United States: Trans-Pacific Partnership Has Challenges, Opportunities For U.S. Companies

Ronald A. Oleynik is a Partner and Farid Hekmat is an Associate both in our Washington DC office.


  • The United States and negotiating partners have reached a preliminary agreement on the Trans-Pacific Partnership (TPP), the most important U.S. trade deal since the North American Free Trade Agreement (NAFTA).
  • Consisting of 30 substantive chapters covering a broad range of trade issues, TPP's primary impact will be reduction in tariffs and other trade barriers.
  • A congressional vote on TPP will likely not take place until late 2016, and although the full text of the agreement has not been released, certain provisions have been made public.

The U.S. and its 11 negotiating partners – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – reached preliminary agreement on October 5, 2015, on the Trans-Pacific Partnership (TPP), which would result in the world's largest free-trade area, with a combined GDP of $27 trillion, equaling almost 40 percent of the global economy. As the most important U.S. trade deal since the North American Free Trade Agreement (NAFTA), TPP presents both opportunities and challenges for U.S. businesses, since increased competition from foreign imports will be coupled with lower barriers abroad. A congressional vote on TPP will likely not take place until late 2016, and although the full text of the agreement has not been released, certain provisions have been made public and are discussed below in detail.


Negotiations for TPP began in January 2008 when the U.S. joined Brunei, Chile, New Zealand and Singapore on liberalization of financial services. In June 2013, Canada and Mexico officially joined the negotiations, with Japan joining the next year. Though driven primarily by economic concerns, an underlying current in the TPP negotiations has been the growing Chinese economic clout as well as a desire by the U.S. to take the initiative in establishing economic and trade ground rules as market liberalization spreads in Asia and the Pacific Rim.

In reaching an agreement, TPP negotiators navigated a maze of sensitive and contentious issues, including Japan's five sacred agricultural commodities (beef, pork, wheat, sugar and rice) and Canada's protected dairy market, non-party content rules for automobile exports, data protection for biologics, protections for intellectual property and new rules for e-commerce. Because modern trade agreements require modifications to existing U.S. law, an important development was passage of Trade Promotion Authority (TPA) by the U.S. Congress in June 2015. Under TPA (also called "Fast Track"), a final trade agreement signed by the U.S. president will be voted on by Congress only on a straight up-or-down vote. Under TPA, there only can be limited debate, and no amendments will be allowed. TPA was critical in assuring other TPP participants that deal specifics agreed upon in the negotiating process would not be altered by the U.S. Congress.

Main Points

TPP consists of 30 substantive chapters covering a broad range of trade issues, including tariffs and quotas on goods, rules of origin, customs administration and facilitation, sanitary and phytosanitary barriers to trade, rules for investment, cross border trade in services, financial services, telecommunications, e-commerce, government procurement, competition policy, intellectual property, labor and environmental standards, and trade remedies and administration.

Unlike the proposed Trans-Atlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union, which will be significant mostly for its increased regulatory harmonization, TPP's primary impact will be reduction in tariffs and other trade barriers. According to the Obama Administration, 18,000 tariffs on U.S.-made goods will be cut. Tariffs on most industrial goods will be phased out almost immediately. Additionally, all tariffs on textiles and apparels will be eliminated, though duties on some sensitive goods will be phased out over a longer period.

Current U.S. tariffs on automobiles (2.5 percent) and light trucks (20 percent) will remain in place for 25 and 30 years, respectively. In fact, the removal of most automobile-related tariffs will be back-loaded in the TPP. Significantly for the "Big Three" U.S. automakers (GM, Ford and Chrysler), Malaysia (currently at 30 percent) and Vietnam (currently at 70 percent) will eliminate their tariffs for automobiles.

A compromise also was reached on the parts content requirements for automobiles. Under NAFTA, 62.5 percent of content in an automobile must originate from the U.S., Canada or Mexico in order to qualify for NAFTA's tariff-free treatment. Under the TPP, only 45 percent of content must originate from a TPP participant in order to be eligible for reduced tariffs.

