For the first time in any trade agreement, the Trans-Pacific Partnership includes rules focused on trade barriers that disproportionately challenge small firms.
As Congress evaluates the details of what could be the world’s biggest trade deal yet in the coming months, one of the most crucial components that often gets overlooked is the agreement’s focus on small and medium-sized businesses. The Trans-Pacific Partnership represents an unparalleled opportunity for the global economy. The deal is the largest and most substantial free trade agreement in history, connecting 12 global economies, 40% of GDP and 800 million consumers across the Americas and the Asia-Pacific region.
For the first time in any trade agreement, TPP includes a chapter focused on addressing trade barriers that disproportionately challenge small business, including complex trade paperwork, opaque customs regulations, and the slow delivery of small shipments. Collectively, these improvements through TPP should help small- and medium-sized companies expand their international business or make the decision to go global in the first place.
There is a lot to unpack in the agreement, and we look forward to carefully reviewing the text ourselves when it is published. But in the meantime, based on stakeholder briefings with our negotiators, here are several ways we expect TPP to benefit the global economy, especially for small businesses:*
Removes red tape in customs
Under the agreement, customs officials will require fewer documents and adopt electronic pre-arrival processing and clearance of shipments. Packages will move through TPP countries more quickly, with fewer customs holds and more reliable delivery to customers.
TPP works to raise standards across the trade region for combatting government corruption. By requiring the adoption of anti-bribery and conflict-of-interest laws, the agreement works to ensure companies can compete fairly in each member country.
Levels the playing field
The agreement levels the playing field for private companies competing against government-run service providers. The deal ensures that private companies providing services aren’t regulated by a government entity that is also a competitor. In addition, it bars governments from subsidizing state-run entities that are competing in competitive industries. Ultimately, these competition rules will ensure better choices for customers and more opportunities for businesses.
Increasing market access for service providers
The deal guarantees foreign-owned service suppliers can compete in the same markets as domestically-owned service suppliers. Foreign ownership restrictions in a number of key services areas are expected to be eliminated if the agreement comes into effect.
Many goods today are produced along complex value chains, and a tariff is applied to the gross value of a good each time it crosses a border. TPP’s tariff cuts – combined with its many other market-opening provisions – will take a lot of the cost, time and complexity out of trade.
Fundamentally, agreements like TPP make it easier for small businesses to export. With the rise of e-commerce, small businesses from Asia to the Americas can now reach new and international markets, but traditionally many of them do not take advantage of the opportunity because trading across borders has been too cumbersome. Trade agreements like TPP can help change that.
Now that small businesses have the opportunity to seize new markets, it is time to ensure that our legislators make this deal a reality. Congress is likely to take up the issue in early 2016, and parliaments across TPP countries will be evaluating and ratifying the agreement in the coming months. For too long, global trade flows have been bogged down by decades-old regulation. TPP allows us to establish a 21st century agreement for our 21st century economy.
*These benefits are based on trade officials’ presentations during the negotiating process, but we await the publication of the final text to confirm the specifics.
Shiumei Lin is vice president of Asia-Pacific Public Affairs for UPS. Amgad Shehata is senior vice president of International Public Affairs for UPS.