The Trans-Pacific Partnership (Trade of Goods)

The Trans-Pacific Partnership (TPP) is one of the trade agreements proposed in

the Asia Pacific Region to facilitate a free trade region, along with the Regional
Comprehensive Economic Partnership (RCEP). Its goal is to eliminate tariffs between
the parties included in this visionary agreement. The foresighted gains to arise from this
agreement amounts to $1.9 trillion. The TPP economies (economies of the countries
involved in TPP) have a combined GDP of about $28 trillion, which is 40% of the worlds
GDP, around $9 trillion in the trade of goods and $2 trillion in the trade of services.
These make the TPP a formidable trading bloc that can bring out the economic
capability of lesser-developed member economies, such as Vietnam and Peru, as well
as to solidify the economic leadership of developed countries like Japan and United
States. This plan also features a free trading bloc that excludes China, which is, based
from hearsays, one objective of President Obama and the United States Government.
Due to the large economy of China, US wants to create an economic group that will
take down the gigantic Chinese economic empire. In addition with this, the US
government is also making this agreement a secret, and the National Economic
Development Authority (NEDA) in the Philippines are prohibiting everyone from the
access to this agreement due to a directive from the US government.
The sectors explicitly targeted by TPP in its proposal sent to its target economies
are as follows:
Goods
Customs
Technical Barriers to Trade
Government Procurement
Labor
Legal and Institutional Issues
Business Mobility
Telecommunications
Investment
Horizontal Issues

Rule of Origin
Sanitary and Phytosanitary Standards
Trade Remedies
Competition Policy
Environment
Cross Border Services
Financial Services
Electronic Commerce
Intellectual Property

Five defining features make the Trans-Pacific Partnership a landmark 21 st

century agreement, setting a new standard for global trade while taking up next
generation issues. These features include:
1. Comprehensive market access
a. The TPP eliminates or reduces tariff and non-tariff barriers across
substantially all trade in goods and services and covers the full spectrum
of trade, including goods and services trade and investment, so as to

2.

3.

4.

5.

create new opportunities and benefits for our businesses, workers and
consumers
Regional approach to commitments
a. The TPP facilitates the development of production and supply chains, and
seamless trade, enhancing efficiency and supporting our goal of creating
and supporting jobs, raising living standards, enhancing conservation
efforts and facilitating cross-border integration, as well as opening
domestic markets
Addressing new trade challenges
a. The TPP promotes innovation, productivity and competitiveness by
addressing new issues, including the development of the digital economy,
and the role of state-owned enterprises in the global economy
Inclusive trade
a. The TPP includes new elements that seek to ensure that economies at all
levels of development and businesses of all sizes can benefit from the
trade. It includes commitments to help small and medium sized
businesses understand the agreement, take advantage of the
opportunities, and bring their unique challenges to the attention of the TPP
governments. It also includes specific commitments on development and
trade capacity building, to ensure that all parties are able to meet the
commitments in the agreement and take full advantage of its benefits
Platform for regional integration
a. The TPP is intended as a platform for regional economic integration and
designed to include additional economies across the Asia Pacific Region

This research will focus on the main priority of the TPP leading to its existence
the facilitation of the enhanced and improved trade of goods among the participating
economies
Should they accept the TPP proposal, member countries shall agree to eliminate
and reduce tariffs and non-tariff barriers on industrial goods, and to eliminate or reduce
tariffs and other restrictive policies on agricultural goods. The preferential access
provided through the TPP will increase trade between the TPP countries in this market
of 800 million people and will support high quality jobs in all parties. Most tariff
elimination in industrial goods will be implemented immediately, although tariffs on some
products will be eliminated over longer timeframes as agreed by the TPP Parties. The
specific tariff cuts agreed by the TPP Parties are included in schedules covering all
goods. The TPP Parties will publish all tariffs and other information related to goods
trade to ensure that small- and medium-sized businesses as well as large companies
can take advantage of the TPP. They also agree not to use performance requirements,
which are conditions such as local production requirements that some countries impose
on companies in order for them to obtain tariff benefits. In addition, they agree not to
impose WTO-inconsistent import and export restrictions and duties, including on

remanufactured goods which will promote recycling of parts into new products. If TPP
Parties maintain import or export license requirements, they will notify each other about
the procedures so as to increase transparency and facilitate trade flows.
On agricultural products, the Parties will eliminate or reduce tariffs and other
restrictive policies, which will increase agricultural trade in the region, and enhance food
security. In addition to eliminating or reducing tariffs, TPP Parties agree to promote
policy reforms, including by eliminating agricultural export subsidies, working together in
the WTO to develop disciplines on export state trading enterprises, export credits, and
limiting the timeframes allowed for restrictions on food exports so as to provide greater
food security in the region. The TPP Parties have also agreed to increased
transparency and cooperation on certain activities related to agricultural biotechnology.
Complementing their WTO efforts to facilitate trade, the TPP Parties have agreed
on rules to enhance the facilitation of trade, improve transparency in customs
procedures, and ensure integrity in customs administration. These rules will help TPP
businesses, including small and medium sized businesses, by encouraging smooth
processing in customs and border procedures, and promote regional supply chains.
TPP Parties have agreed to transparent rules, including publishing their customs laws
and regulations, as well as providing for release of goods without unnecessary delay
and on bond or payment under protest where customs has not yet made a decision on
the amount of duties or fees owed. They agree to advance rulings on customs valuation
and other matters that will help businesses, both large and small, trade with
predictability. They also agree to disciplines on customs penalties that will help ensure
these penalties are administered in an impartial and transparent manner. Due to the
importance of express shipping to business sectors including small and medium sized
companies, the TPP countries have agreed to provide expedited customs procedures
for express shipments. To help counter smuggling and duty evasion, the TPP Parties
agree to provide information, when requested, to help each other enforce their
respective customs laws.
Behind these idealistic views of the United States in this proposal, there are still
underlying motives for them to push through with this trading bloc. Much of the TPP
negotiations are based on existing high level free trade agreements. As a result, the
primary focus in the TPP talks also revolve around US-protected sectors which, being
mostly agricultural products, are also major sectors protected by other TPP economies.
In fact, one country named some of its products as sensitive agricultural products that
must be excluded from tariff eliminations in the TPP.
Looking at particular agricultural products, protecting the dairy appears to be a
difficult goal in TPP, particularly US and Canada which have domestic pricing systems
which are not representative of the true international market trends. Some dairy

