The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

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The Trans-Pacific Partnership (TPP):

Key Provisions and Issues for Congress

(name redacted), Coordinator

Specialist in International Trade and Finance

(name redacted), Coordinator

Analyst in International Trade and Finance

June 14, 2016

Congressional Research Service

7-....

www.crs.gov

R44489

The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Summary

The Trans-Pacific Partnership (TPP) is a proposed free trade agreement (FTA) among 12 AsiaPacific countries, with both economic and strategic significance for the United States. The

proposed agreement is perhaps the most ambitious FTA undertaken by the United States in terms

of its size, the breadth and depth of its commitments, its potential evolution, and its geo-political

significance. Signed on February 4, 2016, after several years of negotiations, if implemented, TPP

would be the largest FTA in which the United States participates, and would eliminate trade

barriers and establish new trade rules and disciplines on a range of issues among TPP partners not

found in previous U.S. FTAs or the World Trade Organization (WTO). In addition, the TPP is

designed to better integrate the United States into the growing Asia-Pacific region and has

become the economic centerpiece of the Administration’s “rebalance” to the region. Congress

would need to enact implementing legislation for the agreement to enter into force for the United

States. Such legislation would be considered under Trade Promotion Authority (TPA) procedures,

unless Congress determines the Administration has not met TPA requirements.

TPP Members

Currently, the TPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New

Zealand, Peru, Singapore, the United States, and Vietnam, which together comprise 40% of the

world’s GDP. TPP is envisioned as a “living agreement,” potentially addressing new issues and

open to future members, including as a possible vehicle to advance a wider Asia-Pacific free trade

area. The United States currently has FTAs with six TPP partner countries. Japan is the largest

economy and trading partner without an existing U.S. FTA. Malaysia and Vietnam also stand out

among TPP countries without existing U.S. FTAs, given the rapid growth in U.S. trade with the

two nations over the past three decades and their generally higher level of trade restrictions.

Potential Outcomes of TPP

The TPP would provide several principal trade liberalization and rules-based outcomes for the

United States. These include the following:



lower tariff and nontariff barriers on U.S. goods through eventual elimination of

all tariffs on industrial products and most tariffs and quotas on agricultural

products;

greater service sector liberalization with enhanced disciplines, such as

nondiscriminatory and minimum standard of treatment, along with certain

exceptions;

additional intellectual property rights protections in patent, copyrights,

trademarks, and trade secrets; first specific data protection provisions for biologic

drugs and new criminal penalties for cybertheft of trade secrets;

investment protections that guarantee nondiscriminatory treatment, minimum

standard of treatment and other provisions to protect foreign investment,

balanced by provisions to protect a state’s right to regulate in the public interest;

enforceable provisions designed to provide minimum standards of labor and

environmental protection in TPP countries;

commitments, without an enforcement mechanism, to avoid currency

manipulation, provide transparency and reporting concerning monetary policy,

and engage in regulatory dialogue among TPP parties;

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress



digital trade commitments to promote the free flow of data and to prevent data

localization, except for data localization in financial services, alongside

commitments on privacy and exceptions for legitimate public policy purposes;

enhanced regulatory transparency and due process provisions in standardssetting; and

the most expansive disciplines on state-owned enterprises ever in a U.S. FTA or

the WTO, albeit with exceptions, to advance fair competition with private firms

based on commercial considerations.

The U.S. International Trade Commission (USITC) has estimated that the TPP would bring

modest overall benefits to the U.S. economy once implemented, slightly increasing both output

(0.15%) and employment (0.07%) above a baseline scenario without the agreement. According to

the USITC study, most agriculture and services sectors would see expansions, while some

manufacturing and natural resources sectors would be expected to contract relative to baseline

projections as resources shifted within the U.S. economy.

TPP Debate

Views on the likely effects of the agreement vary. Proponents argue that the TPP is in the national

interest and has the potential to boost economic growth and jobs through expanded trade and

investment opportunities in what many see as the world’s most economically vibrant region.

Opponents of TPP voice concerns over possible job loss and competition in import-sensitive

industries. Other concerns include how a TPP agreement might limit the government’s ability to

regulate in areas such as health, food safety, and the environment. The Obama Administration and

others have argued that the strategic value of a TPP agreement parallels its economic value, while

others argue that past trade pacts have had a limited impact on broad foreign policy dynamics. In

analyzing the agreement and its implementing legislation, Congress may consider the agreement

from several of these perspectives, as well as how the TPP promotes progress on U.S. trade

negotiating objectives.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Contents

Introduction ..................................................................................................................................... 1

Background ..................................................................................................................................... 1

Congressional Consideration .................................................................................................... 2

TPP’s Strategic Context ............................................................................................................ 4

Economic Significance.............................................................................................................. 6

U.S.-TPP Trade and Investment .......................................................................................... 9

Relationship to Existing Trade Organizations and Agreements ............................................... 11

TPP and the WTO .............................................................................................................. 11

The TPP and Other Asia-Pacific Trade Agreements ......................................................... 12

Core Provisions ............................................................................................................................. 14

Goods ...................................................................................................................................... 15

Tariffs ................................................................................................................................ 15

Rules of Origin (ROO)...................................................................................................... 20

Textiles, Apparel, and Footwear ....................................................................................... 21

Motor Vehicles .................................................................................................................. 25

Services ................................................................................................................................... 29

Cross-Border Trade in Services ........................................................................................ 31

Express Delivery ............................................................................................................... 32

Financial Services ............................................................................................................. 33

Temporary Entry for Business Persons ............................................................................. 34

Telecommunications ......................................................................................................... 35

Stakeholder and Industry Views ....................................................................................... 35

Agriculture .............................................................................................................................. 36

Background ....................................................................................................................... 36

Specific Market Access Commitments ............................................................................. 38

Other Agriculture Provisions ............................................................................................ 40

Stakeholder and Industry Views ....................................................................................... 42

Government Procurement ....................................................................................................... 43

Intellectual Property Rights (IPR) ........................................................................................... 46

Investment ............................................................................................................................... 54

Labor ....................................................................................................................................... 60

Environment ............................................................................................................................ 62

E-Commerce, Data Flows, and Digital Trade ......................................................................... 65

State-Owned Enterprises ......................................................................................................... 66

Currency .................................................................................................................................. 69

Nontariff Barriers .................................................................................................................... 70

Technical Barriers to Trade ............................................................................................... 70

Regulatory Coherence ....................................................................................................... 71

Transparency and Pricing of Health Care Technology and Pharmaceuticals Annex ........ 72

Customs and Trade Facilitation ............................................................................................... 73

Other Provisions ...................................................................................................................... 74

Competition Policies ......................................................................................................... 74

Transparency and Anti-Corruption ................................................................................... 75

Trade Remedies................................................................................................................. 75

Development and Capacity Building ................................................................................ 76

Small- and Medium-Sized Enterprises ............................................................................. 77

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Institutional Issues ......................................................................................................................... 78

Secretariat................................................................................................................................ 78

Dispute Settlement (DS) ......................................................................................................... 78

A “Living Agreement” ............................................................................................................ 79

Relationship to Existing Agreements ...................................................................................... 80

Issues for Congress ........................................................................................................................ 80

Comprehensive, High-Standard Agreement ............................................................................ 80

Role and Timing of TPA and Negotiating Objectives ............................................................. 81

Potential Economic Impact ..................................................................................................... 81

The TPP and U.S. Trade Policy ............................................................................................... 82

Strategic Considerations.......................................................................................................... 82

Potential Consequences of Not Ratifying the TPP .................................................................. 83

Implementation, Future Expansion, and Institutional Issues .................................................. 83

Conclusion ..................................................................................................................................... 84

Figures

Figure 1. Trans-Pacific Partnership Countries ................................................................................. 3

Figure 2. U.S.-World, TPP, and FTA Partner Merchandise Trade ................................................... 9

Figure 3. Largest U.S. FTAs .......................................................................................................... 10

Figure 4. Existing FTAs among TPP Countries ............................................................................ 13

Figure 5. U.S. Collected Duties and Effective Duty Rates ............................................................ 17

Figure 6. TPP Tariff Commitments between the U. S. and Non-FTA Countries ........................... 19

Figure 7. Growth in Global Data Flows ........................................................................................ 65

Tables

Table 1. TPP Country Tariff and Trade Agreement Statistics ........................................................ 16

Table 2. TPP Signatories with Vehicle Production ........................................................................ 25

Table 3. Tariff Elimination Schedule for Selected Food and Agricultural Products in

Selected TPP Countries .............................................................................................................. 40

Table A-1. U.S. Goods Trade with TPP Countries, 2015 .............................................................. 85

Table A-2. U.S. Private Services Trade with TPP Countries, 2014 ............................................... 86

Table A-3. U.S. Foreign Direct Investment (FDI) with TPP Countries, 2014 ............................... 86

Appendixes

Appendix. ...................................................................................................................................... 85

Contacts

Author Contact Information .......................................................................................................... 88

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Introduction

The Trans-Pacific Partnership (TPP) is a proposed free trade agreement (FTA) among the United

States and 11 Asia-Pacific countries. The U.S. Trade Representative (USTR) has described it as a

“comprehensive and high standard” agreement, designed to eliminate and reduce trade barriers

and to establish and extend the rules and disciplines of the trading system among the parties to the

agreement (see Figure 1).1 If implemented, it would be the largest plurilateral FTA by value of

trade, encompassing roughly 40% of world GDP, and could serve further to integrate the United

States in the dynamic Asia-Pacific region. As a “living agreement,” it has the potential to

negotiate new rules and expand its membership. It could also mark a shift to the negotiation of

“mega-regional” trade liberalization agreements in lieu of bilateral FTAs and broader multilateral

trade liberalization in the World Trade Organization (WTO).

The 12 countries concluded the TPP negotiations and released the text of the agreement in late

2015. Trade ministers from the TPP countries signed the final agreement text on February 4,

2016, and several countries are seeking to ratify the agreement this year. TPP draws congressional

interest on a number of fronts, and Congress must approve implementing legislation for U.S.

commitments under the agreement to enter into force. The TPP would be eligible to receive

expedited legislative consideration under Trade Promotion Authority (TPA), P.L. 114-26, unless

Congress determines the Administration has failed to advance TPA negotiating objectives, or has

not met various notification and consultation requirements.2 Furthermore, the TPP may affect a

range of sectors and regions of the U.S. economy and could influence the shape and path of U.S.

trade policy for the foreseeable future. It may also serve strategic goals of the United States by

strengthening regional alliances and extending U.S. influence in the Asia-Pacific region. This

report examines the key provisions of the proposed TPP, related policy and economic contexts,

and issues of potential interest to Congress.

Background

The precursor to the TPP was the Trans-Pacific Strategic Economic Partnership (P-4). It was

conceived in 2003 by Singapore, New Zealand, and Chile as a path to trade liberalization in the

Asia-Pacific region—Brunei joined in 2005—and the P-4 agreement was concluded in 2006. U.S.

trade policymakers took notice of the P-4’s relative ambition as a possible template for a wider

Asia-Pacific free trade agreement. President Bush notified Congress of his intention to negotiate

with the existing P-4 members on September 22, 2008, along with Australia, Peru, and Vietnam,

on December 30, 2008, as required under past and current TPA. President Obama recommitted to

the TPP negotiations in November 2009 and renotified Congress of the Administration’s intention

to negotiate the renamed Trans-Pacific Partnership. In October 2010, the TPP participants agreed

by consensus to the inclusion of Malaysia as a negotiating partner.

The negotiating partners announced a framework for the agreement at the sidelines of the AsiaPacific Economic Cooperation (APEC) Ministerial in Honolulu, HI, November 8-13, 2011.

Thereafter, Canada, Mexico, and Japan consulted with the existing TPP partners on joining the

TPP negotiating parties include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru,

Singapore, the United States, and Vietnam.

For more information on TPA see CRS In Focus IF10297, TPP-Trade Promotion Authority (TPA) Timeline, by (name r

edacted) ; CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy, by (nam

e redacted) ; and CRS Report R43491, Trade Promotion Authority (TPA): Frequently Asked Questions, by (name r

edacted) and (name redacted) .

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

negotiations. The North American Free Trade Agreement (NAFTA) partners—Canada and

Mexico–acceded to the negotiations in December 2012, followed by Japan in July 2013.3 During

the course of the negotiations, others countries, such as South Korea, Taiwan, and the Philippines

expressed varying degrees of interest in joining, but the parties decided to conclude the agreement

before contemplating new members. The agreement must be ratified by all parties to enter into

force in the first two years from its 2016 signing. Thereafter, it requires at least six countries

representing 85% of the bloc’s 2013 gross domestic product (GDP) to accede to the agreement for

it to take effect, thus requiring ratification by the United States and Japan for entry into force to

occur.

Congressional Consideration

The Bipartisan Comprehensive Trade Priorities and Accountability Act of 2015 (P.L. 114-26), the

current grant of TPA (TPA-2015), sets the procedures governing congressional consideration of

the proposed TPP. TPA is the authority by which Congress, for specific periods of time, sets trade

negotiating objectives, establishes notification and consultation requirements, and enables

implementing legislation for reciprocal trade agreements to be considered under expedited

procedures if it meets certain statutory requirements. TPA-2015 was enacted into law on June 29,

2015, and expires in 2018, with a possible extension to 2021.

Legislation to implement the TPP can be considered under the expedited procedures of TPA,

since the TPP was signed during the time TPA has been effect. The TPP could be considered

under expedited procedures during this Congress, the next Congress, or even after the present

grant of TPA expires. TPP was signed and the final text of the agreement was released on

February 4, 2016. Following signature, under TPA, implementing legislation can be introduced 30

days after the release of the final text of the agreement on a day when both Houses are in session.

That day was March 14, 2016. The President notified Congress of the changes to U.S. law that

TPP implementation would require on April 1, 2016. A TPA-required report by the U.S.

International Trade Commission (USITC) on the potential economic effects of the agreement was

released on May 18, 2016. Once the President submits the legislation for introduction, TPA sets a

90-legislative-day deadline for congressional consideration with set periods for committee and

floor consideration by the House and Senate.4

NAFTA is an FTA between the United States, Canada, and Mexico. For more information see CRS In Focus

IF10047, North American Free Trade Agreement (NAFTA), by (name redacted)

See CRS In Focus IF10297, TPP-Trade Promotion Authority (TPA) Timeline, by (name redacted) and CRS Report

R43491, Trade Promotion Authority (TPA): Frequently Asked Questions, by (name redacted) and (name redacted) .

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Figure 1.Trans-Pacific Partnership Countries

(in billions of dollars)

Source: Analysis by CRS. Population and GDP data from IMF, World Economic Outlook, October 2015. Trade

data from the U.S. International Trade Commission (USITC).

Notes: Trade data only includes goods trade, and are from 2015. GDP and population data are from 2014.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

TPP’s Strategic Context5

The TPP could have significant implications beyond its direct economic impact, in what many

term as broader “strategic” contexts. Obama Administration officials and other TPP proponents

argue that these implications would be positive and felt in several ways, both geo-economic and

geo-political. Though such implications are hard to define precisely, proponents of the TPP’s

strategic importance suggest that the United States could use the agreement as a tool to exert

influence in the region and beyond, in not only economic, but also broader political and security

spheres.

Administration officials regularly emphasize the TPP’s strategic value in arguing for its approval.

USTR Ambassador Froman said in a 2014 speech:

TPP is as important strategically as it is economically. Economically, TPP would bind

together a group that represents 40 percent of global GDP and about a third of world

trade. Strategically, TPP is the avenue through which the United States, working with

nearly a dozen other countries (and another half dozen waiting in the wings), is playing a

leading role in writing the [trade] rules of the road for a critical region in flux.6

Secretary of State John Kerry wrote in 2015:

TPP also matters for reasons far beyond trade. The Asia-Pacific includes three of the

globe’s four most populous countries and its three largest economies. Going forward, that

region is going to have a big say in shaping international rules of the road on the Internet,

financial regulation, maritime security, the environment, and many other areas of direct

concern to the United States. Remember that, in our era, economic and security issues

overlap; we can’t lead on one and lag on the other. 7

Overall, proponents maintain that through the TPP, the United States can further a wide range of

goals, including the following:



liberalizing trade, encouraging market-oriented reforms, and driving economic

growth;

establishing and updating regional trade rules and disciplines consistent with U.S.

interests and modern commercial realities;

potentially strengthening the global trade architecture;

strengthening regional alliances and partnerships;

maintaining U.S. leadership and influence in the Asia-Pacific region; and

enhancing U.S. national security.

In terms of economic influence, some observers argue the TPP may present an alternative to

FTAs constructed by other countries, especially in the Asia-Pacific region. Such agreements often

exclude or have less extensive provisions on agriculture, services, investment, and intellectual

property rights (IPR), which some see as among the most important FTA provisions for certain

This section written by (name redacted) and

Brock Williams. For more information on the strategic aspects of TPP see

CRS Report R44361, The Trans-Pacific Partnership (TPP): Strategic Implications, coordinated by (name redacted) and

(name redacted) .

USTR, “Remarks by Ambassador Michael Froman at the Council on Foreign Relations: The Strategic Logic of

Trade,” June 16, 2014, http://www.ustr.gov/about-us/press-office/speeches/transcripts/2014/June/Remarks-USTRFroman-at-Council-Foreign-Relations-Strategic-Logic-of-Trade.

State Department, “Secretary’s Remarks: U.S. Foreign Policy in a Changing World,” October 17, 2015.

http://www.state.gov/secretary/remarks/2015/10/248302.htm.

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U.S. sectors; moreover, these agreements generally have few if any binding protections for

worker rights and the environment. The TPP could provide participating governments political

cover to enact reforms relating to these and other provisions, presenting them as a tradeoff for

greater access to the large U.S. market. While debate continues, both in the United States and

abroad, over the appropriate scope of various TPP provisions and the degree to which they differ

from other regional pacts, some policymakers argue that the TPP would provide the United States

with leverage to help shape regional and, perhaps, broader multilateral economic norms.8

In the geo-political realm, some analysts consider the TPP to be a litmus test for U.S. credibility

in the Asia-Pacific region. Proponents argue the TPP signals the primacy of U.S. integration into

Asia’s economic and diplomatic structures, suggesting that congressional inaction or rejection of

the TPP would make the Administration’s rebalancing strategy look relatively weak and the

United States look divided on how important it considers its leadership role in the region.9

Similarly, many Asian policymakers—correctly or not—could interpret a failure of the TPP in the

United States as a symbol of declining U.S. interest in the region and its inability to assert

leadership.10 Some critics of the TPP assert that such arguments are overstated, and that the

strength or weakness of broader bilateral political and security relationships depend more on

countries’ assessment of their political and security interests than on whether they have a trade

agreement with the United States.11

China is not a TPP member, but its emergence as a regional economic power with active overseas

trade and investment initiatives forms an important backdrop to the TPP’s consideration. Those

championing the TPP, including President Obama, often cast it as a vehicle for maintaining U.S.

leadership in Asia in the face of China’s rise, arguing that through the agreement, the United

States can “write the rules” for regional trade and investment and help foster a broader, rulesbased regional order.12 Others contend that casting the TPP as an effort to “counter” Chinese

initiatives is unproductive, and could create negative perceptions of U.S. intentions, both in China

and elsewhere in the region. Some also argue that in many ways U.S. and Chinese goals for trade

liberalization and rules and norms in the region could be mutually reinforcing, rather than

competing, by promoting the goal of free trade in the Asia-Pacific region13

Trade agreements, and trade policy in general, inevitably exist at the intersection of domestic and

foreign policy and include both economic and political elements. This can create a tension in

balancing various policy priorities, particularly for those policymakers who may support the TPP

on some grounds but not others. Some opponents of the agreement argue that focusing on the

strategic elements of the TPP distracts the debate from what they view should be its main criteria:

the agreement’s potential impact on the U.S. economy. While both TPP critics and supporters cite

different estimates of economic outcomes to support their positions, the broader strategic

Jonathan Soble, "Failure of Obama's Trans-Pacific Trade Deal Could Hurt U.S. Influence in Asia," New York Times,

June 16, 2015.

Jeffrey A. Bader and David Dollar, “Why the TPP Is the Linchpin of the Asia Rebalance,” Brookings.edu, July 28,

2015.

See, for instance, Prime Minister’s Office of Singapore, “Transcript of Keynote Speech by Prime Minister Lee Hsien

Loong at the Shangri-La Dialogue 29 May 2015.” http://www.pmo.gov.sg/mediacentre/transcript-keynote-speechprime-minister-lee-hsien-loong-shangri-la-dialogue-29-may-2015.

Daniel Slane and Michael Wessel, “The TPP: Why It Won’t Address Security Concerns with China,” Renewing

America blog, Council on Foreign Relations, May 15, 2015.

White House, “Statement by the President on the Trans-Pacific Partnership,” press release, October 5, 2015,

https://www.whitehouse.gov/the-press-office/2015/10/05/statement-president-trans-pacific-partnership.

Simon Lester, Chinese Free Trade is No Threat to American Free Trade, Cato Institute, April 22, 2015.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

implications are highlighted largely by proponents, and can be difficult to quantify despite their

potential significance.14

Economic Significance15

Preferential multi-country trade agreements, such as the TPP, generally are expected to alter trade

relations among the participants by lowering tariffs on traded goods and by reducing nontariff

barriers within countries. Most economists agree that reducing trade barriers enhances

productivity by allocating resources towards their most efficient uses, increases consumer choice

and lowers costs, stimulates economic growth, and at the national level improves economic

welfare. The Japanese government, for example, hopes to use increased international competition

achieved by TPP to revitalize its less productive sectors, including agriculture and services, and

lower costs for consumers.16 The gains of trade, however, are not necessarily distributed equally

throughout an economy, and the resource reallocation that can lead to efficiency and job gains in

some sectors may reduce production in other industries and can cause worker dislocation and job

losses, a concern for policymakers and workers and firms in certain industries.17

Removing formal barriers to trade, primarily tariffs and quotas, directly lowers the price of traded

goods. For example, the 20% tariff on certain Vietnamese-made shoes imported into the United

States would be eliminated, while U.S.-grown walnuts would receive a 10% tariff discount in

Japan, once eliminated. In turn, lower prices may impact trade patterns by increasing the overall

amount of trade that occurs (trade creation) and by shifting trade away from countries that are not

party to the agreement to those that are in the agreement (trade diversion). At times, countries are

motivated to participate in trade agreements to prevent this type of trade diversion.

The magnitude of the trade creation and trade diversion effects that arise from TPP likely will be

affected by a number of factors, including: the difference between pre-and post-agreement tariff

rates, the speed with which tariff cuts are implemented, and a range of other external economic

factors that affect global trade as a whole. For instance, the 2008-2010 global economic

slowdown and the sharp drop in commodity prices and changes in exchange rates from 20142016 arguably had a greater impact on the volume of global trade and trade flows between

countries than any FTA trade liberalization measures that might have gone into effect during this

period. In addition, the impact of tariff cuts under the TPP may be muted to some extent due to

the multiplicity of trade agreements that already exist among the participants and the already low

tariff rates that are characteristic of trade among a number of the participants. (See “Tariffs”

section below for more detail.)

In addition to the economic effects expected to result from cuts in tariffs, the TPP may offer longterm benefits to bilateral and regional trade through changes in domestic nontariff barriers that

form the structure under which trade is conducted. In broad terms, the TPP incorporates rules and

disciplines for open, nondiscriminatory treatment for participants. These rules are expected to

For more information concerning the strategic aspects of TPP, CRS Report R44361, The Trans-Pacific Partnership

(TPP): Strategic Implications, coordinated by (name redacted) and (name redacted)

This section was written by James Jackson and Brock Williams, with assistance from Gabriel Nelson. For more

information, see CRS Report R42344, Trans-Pacific Partnership (TPP) Countries: Comparative Trade and Economic

Analysis, by (name redacted) .

Sheila A. Smith, “Trans-Pacific Partnership Trade Deal,” Council on Foreign Relations, event transcript, October 6,

2015, at http://www.cfr.org/asia-and-pacific/trans-pacific-partnership-trade-deal/p37091.

For more information on trade and employment, see CRS In Focus IF10161, International Trade Agreements and

Job Estimates, by (name redacted) .

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reduce market-distorting activities that not only may reduce the overall level of trade, but also

may create market distortions and inefficiencies. Analysts have indicated that some TPP

participants, such as Vietnam, may use the rules and disciplines incorporated in the TPP to

support a market-oriented reform agenda within their economies.18 To the extent that countries

undertake such reforms, the TPP could provide long-term economic benefits to the countries

themselves and to other TPP participants. Other rules such as aspects of IPR protections and

certain labor and environmental commitments are, in effect, less about economic openness and

more about ensuring economic activity meets certain requirements. As such, the rationale behind

them (i.e., encouraging innovation, protecting worker rights, and safeguarding the environment)

can differ from the traditional economic arguments for trade liberalization.

TPP Economic Impact Predictions

A critical aspect of the debate on the TPP is the agreement’s potential economic impact on countries both within and

outside its current membership. The U.S. International Trade Commission (USITC) released a study on May 18, 2016, as

required by TPA, to estimate the effect of the agreement on individual sectors in the U.S. economy.19 The study uses a

computable general equilibrium (CGE) model, a standard tool to estimate adjustments in consumption and production

decisions in response to tariff changes. TPP commitments, however, include complex provisions that affect a broad array

of issues going beyond just tariff schedules. While the USITC study also attempts to measure the impact of changes in nontariff barriers (NTBs), precisely modeling such changes is a challenge, requiring estimations in order to quantify both the

existing NTBs and the rate and degree of their removal. Economic models by their nature, require simplification from the

actual economic activity they attempt to represent and should be interpreted with careful consideration of their underlying

assumptions and methodology. Below we examine the estimates from the USITC and other recent studies on the TPP.

USITC Study

Like most CGE models, the USITC study uses the Global Trade Analysis Project (GTAP) database hosted by Purdue

University for its baseline data and projections. The study compares a scenario with the TPP provisions in effect relative to

a projected baseline with no TPP, focusing largely on 2032 when most commitments would be phased in. Overall the study

predicts a small positive benefit for the U.S. economy from participation in TPP in 2032 relative to the baseline—a 0.15%

increase in GDP ($42.7 billion) and a 0.07% increase in employment (128,200 full time equivalents). The study breaks down

its analysis by sectors, with agriculture and services sectors predicted to grow both in output (0.5% and 0.1%, respectively)

and employment (0.5% and 0.1%, respectively). Output and employment in the manufactured goods, natural resources, and

energy sector is estimated to decline slightly from the baseline (-0.1% and -0.2%, respectively) as TPP is expected to shift

resources towards services and agriculture production.

Peterson Institute for International Economics Study

This study by Peter Petri and Michael Plummer is notable partly for its attempt to model liberalization of nontariff barriers

(including those applied to trade in services) using tariff-equivalency estimates. 20 These nontariff changes, which are the

most difficult to model precisely, drive the results of the study, with changes in tariffs accounting for only 12% of the

economic benefits of the agreement—a point critics emphasize when questioning the validity of the study’s results.21 The

Peterson study also estimates modest net gains for the United States and other TPP partners. Small net losses are

anticipated for some countries not participating in TPP including mainland China, India, South Korea, the Philippines,

Thailand, and Indonesia. By 2030, the authors project the United States will see real annual income gains of about $131

billion above a baseline projection (or 0.5% above baseline GDP). These gains will not be spread uniformly throughout the

economy, according to the model. The authors project some U.S. manufacturing industries to experience a drop in

production from baseline, and the agriculture and any mining sectors to see a small increase. The service sector, however,

is projected to see large relative gains, offsetting the negative impact on manufacturing. The model assumes TPP will not

Ben Bland and Shawn Donnan, "Vietnam looks for reform and investment boost from TPP deal," Financial Times,

October 6, 2015.

USITC, TPP Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, Publication 4607,

May 2016.

Peter Petri and Michael Plummer, “The Economic Effects of the Trans-Pacific Partnership: New Estimates,”

Peterson Institute for International Economics, January 2016, at http://piie.com/publications/wp/wp16-2.pdf.

Dani Rodrik, “The Trade Numbers Game,” Project Syndicate, blog post, February 10, 2016, at https://www.projectsyndicate.org/commentary/tpp-debate-economic-benefits-by-dani-rodrik-2016-02.

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affect the overall level of employment, but may result in shifts from one sector to another. A January 2016 World Bank

CGE analysis, prepared together with Petri and Plummer and based on a similar model, arrives at similar conclusions.22 A

complementary study from the Peterson Institute estimates the resultant adjustment costs from TPP induced-employment

shifts.23 Between 2017 and 2030, when the agreement is assumed phased in, the authors estimate total adjustment costs

would be no more than 8% of TPP gains, providing ample means to compensate dislocated workers, potentially through an

expanded Trade Adjustment Assistance program recommended by the authors.

Tufts Global Development and Environment Institute Study

Using nonstandard trade models, other researchers have produced studies suggesting the TPP will have overall negative

effects on the U.S. and other economies. For example, a study published by the Global Development and Environment

Institute at Tufts University projects the United States to experience a 0.54% reduction in GDP from baseline estimates by

2025, as well as the loss of 448,000 jobs from a baseline employment level.24 In this study, all TPP participants are

predicted to incur net employment losses due to the agreement, a result that runs counter to international trade theory,

leading some economists to argue the methodology is ill-suited to examine a trade agreement.25

TPP would be significant among U.S. trade agreements, due to its size and the commitments

reached. TPP would be the largest U.S. FTA by the number of parties and trade flows, though the

majority of that trade is with countries with an existing U.S. FTA (Figure 2). Japan's participation

has greatly increased the potential economic significance of the agreement. Among the U.S.

negotiating partners in the TPP, Japan is the largest economy and largest trading partner without

an existing U.S. FTA (and hence, with greater scope for trade liberalization with the United

States). In 2015, Japan was the United States’ fourth largest goods export ($63 billion) and import

($131 billion) market.

Malaysia and Vietnam also stand out among the TPP countries without existing U.S. FTAs, both

in terms of their current trade and investment with the United States and their potential for future

growth. Both countries have young, relatively large populations (above 30 million in Malaysia

and 90 million in Vietnam) and their economies have experienced rapid growth in recent years.26

Moreover, Malaysia's and Vietnam's average applied most-favored nation tariffs—the average

tariff on imports—are 6.1% and 9.5%, respectively, two of the highest levels among TPP

members. Removal of various nontariff barriers in both countries is also a primary U.S. goal.

Both nations also have substantial state sectors, which may be affected by TPP outcomes.

U.S.-TPP and FTA Trade Statistics



TPP countries collectively represent the largest U.S. trading partner, accounting for 41% of total U.S. goods trade

in 2015 and 23% of total U.S. services trade in 2014;27

World Bank Global Economic Prospects, “Potential Implications of the Trans-Pacific Partnership Agreement,”

January 2016, at http://www.worldbank.org/en/publication/global-economic-prospects/GEP-Jan-2016-ImplicationsTrans-Pacific-Partnership.

Robert Z. Lawrence and Tyler Moran, Adjustment and Income Distribution Impacts of the Trans-Pacific Partnership,

Peterson Institute for International Economics, Working Paper WP 16-5, March 2016, at

http://piie.com/publications/wp/wp16-5.pdf.

Jeronim Capaldo and Alex Izurieta with Jomo Kwame Sundaram, “Trading Down: Unemployment, Inequality and

Other Risks of the Trans-Pacific Partnership Agreement,” Tufts University Global Development and Environment

Institute, January 2016, at http://www.ase.tufts.edu/gdae/Pubs/wp/16-01Capaldo-IzurietaTPP.pdf.

Robert Z. Lawrence, “Studies of TPP: Which is Credible?”, Trade and Investment Policy Watch, Peterson Institute

for International Economics, blog post, January 29, 2016, at blos.piie.com/trade/?p=553.

According to the International Monetary Fund’s October 2015 World Economic Outlook, both countries had a GDP

growth rate of 6% in 2014. For the ten years prior, growth averaged 5% annually in Malaysia, and 6.4% annually in

Vietnam.

TPP accounts for a smaller share of U.S. services trade because of the large U.S.-EU services trade relationship.

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

U.S. FTAs already exist with 6 U.S. trading partners among TPP participants, which account for 81% of U.S. goods

trade with TPP partners in 2015 and 69% of U.S.-TPP services trade in 2014; and



TPP countries together with all existing U.S. FTA partners, and the European Union, which is currently

negotiating an FTA with the United States, account for 66% of U.S. goods trade. China accounts for nearly half of

all U.S. goods trade with countries not currently negotiating or without an existing U.S. FTA.

Figure 2. U.S.-World, TPP, and FTA Partner Merchandise Trade

Source: CRS analysis. Data from the U.S. International Trade Commission.

U.S.-TPP Trade and Investment28

U.S. trade with TPP countries was more than $1.5 trillion in merchandise in 2015 and more than

$276 billion in services in 2014, the most recent periods for which data are available (Table A-1

and Table A-2, in Appendix). The flow of U.S. foreign direct investment (FDI) into TPP countries

totaled $61 billion in 2014, while TPP countries invested nearly $59 billion in the United States

(Table A-3). The TPP would become the largest U.S. FTA by trade flows (Figure 3).

The TPP group of 12 countries is diverse in population, geographic location, and economic

development, and U.S. trade relations with the countries reflect this diversity. The major U.S.

merchandise exports are fairly similar to most TPP countries and include motor vehicles and

parts; petroleum and coal products; computer equipment, semiconductors, and electronic

components; agriculture and construction machinery; and aircraft. However, the top U.S.

merchandise imports vary greatly by country. Agriculture and natural resources products are key

U.S. imports from Australia, Chile, New Zealand, and Peru, while apparel products are the main

U.S. imports from Vietnam. Canada and Mexico are both major suppliers of crude oil to the

United States, but they also supply manufactured products like motor vehicles and motor vehicle

For more see CRS Report R42344, Trans-Pacific Partnership (TPP) Countries: Comparative Trade and Economic

Analysis, by (name redacted) .

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parts. U.S. imports from Malaysia and Singapore consist primarily of manufactured products such

as computers, semiconductors, and electronic components. Motor vehicles and motor vehicle

parts make up nearly 35% of U.S. goods imports from Japan.

Figure 3. Largest U.S. FTAs

Source: Analysis by CRS. Data from BEA and USITC.

Notes: Services trade data not available for all FTA partners. T-TIP is the Trans-Atlantic Trade and Investment

Partnership between the United States and European Union. CAFTA-DR is the U.S.-Central AmericanDominican Republic FTA including Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

In terms of value, Canada and Mexico are by far the largest U.S. trading partners among TPP

countries in goods. Both countries share a long border with the United States and are among the

oldest U.S. FTA partners. Japan is the third-largest U.S.-TPP goods trading partner, and secondlargest services trade and investment partner. Among the other eight TPP partners, Singapore and

Australia are the top U.S. goods export markets and top overall services trade and investment

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

partners with the United States, while Malaysia, Vietnam, and Singapore are the top sources of

U.S. goods imports.

Relationship to Existing Trade Organizations and Agreements

TPP and the WTO

Though designed as a regional trade agreement, the TPP could have a number of implications for

the multilateral trading system represented by the WTO. Fundamentally, the proliferation of FTAs

over the past two decades calls into question the multilateral system’s ability to negotiate and

implement new trade disciplines and further international trade liberalization.

Although WTO members agreed to a number of customs-related commitments as part of the

Trade Facilitation Agreement in 2013, the goal of concluding a major multilateral trade round

remains elusive nearly 15 years after the launch of the Doha Development Agenda negotiations in

November 2001. Persistent differences among members about the extent and balance of trade

liberalization continue to stymie progress in this forum and major issues, such as services trade

liberalization are being negotiated among a subset of WTO members outside the body. The

United States has pushed for the Doha Round to end and to be replaced by a more attainable

package, but at the most recent WTO Ministerial in Nairobi, trade ministers were unable to agree

on declaring an end to the Doha agenda, since developing countries fear that abandoning the

Doha agenda may result in agricultural issues receiving less priority.

The last major round of global trade negotiations—the Uruguay Round—was concluded in 1994.

Since then, global commerce has adapted to rapid advances in technology, with the result that

current multilateral trade rules do not address some critical aspects of today’s trading

environment, including digital trade and e-commerce. New trade patterns have emerged and new

obstacles to the flow of goods and services have appeared. This has left countries, including the

United States, to pursue new or advanced trade rules and further liberalization through bilateral

and regional agreements like the TPP.

Debate continues over whether or not bilateral and now “mega-regional” trade agreements help or

hinder broader multilateral initiatives. On one hand, “mega-regionals,” such as the TPP or the

Trans-Atlantic Trade and Investment Partnership (T-TIP) negotiations between the United States

and the European Union, could serve as alternative venues for establishing new rules and

disciplines for the trading regime, and their size and economic significance could help spur

negotiations at the multilateral level, influencing their direction. Some argue, for example, that

the conclusion of the North American Free Trade Agreement (NAFTA), among the United States,

Canada, and Mexico, effective since 1994, did in fact push the multilateral Uruguay Round

negotiations to conclusion.29

On the other hand, if the locus of trade negotiations primarily shifts to “mega-regional”

agreements, it could limit the overall effectiveness of the multilateral system. If the rules of the

WTO no longer reflect the standards of trade policy to which much of the world has evolved, it

could endanger the legitimacy of the organization in other aspects of its work, such as dispute

settlement. A two-tier trading system, one working on more extensive rules and disciplines and

one essentially dormant, could raise tensions by alienating those countries that feel they had no

part in developing the new rules. Overlapping in membership with differing rules, these “mega29

The Uruguay Round agreement was signed in April 1994, nearly seven years after it was launched but less than a

year after legislation implementing NAFTA was signed by the U.S. Congress.

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regional” agreements and other trade agreements could also add to the complexity of engaging in

international commerce, as opposed to rules established at the WTO, which are applicable to

nearly all world trading partners. They could also reduce economic efficiency in the global

trading system if trade is diverted into these trading blocs due to preferential tariff treatment.

The TPP and Other Asia-Pacific Trade Agreements

The current 12 TPP countries form part of a growing network of Asia-Pacific FTAs (Figure 4).

All TPP countries have at least one FTA with a TPP partner country, although the extent of trade

liberalization varies among them. The United States has FTAs with six TPP countries, including

Australia, Canada, Chile, Mexico, Peru, and Singapore. Four TPP countries—Brunei, Malaysia,

Singapore, and Vietnam—are part of the Association of Southeast Asian Nations (ASEAN),

which has a free trade area among its membership as well as several external FTAs.30

New FTAs involving key markets in the region have been concluded in recent years. For

example, Australia recently implemented FTAs with China, Japan, and South Korea, and the

European Union has concluded FTAs with Canada, and, most recently, Vietnam. As tariffs fall for

the countries party to these agreements, it could put U.S. firms at a disadvantage in those markets

without existing U.S. FTAs. This is the idea of “competitive liberalization” in practice, whereby

new trade agreements spur other countries to enter into similar pacts in order to maintain their

firms’ competiveness in foreign markets. If the TPP were to enter into force, such motivation

would likely be a major factor in drawing other countries’ interest in joining the agreement.

All 12 TPP partners are also members of the Asia-Pacific Economic Cooperation (APEC) forum,

which does not negotiate FTAs but serves as a forum for dialogue on, and establishes nonbinding

commitments toward, the goals of open trade and investment within the region.31 In the context of

this forum for dialogue and nonbinding commitments, APEC Leaders have repeatedly agreed to

push forward the creation of a Free Trade Area of the Asia-Pacific (FTAAP).

Twelve countries in APEC, seven of which are also in TPP, are currently negotiating the Regional

Comprehensive Economic Partnership Agreement (RCEP). ASEAN leads the negotiations for this

proposed FTA among its members and six ASEAN FTA partners (Australia, China, India, Japan,

New Zealand, and South Korea).32 Both the RCEP and the TPP would encompass a significant

share of regional economic activity, but each currently includes only one of the region’s two

economic leaders, the United States and China. The breadth and depth of trade liberalization

resulting from two potential agreements is likely to differ. In their 2015 Declaration, APEC

Leaders recognized both the TPP and the RCEP, which includes China, but not the United States,

as “ongoing regional undertakings” on which to eventually achieve an FTAAP.33

As noted above, the TPP could not enter into force without the United States and Japan. It is

conceivable, however, that the other 11 countries, after spending five years negotiating an

agreement not only with the United States, but among themselves as well, could conclude a

replacement agreement without the United States. It would not have the economic heft of an

The 10 ASEAN members are Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, the Philippines,

Singapore, Thailand, and Vietnam.

In addition to the 12 TPP countries, APEC includes China, Hong Kong (officially Hong Kong, China), Indonesia,

Papua New Guinea, the Philippines, Russia, South Korea, Taiwan (officially, Chinese Taipei), and Thailand.

For more information see CRS In Focus IF10342, What Is the Regional Comprehensive Economic Partnership?, by

(name redacted) et al.

Asia-Pacific Economic Cooperation, 2015 Leaders’ Declaration, November 2015.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

agreement with the United States, but it still would contain the third-largest economy (Japan) and

could serve as a vehicle for further Asian integration.

Figure 4. Existing FTAs among TPP Countries

Source: WTO FTA database and websites of TPP countries’ trade ministries. Trade data from IMF.

Notes: Aggregate TPP goods trade, both imports and exports, as reported above. ASEAN also includes

countries outside the TPP: Burma (Myanmar), Cambodia, Indonesia, Laos, the Philippines, and Thailand. TPP

goods trade covered by existing FTAs, as depicted above, reflects all goods trade between FTA partners. This

measure slightly overstates trade covered under FTAs, as most FTAs exclude market access for some goods.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Core Provisions

The text of the TPP agreement spans 30 chapters. The main goal as stated by the negotiating

countries is “to establish a comprehensive, next-generation regional agreement that liberalizes

trade and investment and addresses new and traditional trade issues and 21st-century

challenges.”34 FTA provisions are often discussed in two different categories: (1) the market

access component addressing tariff and nontariff barriers to trade in goods, services, and

agriculture, and government procurement; and (2) the rules component covering the procedures,

standards, and regulatory considerations that relate to international trade, including such issues as

investment and intellectual property rights. Market access can be affected by the process by

which trade is conducted, and, hence, the distinction between these two categories is not always

clear. While tariff negotiations are perhaps the most well-known component of trade agreements

and the easiest to measure and verify, U.S. firms are often most competitive in the international

trade of services and products involving high levels of research and development. These

industries face mostly nontariff, behind-the-border barriers, making rules commitments such as

transparent regulatory procedures or IPR protection particularly important for U.S. access to and

ability to compete in overseas markets.

U.S. FTAs also attempt to ensure that U.S. FTA partners meet certain requirements. In particular,

internationally-recognized and other core principles for the protection of worker rights and the

environment have become a significant aspect of U.S. trade agreement negotiations. In addition,

the TPP includes an entirely new chapter that seeks to establish disciplines on how state-owned

enterprises engage in international trade, with a goal of limiting potential negative impacts on

private actors from nonmarket practices.

The 12 TPP countries have varying competitive advantages, sensitivities, and levels of economic

development. As a result of these differences and the “give and take” of trade negotiations,

achieving common TPP rules and disciplines also involves certain exceptions in different forms,

and phase-in periods of varying lengths. When examining the specific commitments of the

agreement it is important to examine these exceptions, as they may impact the agreement’s

practical application.

This section examines the major issues addressed in the TPP negotiations, beginning with the

treatment of trade in merchandise goods. For each issue the report provides background

information, a discussion of the provisions in the text, particularly as they relate to previous trade

agreements, and a summary of the debate on the topic, including, where relevant, U.S. trade

negotiating objectives.

Stakeholders’ views on the TPP agreement vary. Some groups generally oppose or support trade

liberalization; others’ positions hinge on specific provisions in the TPP text. Most business groups

generally support the agreement, while most labor unions and certain nongovernmental

organizations (NGOs) are generally opposed.35 The discussion that follows focuses on specific

commitments in the agreement and debate over those measures.

“TPP Leaders Statement,” November 2, 2011, https://ustr.gov/about-us/policy-offices/press-office/pressreleases/2011/november/trans-pacific-partnership-leaders-statement.

Business associations supporting the agreement include: U.S. Chamber of Commerce, National Association of

Manufacturers, and the American Farm Bureau. Unions opposed to the agreement include: American Federation of

Labor and Congress of Industrial Organizations (AFL-CIO), United Steelworkers (USW), and Teamsters. NGO’s

opposed to the agreement include: Doctors without Borders, Public Citizen, and Sierra Club.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Goods

Although services are an increasingly important aspect of international trade, physical goods still

account for the bulk of such activity. In 2015, merchandise trade accounted for over 75% of the

nearly $5 trillion in U.S. trade. Expanding opportunities for trade in goods by reducing and

eliminating tariff and nontariff barriers remains a top priority for U.S. trade negotiations,

highlighted by Congress in its first principal negotiating objective in the TPA-2015.

Tariffs36

Background

Like previous U.S. FTAs, TPP would eventually eliminate all industrial goods tariffs and most

agriculture tariffs and quotas. These commitments would be phased in over varying periods. For

some of the most sensitive agriculture products, tariff and quota protections would remain in

place or only be partially removed. Each of the 12 TPP countries has its own unique tariff

schedule laying out its product-specific tariff commitments.37 These schedules list each country’s

individual tariff lines (i.e., a list of products described by Harmonized Tariff Schedule (HTS)

product codes at the 8-10 digit level of aggregation) and include the current tariff rate (base rate),

the relevant staging category, and the post-TPP annual tariff rates.38

The staging categories explain the speed and scope of tariff elimination for a specific product. For

example, “entry-into-force” signifies a removal of that product’s tariff immediately when the

agreement becomes effective. The categories may be simple, such as an annual equal decrease

until the tariff is eliminated, or more complex, such as staying at current levels for a period of

years before decreasing by varying amounts. The United States has 36 unique staging categories

that apply to its tariff commitments, surpassed only by Japan, which has 60. The United States

has the longest phase-out period of any TPP country, and longer than any previous U.S. FTA; it

would delay the complete removal of tariffs on light trucks from Japan, for example, and certain

dairy products from New Zealand for 30 years.39

While most TPP countries negotiated a single TPP tariff schedule with their partners, the United

States negotiated bilaterally such that for certain import-sensitive products, U.S. tariff and quota

commitments differ by partners. As a result, U.S. tariffs on some products may be eliminated

according to different staging categories for different countries. This bilateral approach to tariff

commitments within a multi-party agreement stands in contrast to the most-favored nation (MFN)

approach in the WTO, which achieves a single tariff schedule for all trading partners. U.S.

negotiators argue that this bilateral approach allows for more complete liberalization overall, but

some observers question this assertion and raise concerns over setting this precedent for multiparty negotiations.40

This section was written by Brock Williams and Gabriel Nelson.

