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Understanding How the TPP Will Impact Asia and Beyond

The TPP agreement requires ratifying and effectively passing into law by the participating countries. Should there be no political hiccups; the agreement should start to take effect from mid-late 2016.

While full drafts of the agreement have not yet been publically released, what is known is that it contains a number of protocols that require standardization between members, and that these are far reaching. These include issues such as internet access, intellectual property, environmental protection, pharmaceutical protocols and cross border movement of goods, services and people. Effectively this lays the framework for each of the member countries to be in compliance with American standards of protection, and especially within the copyright, trademark, patent and treatment of these.

The TPP covers the elimination of about 11,000 tariff lines, including some on sensitive agricultural products such as rice, wheat, sugar, barley, beef, dairy products and starch crops. In services, the TPP covers banking, insurance, construction, logistics and accounting, travel and tourism, consulting, app and game development and graphic design. In investment, it includes treatments related to the repatriation of funds and capital transfers, fair compensation in the case of expropriation, prohibition on performance requirements such as for local content and technology localization requirements. In addition, it covers an investor-state dispute settlement, which is an instrument of public international law that grants an investor the right to use dispute settlement proceedings against a foreign government.

This last issue has raised concerns, with some lawyers deeming it inappropriate to elevate an individual investor or company to equal status with a nation-state to privately enforce a public treaty between two sovereign countries.

On top of the coverage in the trade of goods, trade in services and investment agreements, there are three main challenges that members may face.

Government Procurement

All government procurements and their processes should be transparent, predictable and “nondiscriminatory”. This means opening up bids and contracts to member state companies. Vietnam, which still controls large aspects of its SOEs, and certainly future potential member nations such as China and, to a lesser degree, India, could have serious problems in complying with this.

Labor Regulations

The TPP grants freedom of association and the right to collective bargaining, and also agrees to have laws governing minimum wages. The challenge for the emerging Asian economies is that they need to be able to improve the capacity of labor unions or any collective bargaining associations. This will be necessary in order to exercise this leverage of their rights for better productivity and working conditions, and to further govern the setting of minimum wages in a constructive manner for all three parties involved (the government, unions and businesses). It is uncertain what ‘constructive manner’ means, but it could pertain to a required relaxing of labor regulations in China should similar trade discussions involve Beijing at a later stage.

Copyrights and Patents

The TPP may grant extensions to copyrights and patents, including patents on medicines that prevent the making of generic medicines, which leads to consumers paying for higher-cost patented medicines for a longer period the lifetime of the author plus 75 years on copyright and 20 years on patents. This is longer than that agreed in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Should TPP negotiations later include India, whose pharmaceutical companies have long made a living out of manufacturing out of patent generics at cheap prices, this would have a significant Impact.

We will have to wait and see how each branch of the VP impacts upon member and non-member nations.

Click here to download the full report: The Trans-Pacific Partnership and its Impact on Asian Markets

Learn more about how Skoda Minotti’s International Tax group can grow your business.

Originally published by Dezan Shira & Associates, a fellow LEA Global member.

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