Many US companies, from Small and Medium-sized Enterprises (SMEs) to large multinationals, rely on exports and/or imports as an important part of their business. Although large companies are often associated with doing business internationally, SMEs actually make up the vast majority of US firms engaged in international trade (97%), even though they account for a much smaller percentage of the total value of US trade (~30%).
The US is currently negotiating the Trans-Pacific Partnership (TPP) trade agreement with 11 other countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam), which together would constitute the single largest export market of goods and services for the US. In addition, it has been reported that China has stated that it would like to join the TPP negotiations as well, and the Obama administration has indicated that it is open to that possibility under certain conditions. Even without China, however, the TPP countries include some of the fastest growing economies in the world, and currently account for about 40% of total Gross Domestic Product (GDP) worldwide. According to the International Trade Commission, US exports to the TPP countries totaled $727 billion in 2014, and imports from the TPP countries totaled $881.9 billion. For the agricultural sector the TPP countries were even more important, since the $58.8 billion in US agricultural exports to those countries represented 85% of all US agricultural exports in 2013.
While the specific provisions of the TPP are not currently public, reports indicate that the legal agreements being negotiated as part of the TPP will cover almost all areas of commercial relations between the TPP countries. Some of the areas where significant agreement has supposedly already been reached are:
Key elements of the customs text establish customs procedures that are more predictable and transparent so goods are released from customs control as quickly as possible.
Market Access for Goods
Tariff elimination, including tariff phase-out schedules covering more than 11,000 commodity categories for each TPP country, and other substantial obligations beyond each country’s current World Trade Organization (WTO) obligations, are part of the text in addition to elimination of non-tariff trade barriers. Import and export licensing, agricultural export competition, and food security proposals are also being discussed.
Reinforcement and further development of the existing WTO Trade-Related Aspects of Intellectual Property (TRIPS) Agreement rights and obligations covering trademarks, patents, copyright and related rights, trade secrets, and enforcement of intellectual property rights are part of the text.
Significant progress has been reported on measures concerning customs duties in the digital environment, authentication for electronic transactions, and consumer protection.
The proposed TPP includes its own chapter specifically on SMEs, and there are indications that the TPP will try to eliminate informational challenges cited by smaller companies (e.g. with easier access to foreign tariff schedules/ regulations that affect imports to that country).
In connection with the TPP, there were a lot of stories in the first half of 2015 about the Trade Promotion Authority bill, or so-called “fast-track” trade bill. Since 1974, administrations of both parties have sought fast-track trade legislation, which is a legislative procedure that provides for Congress’ involvement and approval of any US trade agreement negotiated by the administration, but with Congressional approval limited to a simple up or down vote and without amendment. Supporters of free trade agreements, and the TPP in particular, have been pushing for passage of the fast-track trade bill and, after an earlier defeat, this legislation was passed in Congress and signed into law by President Obama on June 29, 2015.