The Trans-Pacific Partnership (TPP): In Brief
Ian F. Fergusson
Specialist in International Trade and Finance
Mark A. McMinimy
Analyst in Agricultural Policy
Brock R. Williams
Analyst in International Trade and Finance
January 8, 2016
Congressional Research Service
7-5700
www.crs.gov
R44278
The Trans-Pacific Partnership (TPP): In Brief
Summary
The Trans-Pacific Partnership (TPP) is a proposed free trade agreement (FTA) among 12 Asia-
Pacific countries, with both economic and strategic significance for the United States. If
approved, it would be the largest FTA in which the United States participates. The 12 countries
announced the conclusion of the TPP negotiations on October 5, 2015, after several years of
ongoing talks. The President released the text of the agreement and notified Congress of his intent
to sign on November 5, 2015. Congress would need to pass implementing legislation for a final
TPP agreement to enter into force for the United States. Such legislation would be eligible to
receive expedited legislative consideration under the recent grant of Trade Promotion Authority
(TPA), P.L. 114-26, if Congress determines the Administration has advanced the TPA negotiating
objectives, and met various notification and consultation requirements. TPP negotiating parties
include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru,
Singapore, the United States, and Vietnam.
Through the TPP, the participating countries seek to liberalize trade and investment and establish
new rules and disciplines in the region beyond what exists in the World Trade Organization
(WTO). The FTA is envisioned as a living agreement that will be open to future members and
may become a vehicle to advance a wider Asia-Pacific free trade area. It is a U.S. policy response
to the rapidly increasing economic and strategic linkages among Asian-Pacific nations and has
become the economic centerpiece of the Administration’s “rebalance” to the region. The TPP has
slowly evolved from a more limited agreement among four countries concluded in 2006 into the
current 12-country FTA agreement, with the United States joining the negotiations in 2008. Japan,
the most recent country to participate, joined the negotiations in 2013. This significantly
increased the potential economic significance of the agreement to the United States, because
Japan is the largest economy and trading partner without an existing U.S. FTA among TPP
negotiating partners (thus having greater scope for trade liberalization with the United States).
The United States already has FTAs with 6 of the 11 other countries participating. Malaysia and
Vietnam also stand out among the 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 substantial presence of
state-owned enterprises (SOEs) that will be affected by the TPP’s SOE provisions.
Views on the potential impact of the agreement vary. Proponents argue that the TPP has the
opportunity to boost economic growth and jobs through expanded trade and investment
opportunities with negotiating partners that currently make up 37% of total U.S. goods and
services trade, involves writing new trade rules and disciplines, and could deepen U.S. trade and
investment integration in what many see as the world’s most economically vibrant region. The
agreement would eventually eliminate all tariffs on manufactured products and most agricultural
goods. It also includes new trade disciplines on issues such as digital trade barriers, state-owned
enterprises (SOEs), and regulatory coherence, among other provisions. Opponents voice concerns
over potential job loss and competition in import-sensitive industries, and how a TPP agreement
might limit U.S. ability to regulate in areas such as health, food safety, and the environment,
among other concerns.
The Obama Administration, joined by many analysts as well as many policymakers in the region,
has argued that the strategic value of a potential TPP agreement parallels its economic value,
contending that the agreement would strengthen U.S. allies and partners and reaffirm U.S.
economic leadership in the region. The President has repeatedly highlighted the importance of
maintaining U.S. leadership in crafting global trade rules, notably with reference to potentially
alternative Chinese initiatives. China is not a party to the TPP. Others argue that past trade pacts
have had a limited impact on broad foreign policy dynamics.
