Australia and the Trans-Pacific Partnership: what we do and don't know
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Version 0 of 1. The prime minister, Malcolm Turnbull, calls it a “gigantic foundation stone for our future prosperity”, but what does the Trans-Pacific Partnership (TPP) mean for Australia? The short answer is that we don’t know for sure, because the full text of the deal has yet to be released. We simply have assurances from the government and various industry groups about the elements of the 12-country trade pact finalised in Atlanta in the US on Monday. Those details form the basis of this summary. Big picture The TPP includes the US, Australia, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, Vietnam and Brunei. Together these countries represent about 40% of global gross domestic product. China – a key strategic rival to the US – is not part of the deal. The government says the TPP will eliminate 98% of tariffs (import penalties designed to protect local suppliers) across a range of sectors, improving access for Australian goods exports, services and investment. The trade-offs It is not clear what Australian tariffs the government has agreed to cut in the deal, because the government media release focuses on implications for Australian exporters rather than the impacts on local businesses (such as manufacturers) that may face greater competition from overseas companies selling cheap goods to Australians. Turnbull says Australia “is an open economy with relatively low tariffs anyway, so for us to eliminate or lower our tariffs is not giving up a lot”. The trade minister, Andrew Robb, says electronic and white goods coming into Australia will be cheaper for consumers. Robb says existing manufacturers “may have to transition and change the focus of their business, or increase their investment to become more efficient”. But he argues that high-end manufacturers in Australia could become more competitive because of falling input costs (parts they use in their products could be brought in more cheaply). Guardian Australia is seeking more details from Robb’s office about Australia’s commitments. Pharmaecutical sticking point Australia – with several other countries – resisted a US push to patent rules for new medicines. Big pharmaceutical companies wanted their new biologic medicines to be protected from cheaper, generic competition for longer, which would have driven up the cost of Australia’s pharmaceutical benefits scheme. Related: Andrew Robb: Australia and US close to drug patent compromise for TPP deal Robb, who had described it as a red-line issue in negotiations, says: “The government has delivered on its promise not to change Australia’s existing five years of data protection for biologic medicines or any other part of our health system, including our pharmaceutical benefits scheme. Concerns that the price of medicines would increase have proven to be absolutely unfounded.” The Pharmaceutical Research and Manufacturers of America says it is disappointed ministers failed to secure 12 years of data protection. Political parties and health groups in Australia have vowed to scrutinise the full text against Robb’s assurance. The US government’s summary is oblique: “In addition, the [intellectual property] chapter contains pharmaceutical-related provisions that facilitate both the development of innovative, life-saving medicines and the availability of generic medicines, taking into account the time that various parties may need to meet these standards.” Dispute mechanism The TPP includes an investor-state dispute settlement (ISDS) mechanism that allows companies to sue governments. The full details have yet to be released, but the Australian government says the mechanism “contains safeguards to protect legitimate government regulation in the areas of health and the environment”. Related: Penny Wong backs fight against free-trade clauses that let companies sue Australia “Australia will be able to ensure that tobacco control measures are never open to challenge, an issue on which we have been a leading voice,” Robb says. Australia remains in the middle of a dispute with Philip Morris, which has brought a case against Australia under a previous trade deal with Hong Kong. The case relates to the plain packaging legislation introduced by the former Labor government. Critics of ISDS provisions argue they undermine sovereignty and give far too much power to big corporations to subvert democratic decision-making. The US government insists there will be “strong safeguards to prevent abusive and frivolous claims and ensure the right of governments to regulate in the public interest, including on health, safety, and environmental protection”. Australian beef exports Robb says tariffs on beef into Mexico and Canada will be eliminated within 10 years and there are further gains in Japan. The Australian meat and livestock industry says the tariffs levied on Australian beef entering Japan will be reduced from those negotiated under the recently completed Japan-Australia trade deal (JAEPA). “The tariff on both frozen and chilled beef will fall to 9% over 15 years, as opposed to the end point of 19.5% for frozen beef and 23.5% for chilled beef secured under the JAEPA,” the industry says, but points out that all TPP member countries supplying beef to Japan will be similarly advantaged by the TPP tariff cuts. Sugar exports The government says there will be a further