Six things manufacturers should know about the TPP

Posted by Mike Rozon on
Top Manufacturers Blog

What is the Trans-Pacific Partnership (TPP)?

The TPP is a free trade agreement that completed negotiations on October 4, 2015. Negotiations were done in secret and an official document has not been released.

The agreement involves 12 countries along the Pacific Rim including: The United States, Japan, Canada, Australia, New Zealand, Peru, Chile, Mexico, Canada, Singapore, Brunei, and Vietnam.

These countries have around 800 million potential consumers, and almost 40 per cent of the global economy—a combined GDP of US$28.5 trillion.

The agreement needs to be ratified by at least six countries (85 per cent of the total GDP) to come into effect.

What TPP policies should I be aware of?

Eighty-one per cent of Canada’s export market is with TPP countries. The TPP will also be the largest export market for the US, totaling $993 billion in exports of goods and agricultural products to the Asia-Pacific Region in 2011 alone. Both the US and Canada currently pay tariffs on exporting to TPP countries –such as Canada’s tariff of 17.3 per cent to Japan for agricultural products.

With the TPP they will have the advantage of eliminated tariffs on industrial goods, such as agricultural products, forestry products, chemicals and minerals within 10 to 20 years. The TPP will lower more than 18,000 tariffs that are currently being imposed on the US.

“This is absolutely a win,” said Brad Fougere from Canadian Manufacturers and Exporters (CME). CME announced their goal to double Canada’s manufacturing output and exports by 2030, and fully supports the TPP. “If you can sell into another country where it’s exactly the same as selling down the street, that’s a massive victory.”

The trade agreement will also change the rules around food labels—limiting identification on how and where food was produced which could potentially include labels on those identifying genetically modified foods.

What are some criticisms of the TPP for manufacturing jobs?

An increase in exports can create more jobs domestically. Alternatively, an increase in imports can mean job loss. This is one of the main worries that manufacturing workers have when it comes to the TPP.

Manufacturing still accounts for 35 per cent of America’s GDP—something that could change with the increase in a trade deficit as a result of the TPP.

Hillary Clinton has also called out TPP plans for not addressing currency manipulation—something that could create an advantage for countries like Malaysia, Japan and Singapore in their exports, further exacerbating America’s current trade deficit. The Economic Policy Institute cites the loss of more than 5 million jobs in 17 years due to trade agreements causing trade deficits and manufacturing offshoring.

How will this affect pharmaceuticals?

MSF (Doctors without Borders) expressed its disappointment with the countries who have gone along with some aspects of the agreement released in a WikiLeaks document.

The US is seeking longer protections on their drug patents and intellectual property—including a data exclusivity period for biologic drugs (which protects clinical test data on new drugs, preventing generic drug manufacturers from accessing them).

The argument being that countries with universal health coverage, such as Canada and Australia, could be facing escalating drug costs, and developing countries could lose access to drugs that they need.

Despite this, The Canadian Generic Pharmaceutical Association has countered this with a positive reaction to what’s been leaked so far. The commitments are similar to those being made for CETA with the European Union. Canada already provides eight years of data exclusivity for biologics and patents, which has also been set out in the released TPP documents.

The US Government on the TPP

President Obama has positioned this deal as the best way for the countries involved to counter the rise of China in the global market, and rewrite the rules on how international trading can work.

Obama has Trade Promotion Authority (TPA) on the TPP. This is a fast-track trading tool that allows Obama to temporarily negotiate international trade agreements on behalf of the US government, and submit them to congress without opportunities for congress to amend it. However, they can still approve or disapprove it.

The Canadian Government on the TPP

Canada’s newly elected Liberal Party under the leadership of prime-minister-designate Justin Trudeau is supportive of the TPP negotiated by outgoing Prime Minister Stephen Harper. They will be scrutinizing the documents when they go public and voting on it in Parliament.

With the combination of the TPP and the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, and The Canada-Korea Free Trade Agreement (CKFTA), Canada is in a position to be the only country in the world to have preferred access to Asian, Pacific and European Markets. This means a free trade zone of $46 trillion, 1.3 billion consumers and over 60 per cent of the global economy.

Categories: Manufacturing