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 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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.