October 6, 2015
On October 5, 2015, the Canadian government agreed to the historic Trans-Pacific Partnership Agreement. Billed by trade and cross border specialists as a “deal of a generation”, this new free trade agreement will significantly expand the potential importing and exporting partners and opportunities for many Canadian businesses – both large and small.
Here’s a primer on free trade and the TPP, and the five key sectors the TPP will affect and the import/export opportunities it opens for them.
In today’s economy, businesses, both big and small, can – and arguably must – take advantage of global export and import opportunities. But this can be a complex journey. One of the most crucial decisions in the export/import journey is selecting the country to target for export or from which to import. Free trade agreements reduce trade barriers and increases global opportunities, giving access to imported materials at a lower cost and to higher margins on exported goods and services – and this is critically important to Canadian businesses, since Canada’s international trade makes up more than 2/3 of its GDP. It’s also crucially important to the Atlantic region, where provincial leaders and businesses strongly encourage exporting; for example, in 2014, NS exported over $1B worth of goods to other nations; NB continues to be Canada’s most trade-active province.
So choosing a country with which Canada has a free trade agreement can be very beneficial. To read more about the benefits of choosing a country with which Canada has a free-trade agreement, read McInnes Cooper’s: The Export/Import Journey – 3 Key Ways Choosing A Free Trade Agreement Country Can Simplify The Trip.
And the options just got a whole lot broader in terms of both countries and goods.
After years of negotiations, the Trans-Pacific Partnership Agreement (TPP) will be one of the world’s most comprehensive trade agreements. There have been several contentious aspects to the TPP, including the overall secrecy of the negotiations and more recently the negative impact on Canada’s dairy and auto sectors, but TPP proponents argue concessions have to be made for the better of each partner’s economy as a whole.
Partners. The TPP applies to 40% of the global economy. The current trade partners are Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the US (some argue the US is using the TPP to isolate China, but it’s possible that other Asian-Pacific countries such as China and India will join the deal in the future). The TPP is also a plurilateral agreement: it’s designed to allow partners to make sub-agreements if desired.
Trade Issues. The TPP is designed to be exhaustive in terms of addressing trade issues. Initially, it was framed around these five features:
1) Comprehensive market access.
2) Fully regional agreement.
3) Cross-cutting trade issues (including regulatory coherence, competitiveness and business facilitation, small and medium sized enterprises), and development.
4) New trade challenges.
5) Living agreement.
NAFTA Effect. When the TPP comes into force, NAFTA will still be in effect – but of little practical impact. Since the TPP includes the same (and more) parties, and subsumes the same (and more) subject-matter, it will essentially trump NAFTA.
Effective Date. Though the TPP has been finalized, each partner country must still ratify it – no small feat, particularly south of the border – before it comes into effect. So businesses should have time to ramp up to take full advantage of the TPP’s opportunities, and be ready to hit the ground running when it kicks in.
Full Agreement. Read the full scope of the TPP in this Foreign Affairs, Trade and Development Canada’s Technical Summary.
5 KEY SECTORS AFFECTED
Here are the five key sectors the TPP affects, the negotiated terms of the TPP in relation to each and the import/export opportunities it opens for them:
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Cross-Border Team to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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