Updated tariff schedules have been posted by New Zealand, the depository for the TPP, at

https://www.mfat.govt.nz/en/about-us/who-we-are/treaty-making-process/trans-pacific-partnership-tpp/text-of-thetrans-pacific-partnership.

HS codes become increasingly disaggregated with each additional digit and are uniform across countries only up to 6

digits. Product descriptions in the TPP tariff schedules, which are at the 8-10 digit level, may vary by country.

See U.S. staging categories, US17 and US24, in the U.S. General Notes to the Tariff Schedule in the TPP text.

Caroline Freund, Tyler Moran, and Sarah Oliver, “Tariff Liberalization” in Assessing the Trans-Pacific Partnership:

Market Access and Sectoral Issues, Peterson Institute for International Economics, PIIE Briefing 16-1, February 2016,

(continued...)

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Key factors impacting the potential significance of TPP tariff commitments include the following:



Current Tariff Levels. Average MFN applied tariff rates among TPP countries

currently range from 0.2% in Singapore to 9.5% in Vietnam (Appendix 1). Given

the already low simple U.S. average tariff rate (3.5%), U.S. rates would change

less through TPP than those for some other countries, especially Vietnam and

Malaysia.

Existing Trade Agreements. Each TPP country has existing FTAs with at least

four other TPP countries, and Chile has existing FTAs with all 11 other TPP

countries. In 2014, 85% of goods trade among TPP parties occurred between

partners with existing trade agreements.41 Depending on the degree of tariff

liberalization in these existing agreements, the tariff commitments in TPP may

not require a significant adjustment for some TPP parties. For example, under

NAFTA, the United States, Canada, and Mexico have eliminated nearly all tariffs

on trade between the three countries. In cases where existing agreements offer

different tariff rates than the TPP, exporters would be able to choose which

agreement to utilize as long as they also met the relevant rules of origin.

Product Mix. While tariffs are below 10% on average in all TPP countries,

product-specific peaks can be much higher, above 100% on certain sensitive

items. TPP tariff commitments may have a larger impact on countries that trade

heavily in these high-tariff products. For example, U.S. imports from Vietnam are

concentrated in high-tariff footwear and apparel products. U.S. exports facing

relatively high tariffs in certain TPP markets include autos, agricultural products,

and heavy machinery.

Effective Tariff Rates. Calculated by dividing collected duties by the value of

imports, this measure effectively incorporates the factors discussed above to

provide an indication of the average duty actually paid on imports from a

particular country. Among TPP countries, U.S. effective duty rates in 2015 were

highest on imports from Vietnam (Figure 5). Without readily available data on

duties collected by other TPP countries, a similar calculation cannot be made for

effective duty rates on U.S. exports.

Table 1. TPP Country Tariff and Trade Agreement Statistics

MFN Average

Applied Tariff

(%)

Unique TPP

Staging

Categories

Longest TPP

Phase-Out

Period (Years)

Existing FTAs

with TPP

Partners

TPP Trade with

Existing FTA

Partners (%)

Mexico

7.5

97.9

New Zealand

2.0

54.7

Peru

3.4

96.4

Singapore

0.2

97.5

United States

3.5

82.0

Vietnam

9.5

57.8

Country

Source: WTO Tariff Profiles, TPP tariff schedules, and IMF Direction of Trade Statistics.

Notes: (a) For a list of trade agreements among TPP countries see Appendix Table A-1 in CRS Report R42344,

Trans-Pacific Partnership (TPP) Countries: Comparative Trade and Economic Analysis, by (name redacted) . (b) The

number of staging categories excludes agriculture products covered under TRQs. (*) Chile’s tariff schedule also

includes 17 categories matching TPP commitments to commitments in its previous FTAs.

Figure 5. U.S. Collected Duties and Effective Duty Rates

(2015)

Source: Analysis by CRS. Data from USITC.

Notes: Effective duty rates calculated by dividing imports for consumption by collected duties.

Key Provisions with Non-U.S. FTA Countries

Given the existing U.S. FTAs with Australia, Canada, Chile, Mexico, Peru, and Singapore, which

include comprehensive tariff coverage, this section focuses only on TPP tariff commitments

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

between the United States and the five TPP countries without an existing U.S. FTA (Brunei,

Japan, Malaysia, New Zealand, and Vietnam).42

Key aspects of TPP tariff commitments among these countries include (see Figure 6):



More than one-third of tariff lines are already duty-free in each country: U.S.

(37%), Brunei (76%), Japan (39%), Malaysia (65%), New Zealand (58%), and

Vietnam (32%).

Most tariff elimination would occur in the first years after the agreement’s entry

into force, with more than 80% of tariff lines duty-free in each country after three

years, rising to approximately 90% after ten years.

Eventually 95% or more tariff lines in each country would be duty-free. U.S.

commitments would be phased in over the longest period, with tariff phase outs

on two products up to 30 years after the agreement’s entry into force, although on

average U.S. tariff commitments are similar to the other countries.

In terms of U.S. exports, more than 99% of tariff lines would eventually be dutyfree in Brunei, New Zealand and Malaysia. Japan and Vietnam would maintain

some level of tariff protection on more than 2% of their tariff lines

(approximately 200 lines in Vietnam, mostly agricultural products like sugar, as

well as used autos, and more than 400 lines in Japan comprised mostly of

agricultural products, including pork and dairy).

In terms of U.S. imports, more than 99% of tariff lines would eventually be dutyfree for all five countries. The United States would maintain tariffs on some

products from each country, with the highest number of tariffs remaining on

imports from New Zealand (approximately 100 tariff lines, mostly dairy

products).

These rates of duty elimination are similar to previous U.S. FTAs, but with

somewhat longer phase out periods and a slightly higher share of tariff lines

excluded from liberalization. For example, in the KORUS FTA, both South

Korea and the United States committed to eventually eliminate duties on more

than 99% of tariff lines, with more than 92% of tariff lines duty-free within five

years.43

CRS analysis focuses on the share of liberalized tariff lines. This metric allows for comparison across countries and

previous trade agreements, but it has limitations. In particular, each country has a unique number of tariff lines, which

it determines, making the share of liberalization achieved, in effect, endogenous (i.e., a country can affect its

liberalization share by changing the number of total tariff lines in its tariff schedule). Unique tariff lines range from

nearly 7,500 in New Zealand to more than 10,000 in the United States. Japanese tariff commitments are particularly

complex among the TPP countries, including some cases with multiple tariffs associated with the same HTS code. In

these cases, the authors’ included only the least liberalized tariff in their calculations. Some HTS codes also appear to

apply to only a subset of TPP countries. Those not applicable to the United States were excluded from the calculations.

Finally, approximately 50 tariff lines in the Japanese schedule refer to non-originating goods, and were also excluded.

USITC, U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects, Publication

3949, September 2007, p. 1-8.

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Figure 6. TPP Tariff Commitments between the U. S. and Non-FTA Countries

Source: CRS analysis of TPP tariff schedules.

Note: Japanese tariff commitments on more than 1% of tariff lines are of a complexity that required some judgement by the authors to determine whether they would

be completely liberalized for U.S. products, including some cases with multiple tariffs associated with the same HTS code. In these cases, the authors’ included only the

least liberalized tariff in their calculations. Some HTS codes in the Japanese tariff schedule also appear to apply to only a subset of TPP countries. Those not applicable to

the United States were excluded from the calculations. Finally, approximately 50 tariff lines in the Japanese schedule refer to non-originating goods, and were also

excluded—this updated methodology from an earlier version of the report increased the share of Japanese tariff lines eventually becoming duty free from 94.4% to

95.0%.

CRS-19

The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

TPP Product-Specific Tariff Commitments: Illustrative Examples

U.S. Imports

Shoes. HS Code (6404.11.90) Current Tariff (20%)

In 2015, this type of athletic shoe was the top U.S. footwear import from TPP countries ($797 million). The current

20% U.S. import tariff on this type of shoe would be immediately eliminated for all TPP countries.

Light Trucks. HS Code (8704.31.00) Current Tariff (25%)

In 2015, the U.S. imported $12.8 billion in light trucks from TPP countries. Currently these imports come almost

exclusively from Mexico, an existing U.S. FTA partner. Through TPP, the 25% light truck tariff would be eliminated

immediately for the 6 current U.S. FTA partners (as is already the case under the bilateral agreements), and after ten

years with ten equal annual reductions for the non-FTA partners, except for Japan. For Japan this tariff would remain

at 25% until eliminated in year 30 of the agreement.

Luggage and Handbags. HS Code (4202) Current Tariff (0-20%)

In 2015, the U.S. imported $1.2 billion of luggage and handbags from TPP countries, primarily from Vietnam and

Mexico. Tariffs are already eliminated for Mexico under NAFTA. Most U.S. tariffs on these products for other

countries, currently as high as 20%, would be immediately eliminated, and all such tariffs would be eliminated by year

6 of the agreement.

U.S. Exports

Heavy Equipment - Malaysia. HS Code (8429) Current Tariff (5-25%)

In 2015, the United States exported $3.1 billion of heavy machinery (e.g., scrapers, bulldozers, graders) to all TPP

countries, including $11 million to Malaysia. Under TPP, Malaysia would eliminate all tariffs on such equipment,

currently as high as 25%, by year six of the agreement’s entry into force.

Nuts - Japan. HS Code (0802.32.00) Current Tariff (10%)

In 2015, the United States exported $309 million of walnuts to TPP countries, including $116 million to Japan. Under

TPP, Japan would immediately eliminate the 10% tariff on imports of walnuts from the United States.

Motorcycles - Vietnam. HS Code (8711.50) Current Tariff (77-85%)

In 2015, the United States exported less than $1million of large-engine motorcycles to Vietnam, but more than $461

million to all TPP partners. Under TPP, Vietnam would eliminate tariffs on these imports, as high as 85%, from the

United States in eight annual stages.

Sources: U.S. trade data from the Census Bureau accessed through the ITC’s trade dataweb. Tariff data from the

official TPP tariff schedules.

Rules of Origin (ROO)44

Rules of origin (ROO) determine whether products “originate” within an FTA area and, therefore,

are eligible to receive the benefits when imported into an FTA member state. Thus, they are used

to ensure that the parties to an FTA receive the tariff liberalization benefits and to prevent

transshipments. In practice, however, restrictive rules of origin can also be used to limit the

impact of FTAs on import-sensitive sectors. In the TPP, as in other FTAs, rules of origin are laid

out in detail in the agreement and would need to be approved by Congress as part of the

implementing legislation.

All FTAs and preference programs have distinctive ROO, but the ways that they are developed

are similar. One ROO type requires that a product illustrate that it is “substantially transformed”

(i.e., made into a “new and distinct” product) by showing a “tariff shift,” a change in its HTS

tariff classification. The degree of change required varies by product. The “yarn forward” rule, a

tariff-shift rule that is a guiding principle in TPP for textiles and apparel, requires that all

This section written by (name redacted), Specialist in International Trade and Finance.

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qualifying products must be produced in the FTA region beginning with the yarn. Some productspecific ROO in TPP and other FTAs require that a minimum ad valorem (value) percentage of

the product must be produced in the FTA region. TPP uses regional value content rules for many

products, including automobiles, appliances, and machine tools. Another kind of ROO specifies

that the value of foreign content must not exceed a certain maximum percentage (i.e., a de

minimis rule, which in TPP is 10%). Third, ROO for some products require that some kind of

manufacturing or processing operation (e.g., a chemical reaction) must be completed in the

region.

TPP ROO allow for cumulation among TPP countries. This means a TPP country manufacturer

can use unlimited inputs from other TPP partners and have the finished product qualify for TPP

tariff benefits. This could provide an incentive for creation of new regional supply chains within

the TPP area, and may encourage other countries to join the TPP to avoid being left out of supply

chains.

For the majority of goods, the ROO in most U.S. FTAs, including TPP, are quite similar in most

areas. However, TPP ROO pertaining to certain import-sensitive manufacturing industries,

especially in the textile, apparel, and footwear sectors and the automotive industry, have

important distinctions from previous FTAs (see below).

Textiles, Apparel, and Footwear45

Background

While the United States continues to produce certain yarns and fabrics, some of which are used in

apparel production abroad, nearly all apparel sold in the United States is imported and most U.S.headquartered apparel companies have limited or no U.S. manufacturing capabilities.46 Instead,

they rely on extensive global supply chains, which, in turn, depend on costs, lead times, and other

considerations. As a result of these dynamics, the U.S. textile industry generally supported

gradual TPP textile and apparel tariff reductions, but only if the imported products are assembled

using yarn produced in a TPP country (i.e., the “yarn-forward” rule of origin). Meanwhile, trade

organizations representing U.S. apparel companies and retailers generally supported the

immediate elimination of textile and apparel tariffs upon implementation of the TPP agreement,

opposing the yarn-forward rule of origin as too restrictive.

As with apparel products, most footwear consumed in the United States is imported from abroad,

with import penetration in the industry well above 90%.47 Over a decade ago, the U.S. footwear

industry reached a general agreement supporting immediate elimination of nearly all footwear

tariffs in future trade agreements, except for a number of sensitive items determined still to be

manufactured in the United States.48

This section prepared by (name redacted).

American Apparel & Footwear Association (AAFA), “ApparelStats 2014 and ShoeStats 2014 Reports,” press

release, January 9, 2015, https://www.wewear.org/apparelstats-2014-and-shoestats-2014-reports/.

Ibid.

Letter from Kevin M. Burke, President & Chief Executive Officer, AAFA, to Donald Evans, Secretary of

Commerce, February 21, 2003. In the TPP, these footwear types include 18 items such as certain waterproof footwear

with rubber or plastic soles that are glued together (Harmonized Tariff Schedule (HTS) 6401.10.00) and sports and

certain athletic footwear with outer soles of rubber or plastics, valued over $12 per pair (HTS 6402.91.990). The

Footwear Distributors and Retailers of America (FDRA) describes the specific sensitive tariff lines in its TPP Footwear

Duty Guidebook.

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Vietnam has been a major focus of U.S. negotiations over TPP commitments on textile, apparel,

and footwear. Vietnam accounted for 12% of apparel and 15% of footwear imported by the

United States in 2015, and was the second-largest supplier of apparel and footwear to the United

States after China.49 It is the only large apparel and footwear producer among TPP partners

without an existing FTA with the United States. Currently, Vietnam’s apparel sector sources the

overwhelming majority of its yarns and fabrics from non-TPP members, mainly China, Taiwan,

and South Korea, and it purchases only a small amount of yarns and fabrics (about $100 million

in 2015) from the United States.50

Although associations representing the U.S. textile industry ultimately support the TPP, domestic

industry raised concerns over the potential for Vietnamese-made apparel displacing garments

manufactured with U.S. fabric in Western Hemisphere countries such as Mexico, El Salvador,

Honduras, and Nicaragua, where garment makers currently must use U.S. inputs to obtain dutyfree access to the U.S. market under NAFTA and the U.S.-Central America-Dominican Republic

FTA (CAFTA-DR).51 They also raised concerns over Mexico and Peru, both TPP members,

potentially shifting sourcing of textile inputs from the United States to Vietnam should it develop

an industry that can produce large quantities of textiles.52 On the other hand, proponents of FTAs

as a tool for economic development would argue that encouraging movement up the value chain,

such as from apparel to textile production, in a developing country like Vietnam is a goal of U.S.

FTAs.