importers impose high tariffs while dairy exporters seek broader reduction of restrictions
to dairy trade. If these dairy exporters decide to liberalize their markets and lower the
subsidy and protection they give to their domestic producers, they will be the big
winners arising from the expanded market access to Latin America and Asia, where
demand for dairy products is growing.
Sugar is another agricultural product protected by the US and enjoys exemption
from existing US FTAs. In the negotiating table, Australia is keen on seeing concrete
liberalization commitments from TPP players in order to create opportunities for sugar
trading. For the US to agree to remove the exemption, major reforms such as
expanding tariff rate quotas for TPP partners may be required. TPP negotiators should,
however, consider the potential expansion in ASEAN markets and the competition
posed by ASEAN players. Vietnam, for example, applies a 40% tariff on sugar from nonASEAN countries, but applies only 5% to its ASEAN neighbors.
With regard to rice, Malaysia and Japan will likely push to retain existing tariffs,
while producers of low-cost rice, such as Australia, the US, and Vietnam, are likely to
lobby for open rice markets with TPP partners. A study conducted by Alvaro DurantMorat and Eric Wailes of the University of Arkansas entitled The Trans-Pacific
Partnership and Its Potential Impact on the Rice Market: Implications for Japan and the
Partners may provide insights on the different perspectives of the TPP members
regarding rice tariffs. In the study, Japans rice imports are estimated to increase by
70% as a result of TPP, benefitting Vietnams long grain rice and the US medium grain
rice, while negatively affecting China and Thailand. With the entry of cheap rice imports
from TPP liberalization, Japans rice production is projected to eventually shrink by
almost 94%, while the US medium grain rice production could expand by more than
three times its 2009 production levels. Meanwhile, Vietnams long grain rice production
is seen to expand by 5.2% in this scenario. The study also projects Malaysias rice
production to dramatically decrease from 672,000 hectares to 276,000 hectares with
TPPs possible rice trade liberalization. At present, the US applies a fixed tariff ranging
from $18 to $21 per metric ton, while Australia, Brunei, New Zealand, Peru, and
Singapore have open rice markets. The rest of the TPP members either apply steep
tariffs or maintain tight controls on rice imports.
Discussions on trade in agricultural commodities are related to the issue of stateowned enterprises (SOE) in the TPP. The US and Canada are proposing stiff
competitive neutrality among enterprises to mitigate the market advantages coming
from the subsidies and other trade-distorting practices that SOEs and some domestic
players enjoy. The possibilities include liquidating large SOEs to level the playing field
when markets open or retaining SOEs on condition that market shares will be capped
and subsidies will be removed. Either way, TPP negotiators will have to define SOEs,
identify subsidies and support measures that SOEs can enjoy, and determine how such

companies behave in light of competition to avoid firms from escaping classification due
to technical ambiguity (e.g., regulatory exemptions for national security).
Putting a Philippine context on the effects of TPP on our agricultural products,
here are some citations:
1. Rice
a. It is under quantitative restrictions at tariff of 35% within minimum access
volume of 805,000 tons. Through TPP, it will be lifted by 2017. Tariff
outside the minimum access volume of 50% will continue
2. Sugar
a. Thailand is the main source in ASEAN but Thai sugar face nontariff
barriers into the Philippines. With TPP, Australia could be under a similar
regime.
3. Corn
a. Thailand is the main source too, but the US will benefit from 5% tariff from
the 35% to 40% MFN (most favored nation) duty today. It will not benefit
our corn farmers, but will likely benefit the chicken and hog producers.
When the world price of corn is high, they may resort to low-duty feed
wheat.
4. Chicken
a. The MFN duty for the low-priced chicken parts from Canada and the US is
40%. Canada exported 15,400 tons of meat and offal worth $14 million
while the US exported 78,100 tons worth $74 million.
5. Pork
a. The MFN duty for pork is 30 to 40% from Canada and the US. Australia
could come in too. Canada exported 21,200 tons ($34 million) while the
US exported 22,300 tons ($53 million) in 2014.
6. Wheat
a. The MFN duty of 7% will be reduced to zero. Many Filipinos will enjoy
lower prices of pandesal, bread, noodles and biscuits. It will also promote
the export of baked goods.
That being said, where should the Philippines go? According to one article written
by Rolando T. Dy, Vice Chairman of the Management Association of the Philippines
Committee on Agribusiness and Countryside Development, Filipino consumers will
surely gain from lower tariffs of wheat, meat and other food products. Exporters to TPP
countries will have their markets expand or market shares protected. However, local
producers of rice, sugar and meats may need safety nets during the transition. For
example, conditional cash transfer (similar to DSWDs 4Ps) may be necessary for the
affected farmers living in poverty. Tariff production may also be spaced out for a long
period of time. Without carefully calibrated safety nets, accession to the TPP may face
opposition from affected sectors and their allies. As of the moment, since they have

expressed their great interest towards TPP, and they are now backed by President
Obama in their entry to this agreement, the Philippine government officials should
already start strategizing for this agreement and they should not wait for the last minute
to act in this matter.