Trans-Pacific Partnership (TPP), one of the largest and most anticipated trade initiatives after The North American Free Trade Agreement (NAFTA), has finally been revealed by the participating countries’ governments. It projects an increase in international trade, economic growth, and strong political-economic ties among its participants. The partnership is currently being discussed between the United States, Vietnam, Australia, Mexico, Canada, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Japan, and Singapore. It still needs ratification from individual nations and would not take effect until the first or second quarter of 2016. However, if the deal passes and comes into force, this will be a colossal step towards the development of new international supply chains in The Pacific.

While many are cautious of and even oppose the deal, this highly debated agreement promises a great deal of economic advantages and regional opportunities for participating countries. In order to enjoy a bigger share from this new deal in progress, U.S. businesses should stay up to date and be well-informed regarding TPP’s regulations.

If the deal is put into force, what will it mean for U.S. importers and exporters?

TPP will introduce a series of agreements and policies to reduce barriers on international trade, investments, labor, and intellectual property. It will enforce a frame of transparency and collaboration among its participants.

TPP policies will:

  • Lower tariffs, (in some cases eliminate tariffs)
  • Modernize customs clearance processes
  • Cut the red tape on international regulations
  • Simplify Rules of Origin, or Origin Rules
  • Regulate competition
  • Facilitate new trade and businesses

U.S. importers will enjoy reduced duty rates and less red tape for their imported goods from ‘emerging’ markets of Asia Pacific Countries (Vietnam, Brunei Darussalam, Malaysia, and Singapore). This will open new trade routes and offer a larger variety of traded goods to U.S.-based importers. Considering the rising production and raw material cost in China, these new South Asian markets will be an alternative for many U.S. based importers.

While some Asian exporters such as China Bangladesh, Cambodia, Pakistan, and Sri Lanka will suffer from trade diversion losses, TPP members like Vietnam will gain share in the U.S. markets.

The U.S. exports to the region have been dropping and are expected to fall as the US Dollar continues to strengthen. The TPP deal is expected to boost U.S. exports to Asia. Exporters will enjoy greater access to South Asia and the Pacific Rim consumer markets such as Malaysia, Australia, and New Zealand therefore creating more and higher paying jobs in the U.S.

However, according to Journal of Commerce Senior Economist Mario Moreno, U.S. exports to these economies will be visible only in the medium to long-term future.

How does TPP effect the shipping industry?

As we look at the wider trends regarding to U.S-Pacific trade, the container shipping industry will benefit from an expected economic growth in member countries. New businesses and the developments of trade routes will increase volumes and profits in container shipping and air freight industries. London-based analyst ‘Drewry Maritime Research’ also supports that the TPP will provide increased container volume and greater earnings in the container-shipping arena.

Aside from economic benefits, TPP will also have serious enforcements on employee rights, environmental issues, and other progressive initiatives. The benefits of the recently agreed Trans-Pacific Partnership on Pacific-U.S. trade will not be felt immediately, but it will have a sizable impact long term.

We at MTS Logistics believe that it is crucial for us to stay up to date in regards to international developments, new regulations and requirements in the international arena. Our dedicated team is ready to provide you the options and service you need to navigate what is on the horizon.

You can reach the full text of TPP by clicking here.