Textile, apparel, and footwear tariffs differ considerably among TPP countries.53 The TPP

countries currently face U.S. tariff rates as high as 25% on textiles, 32% on apparel, and up to

nearly 50% on footwear. Other TPP countries also maintain high tariffs, including Vietnam,

whose apparel tariffs range from 5% to 20%.

USITC Estimated Economic Impact

The USITC, in its May 2016 report on the economic impact of TPP, estimated sector-specific

outcomes for textiles and apparel, and footwear.54 Their study, which compares a TPP scenario in

2032 against a non-TPP baseline, estimated that the apparel industry would see an increase in

imports over the 2032 baseline of 1.4% or $1.9 billion, and a smaller increase in exports of 0.3%

or $10 million. Vietnam would account for much of this import growth, while imports from China

would be expected to decline. Textile imports and exports would also be expected to increase

over the baseline, by 1.6% ($869 million) and 1.3% ($257 million), respectively. The study

estimated output and employment slightly above the baseline for the apparel industry (an increase

of 1.0% and 0.9%, respectively), and slightly below for textiles (a decrease of 0.4% for both

output and employment). Regarding footwear, USITC estimated a slight overall rise in total U.S.

Import data are from the Department of Commerce’s Office of Textiles and Apparel (OTEXA), accessed February

22, 2016.

OTEXA, Vietnam, U.S. Export Markets, February 22, 2016, http://otexa.trade.gov/exports/e5520.htm.

The majority of yarns and fabrics exported from the United States are sold to Canada and Mexico (TPP partners),

CAFTA-DR countries, and Peru and Colombia, South American FTA partners.

CRS Report R42772, U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations, by (name redact

ed) .

The United States negotiated special rules for certain textile, apparel, and footwear products to account for different

tariff rates and prevent circumvention of high tariffs in some TPP countries. See, U.S. Appendix C, Tariff Differentials,

https://ustr.gov/sites/default/files/TPP-Final-Text-US-Appendix-C-Tariff-Differentials.pdf.

USITC, TPP Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, Publication 4607,

May 2016, pp. 254, 273.

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imports of 2.7% or $1.1 billion, but a major shift in sourcing toward TPP countries with imports

from the region increasing by 23.4% or $1.6 billion. As most U.S. footwear is already imported,

the agreement is not expected to have a significant impact on the U.S. industry, although the

study estimated an increase above baseline in exports to Vietnam, mostly in intermediate

components, and shows a slight (0.5%) increase in U.S. footwear output.

Key Provisions

Tariffs. All textile, apparel, and footwear tariffs will either be eliminated immediately or phased

out in various stages over a decade or more following implementation of the TPP agreement. The

United States has eight different tariff phase out schedules for textiles, apparel, and footwear. The

longest phase out periods apply to the most sensitive products, such as certain men’s and boys’

overcoats, some women’s and girls’ blouses and skirts, men’s leather boots and work shoes, and

women’s pumps. Tariffs on these products will be fully eliminated at the end of year 10 or 12,

after an initial reduction of 50% or 55% when the pact enters into force.

Safeguard. Like most U.S. FTAs, the TPP includes a textile and apparel safeguard that will allow

the United States to reimpose tariffs if import surges cause or threaten to cause serious damage to

domestic industry. This option will be available for five years after the agreement enters into

force, and each safeguard action may last for two years with a possible two-year extension. In

addition, the United States may unilaterally suspend future tariff phase outs after five years of

implementation if it determines that Vietnam has failed to allow independent unions and grant

them the right to strike by that time (see below section on labor provisions).55

Rules of Origin. To qualify for favorable tariff treatment, textiles and apparel must meet a yarnforward rule of origin, which requires the use of U.S. or other TPP country yarns and fabrics, with

only a few exceptions, in textile and apparel products traded within the TPP area.56 Footwear

manufacturers can qualify their shoes as TPP-originated under (1) a tariff shift method, requiring

that sufficient production occurred entirely within the TPP region to change the tariff

classification of the goods, or (2) one of two different methods of measuring the share of a

product’s value that was added within the TPP region.57 These ROO may give Vietnamese

producers of footwear an advantage in the U.S. market over producers in other Asian countries

that do not benefit from tariff preferences.

Short Supply List. Like other U.S. FTAs with a yarn-forward rule of origin for textiles and

apparel, the TPP provides an exception for products that are deemed to be in “short supply”

within the TPP region. The TPP short supply list includes 187 fibers, yarns, and fabrics, such as

cashmere, certain wool yarns for sweaters, and polyester/wool blend fabrics.58 The agreement

would allow goods made within the TPP region using non-TPP inputs from the short supply list to

qualify for privileged access when exported to other TPP countries.59 Other exceptions to the

See, Letter from Ambassador Michael B.G. Froman, United States Trade Representative, to Vu Huy Hoang, Minister

of Trade and Industry, November 2015, https://ustr.gov/sites/default/files/TPP-Final-Text-Labour-US-VN-Plan-forEnhancement-of-Trade-and-Labor-Relations.pdf.

The yarn-forward rule of origin is included in most US FTAs, such as NAFTA, CAFTA-DR, and agreements with

Australia, Chile, Colombia, Panama, Peru, and Singapore.

The RVC test for footwear requires TPP content of 45% using the build-up rule or 55% using the build-down

method. The calculation includes labor, material, and manufacturing costs.

Eight of the 187 items will only be on the short supply list for 5 years after the agreement takes effect.

OTEXA, The Transpacific Partnership (TPP): An Overview of the Rules of Origin and Market Access Commitments

for Textiles and Apparel, February 2, 2016, pp. 15-16,

http://otexa.trade.gov/PDFs/OTEXA_Webinar_TPP_Feb_2016.pdf.

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textile and apparel ROO allow synthetic knit and woven baby clothes and brassieres cut and sewn

in other TPP countries to be exported to the United States even if the yarn and fabric are not

produced within the TPP region.

Earned Import Allowance. The TPP pact includes a program called the Earned Import

Allowance Program to encourage the use of American fabrics in Vietnamese-manufactured jeans

and khaki pants. The provision exempts some U.S. apparel imports from Vietnam from the TPP

yarn-forward rule provided Vietnam imports a specific quantity of U.S. fabrics. This would allow

a limited amount of apparel cut, sewn, and assembled in Vietnam to enter the United States dutyfree even if the garments include fabric from non-TPP countries.60

Importantly, because both the ROO and the Earned Import Allowance program are complex and

have substantial compliance and reporting requirements, some manufacturers in previous FTAs

have opted to simply pay import duties rather than prove a product meets the specified

requirements.61

Customs Enforcement and Implementation. The TPP includes specific customs procedures to

enforce each TPP country’s commitments, such as visiting textile and apparel factories to conduct

verification activities. A Committee on Textile and Apparel Matters is to be established under the

TPP, where industry can raise concerns and issues can be resolved on trade in these products.

Industry Views

The Industry Trade Advisory Committee (ITAC) on Textiles and Clothing (ITAC 13) summarizes

the industry’s divergent views.62 Committee members generally applauded the greater opening of

global markets, but they differed sharply “over how that should be accomplished, whether that

involves greater U.S. market access for foreign products, and what role consumer perspectives

should play in this debate.”63 There were also strong differences over how the trade negotiations

could best accommodate industry adjustments to additional competition. The National Council of

Textile Organizations (NCTO), the industry group representing the domestic textile industry, 64

the American Apparel and Footwear Association (AAFA), the national trade association of the

apparel and nonrubber footwear industries, and the Footwear Distributors and Retailers of

America65 have endorsed the TPP. In contrast, Patagonia, an apparel retailer, has stated its

opposition to the TPP, as has New Balance, a footwear company that maintains some production

in the United States.66

Similar programs are included in the CAFTA-DR FTA and Haiti Trade Preference Programs. The TPP program is

detailed in Appendix E of the U.S. tariff schedule applicable to imports from TPP member states,

https://ustr.gov/sites/default/files/TPP-Final-Text-US-Appendix-E-Earned-Import-Allowance-Program.pdf.

Rachel Horowitz, Nicole Lorden, and Sophie Miyashiro, Best Practices Manual: How to Import Cotton Apparel

Under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), Fashion Institute

of Technology, March 2013, p. 5.

Industry Trade Advisory Committee (ITAC 13) on Textiles and Clothing on the Trans-Pacific Partnership

Agreement, December 2, 2015, https://ustr.gov/sites/default/files/ITAC-13-Textiles-and-Clothing.pdf.

Ibid., p. 5.

NCTO, “U.S. Textile Manufacturers Endorse Trans-Pacific Partnership,” press release, January 21, 2016,

http://www.ncto.org/category/press-releases/.

See, AAFA, “Apparel & Footwear Association Releases Statement of Support for the Trans-Pacific Partnership,”

press release, February 1, 2016, and Footwear Distributors and Retailers of America (FDRA), “Pre-hearing Statement

for the public hearing on the Trans-Pacific Partnership: Likely Impact on the U.S. Economy and on Specific Industry

Sectors,” p. 10, December 21, 2015.

See, Rose Marcario, “Patagonia Opposes TPP,” Patagonia, November 13, 2015,

(continued...)

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Motor Vehicles67

Background

The United States and Japan are the second- and third-largest auto manufacturing nations,

respectively, which made motor vehicle market access issues central to the TPP negotiations

(Table 2). Other TPP signatories that produce motor vehicles are Canada, Mexico, Malaysia, and

Vietnam. Japan, Mexico, the United States, and Canada all export large numbers of vehicles. As a

result of market forces and the elimination of vehicle trade barriers in NAFTA, the North

American auto industry has become highly integrated. The largest source of U.S. imports from

outside the NAFTA region is Japan, which shipped over 1.5 million vehicles to the United States

in 2014.68

U.S. vehicle exports have steadily risen since the 2007-2009 recession and exports to other TPP

countries could grow further as tariffs fall and nontariff barriers (NTBs) are reduced or

eliminated.69 In 2014, U.S. vehicle exports exceeded two million units for the first time, having

doubled since 2009. Nearly half of those exports were sold in Canada (870,025 units). Other TPP

destinations for U.S. vehicle exports were Mexico (151,902), Australia (61,052), Japan (19,003),

Chile (16,631), Peru (6,354), and New Zealand (5,013).70 However, while TPP markets accounted

for 56% of U.S. vehicle exports to the world,71 most of those exports already benefit from dutyfree access under various regional and bilateral trade agreements. Japan is the only large vehicle

market among TPP countries that is not covered by an FTA with the United States.

Table 2. TPP Signatories with Vehicle Production

2015

Country

Units Produced

Units Sold Domestically

United States

12,100,095

17,470,659

Japan

9,278,238

5,562,887

Mexico

3,565,469

1,351,648

Canada

2,283,474

1,939,949

Malaysia

614,671

666,674

Vietnam

50,000

209,804

Source: International Organization of Motor Vehicle Manufacturers, www.oica.net.

Notes: Vehicles include passenger cars and commercial vehicles.

(...continued)

http://www.thecleanestline.com/2015/11/patagonia-opposes-tpp.html and “New Balance renews opposition to TPP,” by

Matthew Korade, Politico Pro, April 12, 2015.

This section prepared by (name redacted).

Automotive News, Data Center, U.S. Car and Light-Truck Sales by Make, 2014, January 5, 2015.

Vehicles are exported from U.S. plants not only by General Motors, Ford, and Fiat-Chrysler, but also by Japanese,

German, and Korean automakers. U.S. Department of Commerce, Office of Transportation and Machinery, Trends in

U.S. Vehicle Exports, August 2015, pp. 4 and 6.

http://trade.gov/mas/manufacturing/OAAI/build/groups/public/@tg_oaai/documents/webcontent/tg_oaai_004086.pdf.

Ibid., p. 9.

Other major non-TPP export markets (in terms of units sold) for U.S. vehicles in 2014 were China (307,425),

Germany (147,680), and Saudi Arabia (104,074).

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TPA-2015 did not spell out specific TPP objectives for trade in motor vehicles. Rather, motor

vehicle industry goals were subsumed under general objectives to reduce tariffs and NTBs and to

refrain from foreign currency manipulation. TPP auto manufacturing countries sought the

elimination or reduction of U.S. vehicle tariffs, which are currently 2.5% on passenger vehicles

and 25% on pick-up trucks. A related goal was to develop rules of origin for TPP vehicle trade

that would ensure parts supply chains could operate smoothly but with strong verification and

enforcement procedures. Some of the rules for vehicle trade in NAFTA and the U.S.-South Korea

FTA (KORUS) served as reference points for TPP negotiators.

USITC Estimated Economic Impact

The USITC study estimated impacts on the passenger vehicle industry over 30 years given the

long phaseout period for tariffs in this sector.72 The study highlights three significant periods

during this transition: (1) after year 6, Canada, the top U.S. export market, would eliminate tariffs

on imports from Japan potentially increasing competition for U.S. auto producers in that market;

(2) by year 13 Malaysia and Vietnam would eliminate auto import duties, making U.S. exports

more competitive in those markets; and (3) by year 30 the United States would eliminate its

import tariffs on Japanese autos potentially increasing competition in the U.S. market for U.S.

producers. Ultimately, the study predicts an increase from the 2047 baseline in vehicle and parts

exports of 2% ($2.9 billion) and 1.5% ($2.1 billion), respectively. Imports are expected to be

above baseline by 1.1% ($4.3 billion) for vehicles and 1.5% ($4.5 billion) for parts. Relative to

the baseline, output and employment are expected to increase slightly for autos (2% for each),

and decline slightly for parts (-0.2% for output and -0.3% for employment).

Key Provisions

Tariffs. If the TPP agreement comes into force, member countries will eventually eliminate

import tariffs on most vehicles and parts. U.S. tariff commitments, including for motor vehicles,

are on a bilateral basis, so tariff reduction speeds differ with respect to each country. 73 The longest

tariff phaseouts are applied to vehicle shipments from Japan to the United States. In that case, the

2.5% tariff on passenger cars will remain in place until year 15, after which it will be eliminated

gradually through year 25 after the agreement’s entry into force. The 25% U.S. light truck tariff

with Japan is not phased out, but eliminated only in year 30 of the TPP. The U.S. rationale for

longer tariff phase outs on Japanese vehicles than on those from other countries is that a longer

transition is necessary for Japan to remove its own NTBs and move toward a “more open

automotive market.”74 The reduction in foreign barriers to U.S. vehicles is likely to be most

significant in Malaysia and Vietnam, where current high tariff levels make imported vehicles

costly. Malaysia’s vehicle tariffs are as much as 40%; Vietnam’s as much as 70%.

Nontariff Barriers. NTBs in the vehicle industry fall into two categories: (1) suppression of

imports through tax breaks for local vehicles and local content requirements for domestically

USITC, TPP Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, Publication 4607,

May 2016, pp. 232.

For six TPP countries (Australia, Canada, Chile, Mexico, Peru, and Singapore, with which the United States already

has FTAs), the TPP vehicle duties are zero when the agreement takes effect. For Brunei, Malaysia, and New Zealand,

vehicle duties are cut in half when the agreement takes effect with the remaining duty removed in year 13 of the

agreement. Vietnam will also remove most auto tariffs by year 13 of the agreement, but tariffs on used vehicles

(representing nearly one-third of Vietnam’s auto tariff lines) will remain in place.

ITAC 2 Advisory Committee Report to the President, the Congress, and the United States Trade Representative on

the Trans Pacific Partnership Trade Agreement, December 22, 2015, p. 5.

