US President-elect Donald Trump has released a video laying out actions he’ll take on his first day in office on January 20, including withdrawing the US from a trans-Pacific Partnership trade deal.
“On trade, I am going to issue our notification of intent to withdraw from the trans-Pacific Partnership, a potential disaster for our country,” he said. “Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores.”
The TPP is a trade agreement among 12 of the Pacific Rim countries — not including China — that was concluded in October last year and was formally signed by participating nations on February 4, in Auckland after seven years of negotiations. It runs to some 30 chapters long. But its future is now uncertain after the US election result and Mr Trump’s declaration today.
WHAT IS THE TPP?
* The trans-Pacific Partnership is the world’s largest regional trade agreement, involving 12 nations with a collective population of 800 million and covering about 40 per cent of the global economy.
* Australia joined the negotiations in late 2008 and former trade minister Andrew Robb was the lead negotiator since the Coalition government was elected in 2013.
* The TPP eliminates more than 98 per cent of tariffs in the region, removing import taxes on about $9 billion of Australian trade.
* Beyond market access, the TPP creates a single set of trade and investment rules between its members countries making it easier and simpler for Australian companies to trade in the region.
* For agriculture, the TPP will eliminate tariffs on more than $4.3 billion of Australia’s dutiable exports of agricultural goods. A further $2.1 billion of Australia’s dutiable exports will receive significant preferential access through new quotas and tariff reductions. Australia exported around $16.7 billion worth of agricultural goods to TPP countries in 2015, representing close to 34 per cent of Australia’s total exports of these products.
WHAT COUNTRIES WERE INVOLVED?
* Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States and Vietnam.
* Even though Australia already have bilateral trade agreements with some of these countries, the government says the deal involving all TPP members will break new ground and give our industries more access to markets.
WHAT DOES THE DEAL COVER?
* The agreement cuts over 18,000 tariffs. Exports, including beef, dairy, grains, sugar, horticulture, seafood, wine, resources and energy, and manufactured and other goods.
* It also addresses modern trade and investment issues such as competition, e-commerce, anti-corruption and levelling the playing field between private business and state-owned enterprises.
* Highlights included:
* Beef: the TPP will see significant reductions and elimination of tariffs on beef and beef products into Japan (building on the Japan-Australia Economic Partnership Agreement (JAEPA); elimination of tariffs on beef and beef products into Mexico and Canada over 10 years and elimination of the AUSFTA beef safeguard into the US;
* Sugar: for the first time in over 20 years, Australia has been granted guaranteed new access into the US; tariff elimination and 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
* Rice: for the first time in over 20 years, quota expansion for Australian rice into Japan and agreement to new administrative arrangements to facilitate trade;
* Dairy: elimination of tariffs on a range of cheeses covering over $100 million in existing trade with Japan, new preferential access for a further estimated $100 million of trade, building substantially on JAEPA and new quota arrangements for Australia on butter/skim milk powder. In the US elimination of tariffs on dairy products including milk powders, ice-cream, infant formula and selected cheeses, increased quota access of 9000 tonnes for Australian cheese exports and improved quota administration arrangements. New preferential access into Mexico and the highly-protected Canadian market;
* Cereals: elimination of tariffs on wheat and barley into Mexico (within 10 years) and Canada (upon entry into force). Reduction of the mark-ups applied to wheat and barley in Japan;
* Wine: elimination of tariffs into Mexico (between 3 to 10 years) and Canada (upon entry into force), Peru (within 5 years) and, for the first time, Malaysia (within 15 years) and Vietnam (within 11 years); and
* Seafood: elimination of all tariffs into Canada, Peru and Vietnam on entry into force, and Mexico and Japan within 15 years.
* Australia’s exports of resources and energy products to TPP member countries are worth over $38 billion. This includes around $33 billion of resources and energy exports to Japan. While the majority of Australia’s major exports, such as coal, iron ore and liquefied natural gas already enter TPP countries duty-free, the TPP has secured additional market access, including:
Immediate elimination of tariffs on iron ore, copper and nickel to Peru;
* Elimination of tariffs on butanes, propane and liquefied natural gas to Vietnam over 7 years;
* Elimination of Vietnam’s 20 per cent tariffs on refined petroleum over 10 years – Australia exports were valued at $13 million in 2015.
* Australia’s exports of manufactured goods to TPP countries were worth an estimated $20 billion. New market access outcomes include:
Immediate elimination of tariffs on iron and steel products in Canada and in 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 duties on paper and paperboard to Peru over 10 years;
Elimination of tariffs on automotive parts to Vietnam over 10 years;
A requirement for Malaysia to cease providing excise tax credits for locally produced automotive parts, which had favoured the use of Malaysian components over parts imported from Australia; and
Australian businesses able to bid for tenders to supply goods (such as pharmaceutical products, electronic components and supplies) used for government purposes in Brunei Darussalam, Canada, Malaysia, Mexico, Peru and Vietnam.
The TPP has its critics who claim the deal would produce very little economic benefit over the next 15 years to Australia. Indeed the World Bank, in a report released in January, said the deal would boost Australia’s economy by just 0.7 per cent by the year 2030. According to the World Bank analysis, other nations stood to gain more such as Vietnam (10 per cent bigger by 2030), Malaysia’s (8 per cent bigger), New Zealand (3 per cent bigger), and Singapore (3 per cent bigger).
According to Civil Liberties Australia, a provision in the TPP, the Investor State Dispute Settlement clauses (ISDS), takes away sovereignty from Australia, and usurps the role of the Australian High Court as final arbitrator of Australian law. “The treaty was negotiated by the world’s giant multinational corporations, whose lawyers had access to all drafts over the past five years: civil society and opponents were only allowed to see the treaty for the first time once it had been locked in stone,’’ Civil Liberties Australia said.
THE WAY AHEAD
With Mr Trump intending to withdraw, the view among several leaders at the Asia Pacific Economic Co-operation summit in Peru was that China could be asked to join, presenting significant implications for long-term US strategic “soft power” engagement in the Asia-Pacific region and adding pressure for a potential US rethink.
The Australian has been told that during closed-door meetings yesterday among member nations of the TPP at the APEC summit, an option of “going it alone” without the US was raised as a “serious” consideration.
Several of the Pacific Rim leaders had informally agreed they should press ahead to ratify the free-trade deal to reduce tariffs among the 11 remaining members.
It is understood Canada, New Zealand, Mexico, Chile, Peru and several of the Asian country members were engaged in discussions about the idea. Australia was also supportive, with sources confirming to The Australian that Trade Minister Steve Ciobo had told a TPP breakfast at the start of the APEC summit on Friday that the pact should proceed regardless of the US position.
Australian Prime Minister Malcolm Turnbull had been optimistic Mr Trump might have a change of heart.
“It may well be over time that the TPP is embraced by the United States … perhaps in the same form it is today, perhaps in a different form,” he said in Lima on Sunday.