TPP Opens Up Market Access for Goods

by | Jan 20, 2016 | Articles

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TPP Opens Up Market Access for Goods

By: Steve Craven

Chapter 2 of the Trans Pacific Partnership, National Treatment & Market Access for Goods, takes us back into the realm of traditional trade negotiations. Focused on tariff cuts, that isn’t all the “Goods Chapter” contains. Still, those cuts will mean that American exporters will face zero customs duties on almost all the hard goods they sell to TPP member countries. More than 18,000 tariffs will disappear after TPP is in force, most of them immediately going to zero. (Some, notably in agriculture and automotive products, will be phased in.) This will be tremendous for U.S. exporters as a whole, and Hawaii’s exporters can expect profound reductions in their selling costs.

One of Hawaii’s largest exports – water – currently faces a maximum tariff of 35% in TPP markets. Chocolate, jewelry and mac nuts can encounter 30% duties. All of these will go toZERO. So will the present 22% duty on cosmetics, a 35% tariff on beer, 50% on beef, 10% on boats, or 35% on fish. Even surfboards and paddles face a 5% customs duty. All of these will go to zero, too. I expect Hawaii is likely to see its sales grow most to Japan, Malaysia and Vietnam.

Free trade agreements can be wonderful if you are in them, but the United States has not negotiated as many FTAs as have other countries. There are numerous FTAs that include other TPP countries, but not us. That means that goods from our competitors enter some markets at lower duties than those that apply to U.S. exporters. For example, Vietnamese auto parts buyers currently pay a 27% tariff if they choose American parts, but only 5% or no tariff at all on Chinese or Thai-made auto parts. That difference will disappear or even turn in our favor when the TPP cuts come into effect.

The flip side is also important since U.S. customs duties for goods entering from our TPP partners will be zeroed out. This is great for American consumers, especially for those in lower income groups. Did you realize that our import duties for things like clothing and footwear are relatively higher for products that lower income customers are likely to buy, than they are for what richer people want? We have long boasted higher percentage rate duties on canvas sneakers that a kid might wear to school, or on a construction worker’s boots, than we have on the leather pumps seen on fashion runways. That will end as TPP tariffs are cut to zero.

It’s not just tariff cuts in the Goods Chapter. TPP follows WTO prohibitions on using import licensing or quotas to replace the protection previously offered by tariffs. Performance requirements, such as making a buyer export goods to offset their imports, or to incorporate local content into their goods, will be prohibited. Import licensing requirements must be clear and notified to all the TPP members, which will help eliminate unpleasant surprises, especially for smaller companies that can’t afford specialized staff to follow such things.

The Goods Chapter requires TPP countries to allow duty-free entry of goods for repairs and alterations. Likewise, entry will be tariff-free for professional equipment (such as a musician’s guitar or amplifiers), commercial samples, goods for displays (such as at trade shows), advertising materials, and sports equipment for competitions.

Though agricultural tariffs may be among the slowest to go to zero, Chapter 2 contains a commitment by all TPP parties to eliminate agricultural export subsidieson goods sold in TPP markets. Some TPP members have been known to restrict or ban exports of agricultural goods, particularly staples like rice or wheat. Chapter 2 limits such measures to true emergencies and for a maximum of six months. This is intended to improve food security for low-income countries not party to TPP, such as Cambodia, Papua New Guinea and Bangladesh. For non-agricultural goods, export licensing can still be used, but – once again – the TPP parties must make their rules and requirements clear and transparent.

At least 28 countries now grow crops that employ advanced agricultural biotechnology such as GMOs. The TPP agreement neither bans these nor forces acceptance of such products. The Goods Chapter requires that each TPP member must be transparent about its requirements for such products and provide clear guidance for what happens if GMOs are discovered at low levels in an agricultural shipment.

Many countries ban imports of used goods. While Chapter 2 doesn’t eliminate such bans, it encourages acceptance of remanufactured goods (i.e., used goods that have been refurbished and returned to the standards for new goods). The United States is the largest re-manufacturer in the world, with at least $11 billion in exports, supporting thousands of American jobs.

 

Steve Craven advises companies on international business strategies and how to overcome problems encountered in foreign markets. He is a former consultant, American diplomat and a U.S. trade negotiator. He served as a Career Diplomat and Senior Foreign Service Officer, member of the U.S. Commercial Service, U.S. Department of Commerce. Mr. Craven also previously served as Chair of the Hawaii Pacific Export Council.

 

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