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produced cars and parts; and (2) safety and environmental regulations that limit vehicle trade

because the regulatory requirements differ among countries.75 Although Japan does not assess

tariffs on vehicles, its consistently low level of vehicle imports has led to assertions that NTBs are

used to restrict sale of foreign-made vehicles. Bilateral U.S.-Japan side letters to the TPP

agreement establish a special joint dispute resolution process and commit Japan to



adopt a more open automotive rulemaking process;

accept a limited number of U.S. motor vehicle safety regulations on an

equivalency basis with similar Japanese standards;

reduce barriers to establishing vehicle distribution centers; and

apply financial incentives equally to imported as well as domestic vehicles.76

Rules of Origin. The motor vehicle rules of origin, while focused to some extent on U.S.-Japan

vehicle trade, are also of interest to Canada and Mexico, which seek to maintain their own large

auto-making industries in the face of increased competition from Asian production. The NAFTA

rules served as a model for the TPP. To receive reduced tariffs under NAFTA, 62.5% of a

vehicle’s content must be manufactured in the United States, Canada, or Mexico. The NAFTA net

cost method takes total vehicle manufacturing costs, then subtracts costs of promotion, marketing,

shipping and other factors. The resulting figure is then divided into the value of regional

content—determined by subtracting the value of all the parts originating outside of the NAFTA

area from the net cost—to find the percentage of regional content. In its own bilateral trade

agreements, however, Japan has used a different calculation, known as the build-down method,

and it argued that this should be the basis of vehicle rules of origin in the TPP. The build-down

method does not subtract shipping and marketing before making the regional content

determination, so cars using this method would have higher regional content than if the net cost

method were used. The formula in the TPP allows either approach, requiring vehicles to have

45% TPP content using the net cost method or 55% using the build-down method to qualify for

tariff preferences. The 45% net cost RVC in TPP is lower than the 62.5% level in NAFTA, but

above the 35% level in KORUS.

Vehicle and parts manufacturers producing and exporting within North America would be able to

choose whether to use the NAFTA or TPP rules of origin. While the rules of origin differential

between NAFTA and TPP may not impact vehicle trade, it may affect trade in auto parts. That is

because the required TPP share of value for auto parts to receive preferential treatment is

significantly lower than the threshold for vehicles, ranging from 35% to 45%, depending on the

type of accounting used. While different regional value content standards for vehicles and parts

were used in NAFTA—62.5% for vehicles and 60% for parts—the standards were closer than

they are in TPP.77 Under TPP rules, some auto parts whose value was added mainly outside the

TPP region may be able to enter the United States duty-free. This differential led ITAC 2 to note

that its auto industry members “acknowledge the real concerns raised by some that the

Sarah Oliver, Assessing the Trans-Pacific Partnership: Auto Sector Liberalization, Peterson Institute for

International Economics, PIIE Briefing 16-1, February 2016, p. 60,

http://www.piie.com/publications/briefings/piieb16-1.pdf.

Motor Vehicle Trade Appendix between United States and Japan, available at https://ustr.gov/sites/default/files/TPPFinal-Text-Japan-Appendix-D-Appendix-between-Japan-and-the-United-States-on-Motor-Vehicle-Trade.pdf; Also see

U.S.-Japan letter exchange, https://ustr.gov/sites/default/files/TPP-Final-Text-US-JP-Letter-Exchange-on-CertainAuto-NTMs.pdf; and https://ustr.gov/sites/default/files/TPP-Final-Text-JP-to-US-Letter-on-Motor-VehicleDistribution-Survey.pdf.

In the U.S.-Korea FTA several types of content calculations are allowed: for both vehicles and parts: 35% (net cost)

or 55% (build down).

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automotive origin RVC [regional value content] is not sufficiently strong, particularly for

automotive parts.”78

Industry Views

The motor vehicle industry does not have a unified position on the TPP; some automakers

support it,79 others have raised concerns,80 and one company opposes it.81 The United

Autoworkers union (UAW) opposes it.82 Concerns include the following:



Currency Manipulation. Some automakers (as well as some other

manufacturers) recommended that the TPP include an enforceable commitment

to prohibit currency manipulation. Instead, the TPP establishes a Macroeconomic

Policy Authority Forum (see below section on currency), which the International

Trade Advisory Committee for autos (ITAC 2) says falls short of its

recommendations, but which “could help mitigate the misuse of exchange rate

policies and the adverse economic impact this policy practice has had on the

United States....”83

U.S.-Japan Side Letters and Appendix. ITAC 2 considers Japan’s vehicle NTB

commitments as marginal improvements, but expects that they “will not lead to a

substantially larger U.S. presence in the Japanese motor vehicle market.”84 It

contends that these commitments are not enforceable under the TPP’s dispute

resolution provisions.85

Long Phase out of U.S. Tariffs on Imported Japanese Cars and Trucks. With

up to 30 years before these tariffs are eliminated completely, some experts

alleged that the TPP tends to emphasize protection over liberalization.86 ITAC 2

sees the long phase out period as appropriate to provide Japan with a “sufficient

transition period to a more open automotive market.”87

ITAC 2, p. 7.

Supporters of the TPP agreement include: Toyota North America, Honda North America, Association of Global

Automakers, and Motor and Equipment Manufacturers Association.

Industry Trade Advisory Committee on Automotive Equipment and Capital Goods, ITAC 2 Advisory Committee

Report.

Ford Motor Company has announced its opposition to TPP and also publicly announced in January 2016 that it was

withdrawing from the Japanese (and Indonesian) markets, stating that in those markets it does not see a “path to

profitability” and that “market dynamics prevent us from being competitive. Ford’s press release also singled out the

TPP’s effect: “Japan is the most closed, developed auto economy in the world, with all imported brands accounting for

less than 6% of Japan’s annual new car market. The overall industry in Japan is projected to decline in coming years,

leaving even less opportunity for success. In addition, in its current form, the Trans Pacific Partnership will not

materially improve our ability to compete effectively in the market.” Ford Motor Company, “Ford Announces Closure

of Operations in Japan and Indonesia Later This Year,” press release, January 25, 2016,

http://www.at.ford.com/news/cn/Pages/Important%20Announcement.aspx.

See the UAW press release outlining its reasons for opposition. International Union, United Automobile, Aerospace

and Agricultural Implement Workers of America (UAW), “United Auto Workers Leadership Statement of Opposition

to the TPP—Statement from UAW President Williams,” press release, December 3, 2015, http://uaw.org/united-autoworkers-leadership-statement-of-opposition-to-the-tpp-statement-from-uaw-president-williams/.

ITAC 2 report, p. 17.

Ibid., p. 8.

Ibid., p. 15.

Sarah Oliver, Assessing the Trans-Pacific Partnership: Auto Sector Liberalization, p. 65.

ITAC 2, p. 5.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress



Slow Liberalization Schedule for Malaysia and Vietnam. These countries will

complete their vehicle and parts tariff reductions in year 13 year of TPP’s

implementation, although some of Vietnam’s restrictions will remain after full

implementation.88 (Almost all auto parts from TPP countries will be able to enter

the United States duty free as soon as the TPP takes effect, as long as they meet

the rules of origin.)

Tracking and Enforcing Complicated Rules of Origin. TPP methods permit

automakers to import vehicles and parts that contain some non-TPP content

(from China or Thailand, for example). While supply chain sourcing is

increasingly global, the impact on smaller U.S. parts manufacturers is not clear.

ITAC 2 report calls for the U.S. government to monitor and enforce these rules to

prevent non-TPP countries from benefiting from the preferential tariff benefits.89

Lack of Regulatory Harmonization. There are no obligations to require TPP

countries to accept motor vehicle imports engineered to U.S. regulatory

standards. This means that U.S. producers may need to modify their vehicles

before selling them in other TPP member countries. This can be costly, especially

in countries where the prospective demand for U.S.-made vehicles is small. ITAC

2 calls the lack of recognition of U.S. standards a “retreat from the longstanding

U.S. practice of securing concessions in new agreements that go beyond what

had been achieved in prior pacts. As such, this represents a significant missed

opportunity.”90

Services91

Background

A major priority for the United States in its negotiations of bilateral and regional FTAs is

increased market access for services providers.92 Congress identified expanded market

opportunities in services trade as a principal negotiating objective in the TPA-2015. Cross-border

trade in services represents slightly less than one-fourth of total U.S. trade, and is an area of focus

for the United States due to U.S. firms’ competitiveness in these sectors. Services accounted for

78% of U.S. private sector gross domestic product (GDP) and 87 million (82%) private sector

employees in 2013. 93 The United States consistently runs a surplus in services trade; U.S.

services exports surpassed imports by $233 billion in 2014. Some economists argue that the

expanded commitments in international services may represent the greatest benefit for the United

States in the TPP.94

The United States sought to expand on previous commitments the 11 partner countries have made

on trade in services, particularly with the five countries with whom the United States does not

CRS calculations based on the legally verified TPP Tariff Elimination Schedules.

ITAC 2, p. 7.

ITAC 2, p. 14.

This section written by Rachel Fefer and Brock Williams.

For more information see CRS Report R43291, U.S. Trade in Services: Trends and Policy Issues, by (name redacted).

Meredith M. Broadbent, Chairman, Recent Trends in U.S. Services Trade: 2015 Annual Report, United States

International Trade Commission, May 2015, http://www.usitc.gov/publications/332/pub4526.pdf.

David Autor, David Dorn, and Gordon H. Hanson, "Why Obama's Key Trade Deal with Asia Would Actually be

Good for American Workers," Washington Post, March 12, 2015.

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have existing U.S. FTAs (Brunei, Japan, Malaysia, New Zealand, and Vietnam). For these

countries, existing commitments with the United States are based on the multilateral WTO

General Agreement on Trade in Services (GATS). Another major U.S. objective was to address

new services trade barriers not covered, or covered only partially, in previous trade agreements,

and in doing so, potentially influence other ongoing U.S. services trade negotiations, including

the Trans-Atlantic Trade and Investment Partnership (T-TIP) with the EU and the plurilateral

Trade in Services Agreement (TiSA) on the sidelines of the WTO.95 Emerging issues in services

trade include the prohibition of restrictions on data flows and data localization requirements and

treatment of electronic payment card systems.

Unlike tariff barriers, nontariff barriers (NTBs) on services trade that the TPP seeks to reduce and

eliminate can take many different forms, making them difficult to quantify and compare across

countries. The Organization for Economic Cooperation and Development (OECD) has created

indices that provide some measure of services trade restrictiveness.96 These indices, available for

OECD countries and some selected other countries across 18 different services sectors, show

considerable variation in services trade restrictiveness among TPP OECD countries (Australia,

Canada, Chile, Japan, Mexico, New Zealand, and the United States) and hence the opportunity

for liberalization through TPP negotiation efforts. For example, in telecommunications, the index,

which takes a value from 0 to 1 (most restrictive), ranges from 0.12 for the United States to 0.30

for Japan and 0.34 for Mexico. Such restrictions are likely even greater among some of the lesser

developed TPP countries not included in the OECD database. Similar work by researchers at the

World Bank, which covers more countries but in less detail, supports this hypothesis. Their index

for overall services trade restrictiveness, which takes a value from 0 to 100, ranges from 11 for

New Zealand to 41.5 for Vietnam and 46.1 for Malaysia, although the middle income country of

Peru (16.4) scores lower than the United States (17.7).97

Due to the complexity of services trade barriers, TPP commitments in several chapters may affect

services trade. Chapters with a focus on services-related commitments discussed in more detail

below include: Cross Border Trade in Services (Chapter 10), Financial Services (Chapter 11),

Temporary Entry (Chapter 12), and Telecommunications (Chapter 13).

USITC Estimated Economic Impact

The USITC predicts generally positive results for U.S. services industries from the TPP.98 The

May 2016 study estimates that both services sector output and employment would see increases

above a 2032 baseline as a result of the TPP. These gains are small in relative terms (0.1%), but

large in absolute terms ($42.3 billion increase in output) given the scale of the U.S. services

sector. Both exports and imports are expected to increase above the baseline ($4.8 billion and

$7.0 billion, respectively) but the estimated larger growth in imports would lead to an overall

decline in net U.S. exports of services. The authors attribute this to a few factors: increased

For more information see CRS Report R43387, Transatlantic Trade and Investment Partnership (T-TIP)

Negotiations, by (name redacted), (name redacted), and (name redacted)

; and CRS In Focus IF10311, Trade in

Services Agreement (TiSA) Negotiations, by (name redacted).

OECD Services Trade Restrictiveness Index available at http://www.oecd.org/tad/services-trade/services-traderestrictiveness-index.htm.

Ingo Borchert, Batshur Gootiiz, and Aaditya Mattoo, Policy Barriers to International Trade in Services: New

Empirical Evidence, World Bank Policy Research Working Paper (WPS6109), 2012, http://iresearch.worldbank.org/

servicetrade/home.htm.

USITC, TPP Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, Publication 4607,

May 2016, pp. 319.

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expenditures on tourism abroad (a U.S. services import), due to higher U.S. incomes post TPP; a

shift in U.S. productive resources to sectors experiencing greater liberalization in foreign markets,

including food and agriculture; and increasing U.S. demand for services imports given output

capacity constraints and greater demand for U.S. services exports in TPP countries. The increase

in U.S. services exports is estimated to go largely to TPP countries without an existing FTA while

the increase in U.S. services imports would come from non-TPP countries, particularly the EU.

Examples of TPP Services Liberalization

A key component of services trade commitments in TPP is liberalization of specific industries. Most U.S. service

sectors are already open to international competition and the United States made few commitments that went

beyond existing trade agreement obligations. Longstanding restrictions on maritime shipping services, for example,

would not be affected by the TPP. Other TPP countries, particularly the five countries without existing U.S. FTAs,

opened additional services sectors to U.S. competition. Examples include



Japan would remove preconditions to provide express delivery and insurance services, and allow competing

insurance providers access to the distribution network of Japan Post, the Japanese postal provider.



Malaysia would eliminate its foreign capital cap in telecommunications services and all joint venture and

performance requirements for 12 service sectors in the upstream oil and gas industry, including drilling services,

turbine repair and maintenance, and seismic data acquisition.



Vietnam would remove foreign equity restrictions on freight agency, warehousing, and customs clearance, and

eliminate joint venture requirements for freight brokerage and related cargo logistics services.

Cross-Border Trade in Services

The TPP chapter on cross-border trade in services commits parties to provisions governing

situations in which the buyer and seller are located in different territories. As with previous U.S.

FTAs, the TPP employs the “negative list approach,” that is, the provisions are to apply to all

types of services, unless specifically excluded by a partner country in the chapter annex on

NCMs. This approach is generally considered more comprehensive than the “positive list

approach” used in the GATS, which requires each covered service to be identified. The negative

list approach also implies that any new type of service that is developed after the agreement

enters into force is automatically covered unless it is specifically excluded. Key provisions

include the following:



nondiscriminatory treatment of services from partner-country providers,

including national treatment and MFN treatment;

no limitations on the number of service suppliers, the total value or volume of

services provided, the number of persons employed, or the types of legal entities

or joint ventures that a foreign service supplier may employ;

prohibition on locality requirements that a TPP-based service provider maintain a

commercial presence in the country of the buyer;

support of mutual recognition of professional qualifications for certification of

service providers;

transparency in the development and application of government regulations; and

allowance for payments and transfers of capital flows that relate to the provision

of services, with permissible restrictions in some cases including bankruptcy and

criminal offences.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Examples of TPP Services Nonconforming Measures (NCMs)

Each TPP party, including the United States, has a list of specific industries or practices it would exempt from its TPP

services trade obligations. Examples include



Accounting: An accountant in Japan is required to be qualified as a certified public tax accountant under the

Japanese laws and regulations and establish an office within the district of the certified public tax accountant

association to which the person belongs.



Audiovisual: In Vietnam, the ratio of screening Vietnamese films to total films must be at least 20 percent

annually and cinemas should show at least one Vietnamese film between the hours of 18:00 and 22:00.