levy reduction for high polarity sugar into Japan; elimination of the tariff on refined sugar into Canada; elimination of tariffs on raw sugar into Peru; wholesale licensing arrangements for supply of refined sugar to the food and beverage industries in Malaysia will be liberalised. Related: Bill Heffernan vows to block any US beef imports under Trans-Pacific Partnership Robb says Australian sugar exporters will also have an extra quota of 65,000 tonnes of the base allocation of the US market, as well as a 23% share of additional allocations – triple the previous amount. Australia’s average annual exports of sugar to the US are 107,000 tonnes. The sugar industry had wanted to rectify the US-Australia free trade agreement, negotiated a decade ago, which excluded sugar. The Australian Sugar Industry Alliance describes the finalisation of the TPP as “bittersweet”, saying it is disappointed that “the US sugar lobby was successful in blocking all but a small amount of additional market access for Australian sugar”. “The increase in access for Australian sugar is welcome but it must be recognised that it comes from a very low start, with an annual increase of 65,000 tonnes, for a total of 152,000 tonnes,” says the chairman of Canegrowers, Paul Schembri. “In today’s market, that extra access translates to approximately $13m per year benefit for the Australian sugar industry.” Other agricultural exports The government says Australia will be able to export more rice to Japan and it has reached agreement on administrative arrangements to facilitate trade, while rice tariffs into Mexico will be eliminated. In Japan, tariffs are to be eliminated on a range of cheeses and there will be a new quota access for Australia on butter and skim milk powder, the government says. “Australian exports to Japan of mozzarella for processing use will be duty free when blended with Japanese cheese.” Australia says it has also won access for 9,000 more tonnes of cheese to the US and tariff elimination on milk powders and Swiss cheese, and it will gain preferential access into Mexico and the highly protected Canadian market. Tariffs are also to be eliminated on wheat and barley exports into Mexico within 10 years, and Canada when the deal takes effect, along with reductions of the mark-ups applied to wheat and barley in Japan. Wine tariffs are to be phased out for products going to Mexico, Canada, Peru, Malaysia and Vietnam. There is also movement on seafood, with the government saying tariffs into Canada and Peru will be eliminated straight away, whereas this will occur in Japan within 16 years and Mexico within 15 years. Energy exports The government says the TPP will deliver immediate elimination of tariffs on iron ore, copper and nickel to Peru; elimination of tariffs on butanes, propane and liquefied natural gas to Vietnam within seven years; elimination of Vietnam’s 20% tariffs on refined petroleum. Manufacturing exports The government says Australia will benefit from the immediate elimination of tariffs on iron and steel products exported to Canada, and to Vietnam within 10 years; the elimination of ship tariffs in Canada over six to 11 years; the elimination of tariffs on pharmaceutical, machinery, mechanical and electrical appliances, and automotive parts to Mexico within 10 years; the elimination of tariffs on pharmaceuticals to Peru over 11 years. Related: Labor, Greens and crossbenchers concerned at Trans-Pacific Partnership Australian exporters are also being told to expect the elimination of duties on paper and paperboard to Peru over 11 years and the scrapping of tariffs on automotive parts to Vietnam over 10 years. “Australian businesses will now be able to bid for tenders to supply goods (such as drugs and pharmaceutical products, electronic components and supplies) used for government purposes in Brunei, Canada, Malaysia, Mexico, Peru and Vietnam,” the government says. A ban on local content requirements The US government’s summary says the TPP provides investment protections including “prohibition on ‘performance requirements’ such as local content or technology localisation requirements”. This is likely to be of interest to unions. Foreign investment in Australia The screening threshold, at which private foreign investments in non-sensitive sectors are considered by the Foreign Investment Review Board, will be increased from $252m to $1,094m for all TPP countries. Related: Trans-Pacific Partnership taking shape behind closed doors, Andrew Robb says “Under the TPP, Australia has retained the ability to screen investments in sensitive sectors to ensure they do not raise issues contrary to the national interest,” the government says. “All investments by foreign governments will continue to be examined and lower screening thresholds will apply to investment in agricultural land and agribusiness.” When will the TPP be released? Unions and numerous other stakeholders have suggested that if the deal is so good, the details would not remain a secret. The Australian government says the TPP parties will finalise arrangements for the release of the text “and it will be released well in advance of signature”. Each country will have to take steps to bring the deal into effect. “For Australia, this will involve tabling the treaty text in parliament along with a national interest analysis and a review by the joint standing committee on treaties to which all interested parties can make submissions.” |