In 2005, three countries viz. Chile, New Zealand and Singapore came together and created a free trade agreement called Trans-Pacific Strategic Economic Partnership or TPSEP. Later Brunei joined them and it was now also known as P4.
From 2010 onwards, there have been discussions to make it more wider, more disciplined free trade agreement to be known as TPP or Trans-Pacific Partnership (TPP). On October 5, 2015, an agreement was reached among the twelve Pacific Rim countries in the form of largest trade liberalization pact since WTO. TPP is still in proposed state and would come into force when each of the 12 members ratifies it.
The 12 countries among which TPP has been agreed upon include – United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. These countries are home to 800 million people and account for 40% of global trade.
TPP is essentially a Free Trade Area that among other things, seeks to:
- lower trade barriers such as tariffs
- establish a common framework for intellectual property
- enforce standards for labour law and environmental law, and
- establish an investor-state dispute settlement mechanism.
The agreement aims to liberalize trade in nearly all goods and services by eliminating tariff and non tariff barriers. This will lead to creation of a unified market like in Europe which will help different countries in different manner. For example, while the Japanese carmakers would get cheaper access to United States for their exports; US vehicle makers would get cheaper access to sell their products in Vietnam and Malaysia. Further, the TPP negotiations have included elaborate but mostly secretive negotiations on intellectual property rights, foreign investments, environment and labor related matters; government and private enterprise, government procurement, technical barriers to Trade (TBT), transparency and regulatory coherence.
There are 30 chapters in the TPP agreement text. The salient Provisions of TPP can be summarized in five defining areas as follows:
Comprehensive market access
This involves reduction or complete elimination of tariff and non-tariff barriers in a huge list of goods, services and investments.
Regional approach to commitments.
The TPP agreement facilities seamless integration of economies of members facilitating development of production and supply chains; opening markets and cross border trade.
Addressing new trade challenges
The agreement promotes innovation, productivity, and competitiveness by addressing new issues such as of digital economy, ecommerce etc. It also includes the role played by state enterprises in the countries.
It tries to create an environment where members with all levels of development and businesses of all sizes can benefit from trade.
Platform for regional integration
The agreement seeks to serve as a platform for regional economic integration.