Financial: Malaysia maintains a “best interest” screening test for granting licenses or approvals for an

investment in financial institutions with no specific threshold or established criteria.



Hospitality: To supply food or beverage catering services in Singapore, a foreign supplier must incorporate as

a limited company, and apply for the food establishment license in its name.



Insurance: In Australia, approval of nonresident life insurers is restricted to subsidiaries incorporated under

Australian law.



Legal: Only Chilean and foreign nationals with a residence in Chile, who have completed the totality of their

legal studies in the country, are authorized to practice as lawyers, and only lawyers duly qualified to practice law

are authorized to plead a case in Chilean courts, or file the first legal action or claim of each party.



Maritime: Only U.S.-flag vessels may carry cargo between U.S. ports and must be staffed by U.S. crew.



Printing: Foreign investors in Mexico are limited to 49 percent of the ownership interest in a business for

printing or publication of daily newspapers written primarily for a Mexican audience and distributed in Mexico.

Express Delivery

The United States made market access of express delivery services a priority in the TPP

negotiations, as it has in other recent FTAs, including KORUS. Covered in a chapter annex, the

commitments on express delivery focus, in particular, on cases where a government-owned and

operated postal system provides express delivery services competing with private sector

providers. Japan Post, which also includes banking and insurance services, has been moving

towards privatization with an initial public offering of a portion of its shares in 2015, but remains

majority owned by the government. Even domestic Japanese competitors in express delivery have

argued that the Japanese postal service receives a number of unique advantages. The TPP annex

and a separate side letter between the United States and Japan attempt to eliminate those

advantages.99

TPP, like KORUS, stipulates that the postal system cannot use revenue generated from its

monopoly power in providing postal services to cross-subsidize an express delivery service.

Vietnam would be exempt from such a rule for 3 years. TPP, however, goes beyond KORUS in its

express delivery commitments, and would also require independence between express delivery

regulators and providers, prohibit the requirement of providing universal postal service as a

prerequisite for express delivery, and prohibit fees on express delivery providers for the purpose

of funding other such providers. Unlike KORUS, TPP lacks a specific threshold for the customs

de minimis, a critical commitment for express delivery providers as shipments valued below the

de minimis receive expedited customs treatment and pay no duties or taxes. Industry sought a

$200 de minimis, like that in KORUS, and has noted that TPP parties agreed to periodically

review their respective thresholds.100

Leo Lewis, "Yamato Launches Rare Japan Post Broadside," Financial Times, November 12, 2015.

Industry Trade Advisory Committee on Services and Finance Industries (ITAC 10), Advisory Committee Report to

the President, the Congress and the U.S. Trade Representative on the Trans-Pacific Partnership Trade Agreement,

(continued...)

100

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Financial Services

Financial services, including insurance and insurance-related services, banking and related

services, as well as auxiliary services of a financial nature, are addressed in a separate chapter as

in previous FTAs. The financial services chapter adapts relevant provisions from the foreign

investment chapter and the cross-border trade in services chapter. The prudential exception in

TPP provides that nothing in the FTA would prevent a party to the agreement from imposing

measures to ensure the integrity and stability of the financial system. TPP, like KORUS,

distinguishes between financial services traded across borders and those sold by a provider with a

commercial presence in the home country of the buyer. In the case of providers with a foreign

commercial presence, TPP applies the negative list approach with commitments applying

generally except where noted; in the case of cross-border trade, TPP limits coverage to specific

banking and insurance services as defined by each country.101

Some critics have noted the long list of NCMs. The United States, for example, excludes

Government-Sponsored Enterprises such as the Federal National Mortgage Association (Fannie

Mae). One of Malaysia’s NCMs has received particular scrutiny from the business community, as

it would require the Malaysian government’s approval for certain bank and insurance investments

based on whether such investment is in “the best interest of Malaysia.” Services industry

representatives have raised concerns over the potential breadth of this exemption given its lack of

a threshold or specific definition or criteria.102

Financial services are not covered under the e-commerce chapter and therefore not protected by

that chapter’s new obligations such as the prohibition of localization requirements for data servers

and computing facilities. The chapter does, however, have a separate provision prohibiting

restrictions on cross-border data flows based on KORUS, which is similar to that found in the ecommerce chapter. U.S. financial services firms and some Members of Congress are concerned

about the distinct treatment of the sector because, like many other industries, financial services

firms rely on cross-border data flows to ensure data security, create efficiencies and cost savings

through economies of scale, and utilize internet cloud services that are often provided by U.S.

technology firms.103 Localization requirements imposed by countries could require companies to

have in-country servers and data centers to store data. These types of regulations can create

additional costs and may serve as a deterrent for firms seeking to enter new markets or a

disguised barrier to trade. Localization supporters, though, claim they increase local control and

data security.

In TPP, USTR negotiated for the position advocated by the U.S. Treasury Department and sought

flexibility for financial regulators to impose localization requirements. While localization

requirements are not currently in place in TPP countries, observers note that Malaysia and

Vietnam are considering imposing such regulations. In addition, some stakeholders note concern

(...continued)

December 3, 2015.

101

See TPP Annex 11-A for a complete listing of insurance, banking, and other financial services covered by the crossborder trade in financial services disciplines.

102

Ambassador Peter Allgeier, Testimony before the International Trade Commission, Coalition of Services Industries,

January 14, 2016,

https://servicescoalition.org/images/CSI_Public_Documents/ITC_Hearing_on_Economic_Impact_of_TPP_on_Service

s.pdf.

103

ITAC 10, op. cit.; Letter from Representative Mike Kelley, Member of Congress, et al. to Jacob J. Lew, Treasury

Secretary, et al., January 11, 2016; Letter from Senator Kelly Ayotte, Member of Congress, et al. to Jacob J. Lew,

Treasury Secretary, et al., March 7, 2016.

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about other countries, including potential future TPP parties such as South Korea and Indonesia,

which have or are considering localization requirements. Treasury Secretary Lew cautioned that

options for altering the 12-country agreement are limited104 and, on May 25, 2016, announced a

proposal to resolve the issue in future trade agreements (which would not directly affect TPP

commitments).105

TPP, like KORUS, also addresses insurance sold by government postal entities. U.S. providers

have argued that government-owned and operated insurance providers are not regulated as

stringently and, therefore, have a competitive advantage over privately-owned counterparts. TPP

would require that parties to the agreement ensure that postal insurance entities are not given

advantages over private suppliers, specifically including through regulations, requirements to

maintain a license, and access to distribution channels. In some ways, these measures go beyond

what was included in KORUS. The separate U.S.-Japan letter on nontariff measures specifically

addresses Japan Post’s insurance business with clarified and additional commitments by Japan.106

For the first time in a U.S. FTA, the TPP also includes commitments on electronic payment card

services. The TPP would require that each country in the agreement allow for the supply, by

persons of other TPP countries, of electronic payment services for payment card transactions,

defined by each country, and generally including credit and debit cards. The provisions on card

services would, however, allow for certain preconditions of access, including requiring a

representative or office within country.

Temporary Entry for Business Persons

While some services can be traded across borders, services are also traded by a person supplying

the service traveling to the location where the service is consumed. This is known as mode 4

delivery in the GATS. TPP, like some previous U.S. FTAs, includes commitments on temporary

entry for business persons in order to facilitate such trade. As temporary entry has been a

controversial issue in the context of previous trade agreements, the United States did not offer or

seek commitments on additional visas for temporary entry, and only agreed to measures on

regulatory transparency and predictability. According to the Administration, these rules would not

require any change in U.S. immigration laws or regulations, and dispute settlement for this

chapter is limited to very specific circumstances.107 Other TPP parties, however, have made

additional access commitments on the temporary entry of business persons, including on length of

stay and types of occupations, but these will only apply to the other countries making

commitments in this area (i.e., not the United States). Australia, for example, provides categories

defining “business visitors” and spells out the conditions and limitations for each category such as

“service sellers” who are permitted an initial stay of 6 months up to a maximum of 12 months.108

104

U.S. Congress, House Committee on Appropriations, Subcommittee on Financial Services and General

Government, President Obama's Fiscal 2017 Budget Request for the Treasury Department, 114th Cong., 2nd sess.,

March 16, 2016.

105

Treasury Department, A New Approach to Data Localization and Financial Services, May 26, 2016.

106

This letter can be found at https://ustr.gov/sites/default/files/TPP-Final-Text-US-JP-Letter-Exchange-on-Non-TariffMeasures.pdf.

107

USTR, TPP Chapter Summary: Temporary Entry for Business Persons, November 5, 2016, at

https://ustr.gov/sites/default/files/TPP-Chapter-Summary-Temporary-Entry-for-Business-Persons.pdf.

108

See annex 12-A of the TPP text.

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Telecommunications

For the first time in a U.S. FTA, the telecommunications chapter covers mobile service providers.

Television or radio broadcast or cable suppliers, though, are not covered. Overall, the chapter

applies a market driven approach, enshrining competition and consumer choice in the sector, and

promotes the independence of regulators from the regulated. According to the Administration and

the industry advisory committee, given current competition in the U.S. mobile market, the United

States would not have new obligations resulting from the TPP commitments, but U.S. mobile

carriers would gain greater access to markets abroad.109 The chapter’s provisions would require

regulatory transparency; that providers can interconnect with one another; that there is reasonable

and nondiscriminatory access to networks, infrastructure, government-controlled resources like

spectrum bandwidth, for reasonable rates; and protection of the supplier’s options for employing

technology. The chapter would promote cooperation on charges for international roaming services

and allow regulation for mobile roaming service rates. Other provisions aim to ensure that

suppliers can resell and unbundle services.

Stakeholder and Industry Views

Services industries generally have reacted positively to the TPP provisions relating to U.S. trade

in services, with some key exceptions. The International Trade Advisory Committee for services

and finance industries (ITAC 10) reported that the agreement satisfies TPA negotiating objectives

and “on balance promotes the economic interest of the United States.”110 Business groups note

that for the five countries without existing U.S. FTAs, the provisions in TPP would provide

meaningful additional market access.111 They also highlight new provisions in TPP, particularly

those related to data flows and digital trade, as advancing U.S. service firms’ interests. Provisions

on data flows also affect other (non-services) firms, such as manufacturers who rely on global

supply chains and transmitting data across borders. The larger business community also sees

additional advances in the TPP, include ensuring electronic payment card services and electronic

signatures, as well as addressing mobile telecommunications carriers and international roaming

rates.

While business groups generally support the agreement and its impact on services, they have

raised some concerns. There has been vocal opposition from some in the services sector, for

example, over financial services firms’ exclusion from TPP’s e-commerce chapter and its

provisions prohibiting localization requirements for computing facilities.112 The U.S. Treasury

Department reportedly argued in favor of this exception to maintain regulatory flexibility for

requiring local storage of financial firm data; opponents of the provision view it as unnecessary

given the general prudential exception in the services chapter.113 Several Members of Congress

have expressed their concerns over this exemption in a letter to USTR, urging the Administration

to address the issue both in TPP and in ongoing negotiations.114 Other issues of concern for

109

USTR, TPP Chapter Summary: Telecommunications, November 5, 2016, at https://ustr.gov/sites/default/files/TPPChapter-Summary-Telecommunications.pdf; and Industry Trade Advisory Committee for Information and

Communications Technologies, Services and Electronic Commerce (ITAC 8), Advisory Committee Report to the

President, the Congress and the U.S. Trade Representative on the Trans-Pacific Partnership Trade Agreement,

December 3, 2015.

110

ITAC 10, op. cit.

111

Allgeier, op. cit.

112

Allgeier, op. cit.

113

"Administration Engages with Financial Services Firms on TPP Objections," Inside U.S. Trade, December 4, 2015.

114

Letter from Representative Mike Kelley, Member of Congress, et al. to Jacob J. Lew, Treasury Secretary, et al.,

(continued...)

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

services industries include: the long list of nonconforming measures (NCMs) that limit the level

of liberalization achieved; what some view as a narrow definition of SOEs, limiting these

disciplines’ applicability; and the U.S. decision not to negotiate additional commitments on

temporary entry for business persons in TPP.115

The Communications Workers of America (CWA), a union representing workers in a number of

service industries, opposes TPP. They argue that increased access to the U.S. services market and

various provisions throughout the agreement, including on government procurement, investment,

and data transfers, could have negative impacts on service workers including in jobs such as call

centers and data processing.116 Other groups also oppose TPP, in part, due to certain services

provisions, particularly those on financial services. They argue that TPP commitments will

restrict the U.S. government’s ability to regulate the financial services industry.117

Agriculture118

Background

Exports make a vital contribution to U.S. agriculture, absorbing about 20% of total agricultural

production, while representing a far larger share of the production of certain commodities,

including wheat, rice, soybeans, cotton, almonds, pecans, pistachios, and walnuts, to name a few.

As such, foreign demand for U.S. food and fiber contributes materially to higher commodity

prices and farm income. The positive ripple effects from farm trade extend beyond farmers and

ranchers to rural communities to include: farm input industries that provide seed, fertilizer, and

machinery; and commodity processors and food manufacturers with a stake in foreign markets.

Exports also can contribute to higher input prices for food to the extent that additional foreign

demand is not met by an increase in domestic supplies, although commodity costs amount to a

fraction of overall retail food prices. Rising farm productivity, market-oriented U.S. farm policies,

and the prospect of competing on more favorable terms for a larger share of the faster-growing

food markets in many developing countries are among the reasons that negotiations aimed at

liberalizing agricultural trade among TPP countries has elicited a high level of interest and broadbased engagement from U.S. agriculture and food industry interests.

It appears the TPP agreement would improve market access for many U.S. food and agricultural

products, thus enhancing U.S. competitiveness in a number of markets. At the same time, it also

would provide TPP partners with greater access to U.S. markets, thus raising the level of

competition from TPP partners.

Three considerations around the TPP are particularly relevant for U.S. food and agriculture. A

discussion of these issues and USITC estimates of TPP’s economic impact on U.S agriculture is

followed by a partial snapshot of some of the higher-profile improvements in market access for

(...continued)

January 11, 2016; Letter from Senator Kelly Ayotte, Member of Congress, et al. to Jacob J. Lew, Treasury Secretary, et

al., March 7, 2016.

115

ITAC 10, op. cit.

116

CWA, “10 Ways the TPP Would Hurt U.S. Working Families,” accessed April 22, 2016, at http://www.cwaunion.org/pages/10_ways_the_tpp_would_hurt_cwa_represented_workers.

117

Public Citizen, “The Trans-Pacific Partnership: Undermining Wall Street Reform,” April 22, 2016, at

http://www.citizen.org/Page.aspx?pid=6474.

118

This section written by Mark McMinimy.

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agricultural products in the agreement, a summary of selected provisions beyond market access

that are of interest to food and agriculture, and a review of industry reactions to the agreement.

Key Considerations

An overarching consideration is that among significant TPP markets, the United States lacks

FTAs with five TPP countries—of which the most significant are Japan, Vietnam, and Malaysia.

With a combined population of roughly 250 million, these three countries likely offer the greatest

potential for boosting U.S. farm and food exports via lower tariffs, or expanded tariff rate quotas

(TRQs).119 Significantly, all three countries impose much higher average applied MFN

agricultural tariffs than the United States, which could work to the advantage of U.S. farm and

food exports versus domestic suppliers and non-TPP export competitors as tariffs decline under

the agreement. 120 In 2014, applied MFN tariffs on agriculture products averaged 5.1% in the

United States, 9.3% in Malaysia, 14.3% in Japan and 16.3% in Vietnam.121 Moreover, existing

tariff peaks are far higher for a number of product categories. Examples include dairy and poultry

imports into Canada; bovine meat, rice and dairy products into Japan; and Vietnamese tariffs

across a number of food categories. Japan is likely the leading agricultural market opportunity in

the TPP due to its highly protected farm and food markets, large population, and high per capita

gross domestic product. Vietnam, with the fourth largest population in the TPP and a fast growing

economy, is generally viewed as a market that could hold significant future growth potential for

U.S. farm and food products.