TPP also includes significant changes on trade in agricultural commodities. Most tariffs on U.S. agricultural exports will be eliminated. According to U.S. negotiators, more than 50 percent of U.S. agricultural exports (by value) will receive duty-free treatment.

Japan will eliminate duties on 74 percent of beef-related tariffs, while tariffs on fresh, chilled or frozen beef will be reduced from 38.5 percent to 9 percent within 16 years. Tariffs on most pork products will be immediately cut by half (to 2.15 percent) and be completely phased out within 11 years. Additionally, Japan will modify its current "gate price" system (under which additional duty is place on imported pork if the price is below a determined market price). Japan also will establish a new 114,000-ton country specific quota (CSQ) for U.S. wheat that will grow to 150,000 tons within seven years. Japan also will reduce tariffs on processed wheat products such as biscuits, crackers, cookies, and uncooked spaghetti and macaroni.

Japan also agreed to modestly loosen import restrictions on rice, its most sensitive agricultural commodity. Currently, Japan imports 770,000 tons of rice under tariff-free state trading (of which U.S. exports account for almost half, at a value of $269 million in 2014), but imposes a prohibitive 778 percent tariff on imports outside the minimum access framework. Under TPP, Japan immediately will set aside a duty-free CSQ of 50,000 tons for U.S. rice, eventually rising to 70,000 tons.

Neither the U.S. nor Japan agreed to significant liberalization on trade in sugar. The U.S. will establish an 86,300-ton quota for TPP participants, of which Australia will receive 65,000 tons, while Japan will significantly reduce tariffs on sugar products such as caramel and maple syrup, but only will allow 500 tons of duty-free imports of raw or refined sugar.

Canada also held a hard line trade in dairy products. Under its current dairy supply management system, strict production limits and prohibitive tariffs have protected small, inefficient diary operations at the cost of high prices for consumers. Although the U.S. and New Zealand pressed for a substantial opening of the Canadian market, only imports equal to 3.3 percent of Canada's annual production of dairy products will be eligible for tariff relief under the TPP.

The extent of intellectual property protection for biologics (drugs developed from living cells) was a controversial issue that garnered widespread attention from public advocacy groups. Current U.S. law provides 12 years of data protection, which was adamantly opposed by countries such as Vietnam and Australia, who feared increased healthcare costs. Under TPP, biologics will receive at least five years of data protection, though participating countries have the option of lengthening this period.

TPP also will usher in changes to cross-border trade in services by adopting a "negative-list" regime under which the parties may not impose barriers (e.g., quantitative restrictions on the supply of services, requirements for specific types of entities or joint ventures or local presence) unless they have specifically excluded a certain sector. Even then, each party accepts an obligation not to make its measures more restrictive in the future and to bind any future liberalization. Trade in financial services takes a similar approach and permits the sale of certain financial services across borders, rather than requiring a service provider to establish operations in the country in which the services are sold.

Reaction and Timeline

Reaction to the TPP has been decidedly mixed. The U.S. Chamber of Commerce has shown broad support, though specific industries have been vocal in their criticism. The auto industry, in particular, is urging Congress to reject the deal as currently constituted. Automaker Ford has urged Congress to "renegotiate TPP and incorporate strong and enforceable currency rules," while the CEO of the Biotechnology Industry Organization has protested that "12 years of data exclusivity is a prerequisite to attract the type of investment required to continue medical innovation."

Labor groups also have criticized the agreement. The AFL-CIO claims that the TPP will lead to additional outsourcing of U.S. jobs abroad, and the president of the Communications Workers of America called the TPP "a bad deal for working families and communities."

The timeline for congressional approval of the TPP is uncertain at this point. Under TPA, the full text of the TPP must be made available to Congress at least 90 days prior to the president formally signing the agreement (and the text must be made available to the public at least 60 days prior to the signing). Additionally, the International Trade Commission is required to provide a full report assessing the TPP's impact on the U.S. economy within 105 days of the president's signing of the agreement. Subsequently, once the president submits the agreement, Congress has 90 legislative days to either approve or reject the agreement. Given the political calendar and upcoming presidential primaries, the most likely time period for a congressional vote may be the lame duck period following the November 2016 presidential election.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions