens and restrictions currently in place that make it impractical for global trade in the region.
Benefits for Smaller Companies
Historically, trade agreements have favored large corporations; however, the TPP aims to make global market expansion feasible for small to mid-size companies as well. TPP will benefit smaller companies by eliminating tariff and non-tariff barriers, streamlining customs procedures, strengthening intellectual property protection, promoting e-commerce, and developing more efficient and transparent regulatory regimes. The objective of the TPP with respect to these smaller companies is to make it cheaper, easier, and faster to get their products across borders and into foreign markets through efficient and transparent customs procedures. In addition, the TPP has specific provisions related to challenges that give rise to smaller companies engaging in global trade.
It’s important to keep in mind that the channels of trade are opening both ways. The U.S. has minimized restrictions and lessened tariffs on foreign imports as well. The concern here, and the basis for much of the criticisms of the TPP, is that competition, both within and outside, the U.S. is going to increase with a substantial negative impact on U.S. companies. The reports and studies are conflicted and divided as to how this is really going to affect the U.S. economy. In reality, the full impact of the TPP won’t be realized for years as many of the provisions, particularly those concerning tariffs, roll out, in some cases, over a 30-year period. That being said, it would be wise for companies, both small and large, to prepare for the TPP by taking steps to protect its market share and effectuating strategies for global market growth and brand expansion.
As we move closer to the possibility of TPP Congressional approval, it will be a priority for companies to understand how and to what extent the TPP will affect their business to allow ample time for strategic development so companies can enter the post-TPP world ready to take advantage of the new global market