Also significant is that potential key export expansion opportunities for U.S. food and agriculture

interests, such as beef and pork to Japan and dairy products to Japan, Canada, and Vietnam,

generally are to be phased in over a period of years, if not decades. For certain products in certain

countries, including Japan for beef, pork, and whey powder, and the United States for some dairy

products, safeguard measures allow for additional tariffs to be imposed if imports should exceed

specified thresholds. Generally, the quantitative trigger level for invoking safeguard measures

would increase over time, while the duties imposed under the safeguard are scheduled to be

reduced or eliminated. At the same time, preferential access that U.S. food and agricultural

interests have to markets in Canada and Mexico under the North American Free Trade Agreement

(NAFTA) would become available to a wider group of potential competitors over time as tariffs

are lowered for TPP countries.

If the United States chooses not to implement the TPP agreement, U.S. agricultural export

competitors would have the potential opportunity to gain a competitive edge over U.S. exports of

certain products to Japan and elsewhere. This could occur as a result of existing preferential tariff

arrangements—such as Australia’s FTA with Japan—or by ratifying an agreement similar to TPP

without U.S. participation. Also, while the European Union is not party to the TPP, it is

negotiating FTAs with Japan, Malaysia, and Vietnam that could enhance its producers’ competitive

position in those markets.

119

Under a TRQ, lower tariffs are applied to in-quota imports, while higher, often prohibitive tariffs are imposed on

imports in excess of the quota amount.

120

The MFN rate is the normal nondiscriminatory tariff charged on imports from WTO members, excluding

preferential tariffs under free trade agreements and other schemes, or tariffs charged inside quota regimes.

121

World Tariff Profiles 2015, World Trade Organization, at https://www.wto.org/english/res_e/booksp_e/

tariff_profiles15_e.pdf.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

USITC Estimated Economic Impact

The USITC in its report on TPP of May 2016 concluded the agreement would provide significant

benefits to U.S. agriculture.122 The model estimated TPP outcomes in 2032 for U.S. agriculture

compared with a baseline scenario without TPP and reached the following conclusions:



Agricultural exports would be $7.2 billion higher (2.6%), while imports would

increase by $2.7 billion (1.5%). Agricultural output would expand by $10 billion

(0.5%), while employment in agriculture also would increase by 0.5%.

U.S. dairy product exports would increase by $1.85 billion (18%), while

processed foods and beef would post gains of $1.54 billion (3.8%) and $876

million (8.4%), respectively. Fresh fruit, vegetables and nuts would see an

estimated increase of $575 million (2%), while pork and poultry meat products

post increases of $219 million (1.9%) and $174 million (1.3%), respectively.

Corn and rice exports are estimated to be marginally lower with TPP by 0.1% and

0.3%, respectively.

As for U.S. imports, processed food would increase by $427 million (1.1%),

while beef imports would expand by $419 million (5.7%) and dairy products

would be $349 million higher (10.3%).

Export gains stem primarily from greater market access via lower tariffs and

expanded TRQs, with the lion’s share of the total increase of $7.2 billion

concentrated in Japan ($3.6 billion) and Vietnam ($3.3 billion).

Specific Market Access Commitments

A principal negotiating objective for agriculture in the TPA-2015 is to obtain competitive

opportunities for U.S. exports of agricultural commodities that are substantially equivalent to

those provided to foreign exports in U.S. markets. In part, this is to be achieved by reducing

foreign tariffs on U.S. commodities, while providing a reasonable adjustment period for importsensitive U.S. products. Accordingly, the TPP agreement would affect market access for a broad

range of agricultural commodities and food products. What follows is a selection of some of the

notable changes included in the agreement. It is not meant to be comprehensive.



Beef: Japan ranks as the largest U.S. export market for beef and beef products,

according to the U.S. Department of Agriculture (USDA). Under the TPP

agreement, Japan would drop its current tariff on fresh, chilled, and frozen beef

from 38.5% to 27.5% in year one, with subsequent annual reductions to 9% by

year 16. Japan would lower tariffs on other beef products as well, while Vietnam

would eliminate such tariffs, currently as high as 34%, over three to eight years.

The United States, for its part, would eliminate tariffs on beef and beef products

that range as high as 26.4% in no more than 15 years and in fewer than 10 years in

most instances.

Pork: Japan, which also ranks as the leading market for U.S. pork and pork

product exports, would immediately cut its tariff of 4.3% on fresh, chilled, and

frozen pork cuts to 2.2%, phasing out the residual over nine years. A separate

duty on pork cuts under Japan’s “gate price system,” which acts as a minimum

import price, would be lowered immediately to 125 yen per kilogram, from 482

122

USITC, TPP Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, Publication 4607,

May 2016, pp. 111.

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

yen now. This duty would then be cut to 70 yen in year five and subsequently

lowered each year thereafter to reach 50 yen in year 10. A special U.S.-specific

safeguard would allow Japan to temporarily increase the duty during this

transition period if imports were to exceed a trigger level. Vietnam would

eliminate tariffs that are as high as 34% on pork and pork products within 10

years, while the United States would immediately eliminate most such tariffs.

Poultry: Canada would allow incremental increases in access to its highly

protected poultry and egg markets over five years via new duty-free, TPP-wide

TRQs amounting to 2.3% of domestic production for eggs, 2.1% for chicken, 2%

for turkey, and 1.5% for broiler hatching eggs. Thereafter, the quotas would be

raised moderately each year, plateauing in year 19, at which point these TRQs

would amount to 19 million dozen eggs, 26,745 metric tons of chicken, 3,983

tons of turkey and 1.14 million dozen broiler hatching eggs and chicks.

Vietnamese tariffs on poultry of up to 40% would be eliminated within 13 years.

U.S. tariffs of up to 18.6% ad valorem equivalent would be eliminated within 10

years.

Dairy: Opening dairy markets to greater import competition was among the most

difficult agricultural issues to resolve during TPP negotiations. Under the

agreement, Canada would allow incremental additional access to its highly

protected dairy product markets amounting to 3.25% of its output for 2016 under

TRQs that would be phased in over five years, with moderate annual increases

thereafter. For perspective, this additional access would amount to about 0.3% of

current U.S. milk production and would be open to all TPP countries. These Canadian

TRQs for dairy products, such as fluid milk, butter, cheese, and yogurt, would

increase between 14 and 19 years and then remain fixed. In-quota dairy products

would enter Canada duty free. Canada also would eliminate its over-quota tariff

of 208% on whey powder over 10 years. Japan would eliminate many tariffs it

imposes on cheese imports within 16 years and on whey within 21 years. The

United States would gradually phase out tariffs and establish TRQs for dairy

products from Australia and New Zealand that would be increased annually.

Existing preferential access for Australian dairy products under the U.S.-Australia

FTA would be transferred to perpetual TRQs. New U.S. TRQs for Canadian dairy

products would be raised gradually each year until year 19, at which point the

quantities would remain level.

Rice: Japan, the second-largest overseas market for U.S. rice, would establish a

new duty-free quota for U.S. rice of 50,000 tons initially, rising to 70,000 tons in

year 13, but still well below the 165,000 tons the U.S. rice industry had sought.

Japan also would allow a broader range of domestic entities to participate in

tenders on this additional quota, as well as on 60,000 tons of rice under an

existing quota. But Japanese officials indicate that the “minimum mark-up” Japan

imposes on rice imports—equivalent to a 15-20% duty according to USA Rice—

would continue to be applied to all imports. U.S. tariffs on rice products of up to

11.2% would be eliminated within 15 years.

Cotton: U.S. tariffs on cotton that range up to $0.314 per kg generally would be

eliminated by 2022, and in some cases would be removed immediately.

Sugar: Access to the U.S. sugar market would be expanded incrementally by

establishing new TRQs for sugar and sugar-containing products totaling 86,300

tons annually, representing 2.4% of U.S. sugar imports in 2014/2015. Australia

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress



and Canada would immediately receive new duty-free quotas totaling 65,000 tons

and 19,200 tons per year, respectively. The residual would be split between Japan,

Malaysia, and Vietnam. The Australian and Canadian TRQs include the potential

for expansion in years when additional U.S. sugar imports are required. The

additional TRQ for sugar is not expected to threaten the budget neutral requirement of

the U.S. sugar program. Japan would provide new TRQs that would expand access

to its market for sugar and sweetener-related processed products on a duty-free or

preferential-tariff-rate basis, including chewing gum, chocolates and products

containing chocolate, confectionery goods and other such products, and would

eliminate tariffs on various sweetener products over time.

Tobacco: U.S. tariffs on tobacco of up to 350% would be eliminated within 10

years, while Japan would eliminate tariffs on smoking tobacco and cigars over 11

years, and Malaysia would eliminate all tariffs on tobacco and tobacco products

over 16 years. Vietnam would create a TRQ of 500 metric tons for unmanufactured

tobacco imports that increases gradually for 20 years with no limit from year 21,

while eliminating in-quota tariffs over 11 years and for all tobacco leaf after 20

years. Vietnamese tariffs on blended tobacco, cigars, and other tobacco products

would be eliminated over 16 years. A controversy has emerged over a provision in

the Exceptions chapter of the agreement that allows countries to deny recourse to

protections under the investor-state dispute settlement (ISDS) to tobacco product

manufacturers for claims directed at tobacco control measures. This optional

exclusion would not apply to leaf tobacco, although, to the extent that tobacco

product sales could be blunted by this provision, it would appear to have the

potential to affect sales of leaf tobacco.

Table 3. Tariff Elimination Schedule for Selected Food and Agricultural Products in

Selected TPP Countries

Product

Importing Country

Tariff Elimination Timetable

Frozen French fries

Japan

Within 6 years

Peanuts and peanut products

United States

Within 10 years

Grapes, avocados, strawberries

Japan

Immediate

Fresh/chilled broccoli, tomatoes,

lettuce, and garlic

Japan

Immediate

Tree nuts, fresh/dried

Japan

Immediately for most

Tree nuts, fresh/dried

United States

Mostly immediate, but within 5 years

Wine

Japan

Within 11 years

Source: TPP Agreement released November 2015.

Notes: USDA has compiled summaries with additional detail on what the agreement contains in terms of market

access for numerous farm commodities groups at http://www.fas.usda.gov/data/tpp-benefits- specific-agriculturalcommodities-and-products.

Other Agriculture Provisions

The agreement addresses a number of trade-related areas beyond tariffs and TRQs are import to

exporters of food and agricultural products, among which are sanitary and phytosanitary

measures (SPS), agricultural biotechnology and export programs.

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The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress

Geographical Indications

Geographic Indications (GIs) are geographical names that act to protect the quality and reputation

of a distinctive product originating in a certain region.123 As such, GIs can be commercially

valuable and, as intellectual property, can provide eligibility for relief from acts of infringement

or unfair competition. GIs are most often, but not exclusively applied to wines, spirits and

agricultural products. Examples of GIs include Parmesan cheese and Parma ham, Champagne,

Florida oranges, Idaho potatoes, Washington State apples and Napa Valley wines. GIs have

become a point of controversy in international trade because GIs that are considered by some to

be protected intellectual property are considered by others to be generic or semi-generic names

and thus not protected. For example, “feta” is considered a generic name for a type of cheese in

the United States, but is a protected GI in the European Union (EU). As such, U.S.-produced

“feta” cannot be sold under that name in the EU. This type of exclusivity can extend beyond the

EU, for example, when a third country has agreed to recognize EU-approved GIs under a bilateral

trade agreement.

The TPP agreement obligates members that provide for recognition of GIs to make this process

available and transparent to interested parties within the TPP, while also providing a process for

canceling GI protection. Parties that recognize GIs also are to adopt a procedure by which

interested parties may object to the provision of a GI. Among the reasons the agreement lists for

opposing a GI are: the GI is likely to cause confusion with a trademark that is recognized within

the country, a pre-existing application is pending, or the GI is the customary term for same item

in the common language of the country. Specific to wines and spirits that are products of the vine,

TPP members are not required to recognize a GI of another member if the GI is identical to the

customary name of a grape variety existing in that party’s territory. Factors that are relevant in

determining whether a term is the customary common name for a good include whether the term

is used to identify the good in dictionaries, newspapers and websites, and whether the term is the

name by which the good is marketed and referenced in trade in the country.

Finally, with respect to other international agreements involving TPP members that provide for

the protection of GIs, the TPP agreement states that members are to make available to interested

parties information concerning the GIs involved and to allow them a reasonable opportunity to

comment and to oppose the prospective recognition of the GIs. These obligations would not apply

to international agreements that were concluded, agreed in principle, ratified, or that had entered

into force prior to the entry into force of the TPP agreement.

Sanitary and Phytosanitary (SPS) Measures

As tariff rates have been lowered for food and agricultural products in recent decades, nontariff

barriers have gained greater visibility as obstacles to trade. Among the nontariff measures the TPP

seeks to address are SPS measures, which consist of actions that address issues of food safety,

plant pests and animal diseases.124 Among SPS commitments the agreement addresses are: the

establishment of an SPS committee composed of TPP member representatives; an obligation to

base SPS measures either on international standards or on objective scientific evidence and to

select risk management measures that are no more trade-distorting than necessary; a commitment

to allow for public comment on the development of SPS measures; and the obligation to provide

123

For more information on GIs, see CRS In Focus IF10188, Geographical Indications (GIs) in U.S.-EU Trade

Negotiations, by (name redacted).

124

For more information on SPS, see CRS Report R43450, Sanitary and Phytosanitary (SPS) and Related Non-Tariff

Barriers to Agricultural Trade, by (name redacted).

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rapid notification of shipments held on importation. Importantly, SPS disputes are to be addressed

first in technical consultations among relevant governmental authorities under a procedural timeline

established in the agreement. If the issue cannot be resolved through technical consultations, parties may

turn to dispute settlement procedures in the agreement.

TPP builds on the WTO’s SPS agreement with the introduction of a rapid notification requirement

that obligates an importing country to provide notification within 7 days when an inbound

shipment is restricted or prohibited. IT also establishes a new rapid response mechanism that

allows parties to raise SPS concerns through recourse to Cooperative Technical Consultations by

engaging national trade and regulatory agencies with the aim of resolving them within a defined

procedural framework and timetable.

Agricultural Biotechnology125

As concerns agricultural products of modern biotechnology, the agreement commits the

signatories to increase transparency and provide notification of national laws and regulations

of biotech products. It also encourages information sharing on issues related to the

occurrence of low-level presence (LLP) of biotech material in food and agricultural products.

To minimize LLP occurrences and any disruptions to trade that may result from an LLP

incident, both importers and exporters commit to exchange certain information, such as

product risk assessments and new plant authorizations.

The agreement also establishes a working group on agricultural biotechnology within the

TPP Committee on Agricultural Trade. The working group is to function as a forum for

exchanging information on issues such as national laws, regulations and policies affecting

trade in biotech products. Finally, the agreement states that parties are under no obligation to

adopt or modify existing laws, regulations or policies that apply to biotechnology.

Export Disciplines

On the topic of agricultural export programs, signatories to the agreement commit to

eliminate the use of export subsidies, a type of incentive the United States does not employ

in any case. The export subsidy ban is seen mainly as setting a standard for future reform on

a multilateral basis. A commitment around export credits, credit guarantees, and insurance

programs—which the United States does employ—is less ambitious: the agreement merely

states the parties will cooperate to develop multilateral disciplines around these programs.

The agreement also discourages restrictio

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