Congressional Research Service
The Trans-Pacific Partnership (TPP): In Brief
Contents
Overview ......................................................................................................................................... 1
Economic Significance .............................................................................................................. 2
Strategic Implications ................................................................................................................ 2
Specific Issue Areas ......................................................................................................................... 4
Market Access ........................................................................................................................... 4
Agricultural Products .......................................................................................................... 4
Autos ................................................................................................................................... 6
Textiles and Apparel ........................................................................................................... 6
Customs and Trade Facilitation ................................................................................................. 6
Digital Trade/E-Commerce ....................................................................................................... 6
General and Institutional Provisions ......................................................................................... 7
Government Procurement ......................................................................................................... 7
Intellectual Property Rights (IPR) ............................................................................................. 8
Investment ................................................................................................................................. 9
Labor and Environment ............................................................................................................. 9
Regulatory Barriers ................................................................................................................. 10
Rules of Origin ......................................................................................................................... 11
Services ................................................................................................................................... 12
State-Owned Enterprises ......................................................................................................... 12
Contacts
Author Contact Information .......................................................................................................... 13
Congressional Research Service
The Trans-Pacific Partnership (TPP): In Brief
Overview
The Trans-Pacific Partnership (TPP) is a proposed free trade agreement (FTA) among 12 Asia-
Pacific countries, which the Obama Administration casts as comprehensive and high standard,
with economic and strategic significance for the United States.1 The 12 countries (including the
United States) announced the conclusion of the TPP negotiations on October 5, 2015, after
several years of ongoing talks. President Obama publicly released the text of the agreement and
notified Congress of his intent to sign it on November 5, 2015. Congress would need to pass
implementing legislation for a final TPP agreement to enter into force for the United States.2 It
would be eligible to receive expedited legislative consideration under Trade Promotion Authority
(TPA), P.L. 114-26, if Congress determines the Administration has advanced the TPA negotiating
objectives, and has met various notification and consultation requirements.3 Under TPA, the
agreement could be signed as early as February 3, 2015, with press reports indicating that the 12
nations may sign it in New Zealand on February 4.4
Through the TPP, the participating countries seek to liberalize trade and investment and establish
new rules and disciplines in the region beyond those that already exist in the World Trade
Organization (WTO). The FTA is envisioned as a living agreement open to future members and
new issues and may become a vehicle to advance a wider Asia-Pacific free trade area. Indonesia,
the Philippines, and South Korea have recently indicated their interest in joining the TPP. It is
also a U.S. policy response to the rapidly increasing economic and strategic linkages among
Asian-Pacific nations and has become the economic centerpiece of the Administration’s
“rebalance” toward the region. The United States has existing FTAs with 6 of the countries
participating in the TPP.5
Views on the likely impact of the agreement vary. Proponents argue that the TPP will boost
economic growth and jobs through expanded trade and investment with countries currently
accounting for 37% of total U.S. trade, and deepen U.S. trade and investment integration in what
many see as the region with the world’s greatest economic opportunities. Proponents also argue
the agreement allows the United States to “write the rules” of trade and investment in the region,
including new disciplines on issues such as digital trade barriers, state-owned enterprises (SOEs),
and regulatory coherence, and to show its strategic engagement and economic leadership in the
Asia-Pacific region. Opponents voice concerns over possible job losses and competition in
import-sensitive industries. They also raise concerns that the proposed TPP will limit the U.S.
government’s ability to regulate in areas such as health, food safety, and the environment.
Throughout the negotiations on TPP, certain aspects of the agreement have proven controversial.
These include select market access issues (such as on dairy and other agricultural products, autos,
and textiles and apparel) as well as the level of intellectual property protection, the scope and
enforcement of environment and worker rights provisions, the treatment of SOEs, investor-state
1 TPP negotiating parties include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru,
Singapore, the United States, and Vietnam.
2 For more information on the timeline of potential congressional consideration of TPP, see CRS In Focus IF10297,
The Trans-Pacific Partnership (TPP)-Trade Promotion Authority (TPA) Timeline, by Ian F. Fergusson.
3 For more information on TPA, see CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of
Congress in Trade Policy, by Ian F. Fergusson; and CRS In Focus IF10038, Trade Promotion Authority (TPA), by Ian
F. Fergusson.
4 “TPP Countries to Sign Trade Pact in New Zealand Feb. 4,” International Trade Reporter, January 7, 2015.
5 U.S. FTA partners in the TPP negotiations are Australia, Canada, Chile, Mexico, Peru, and Singapore.
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The Trans-Pacific Partnership (TPP): In Brief
dispute settlement, access to government procurement, and the potential inclusion of provisions
on currency valuation and exchange rates. This report briefly summarizes some of the key
provisions listed generally in alphabetical order. Additional analysis of the agreement will be
forthcoming.
Economic Significance6
The potential economic impact of the TPP agreement will depend on a number of factors,
including the extent of trade liberalization achieved in the agreement, as well as the current level
and potential growth of trade and investment among TPP members. On both measures, the TPP
appears significant given that it would be the largest U.S. FTA by trade flows ($905 billion in
U.S. goods and services exports and $980 billion in imports in 2014), and would eventually
eliminate all tariffs on manufactured products and most agricultural goods. From the U.S.
perspective, a significant share of this liberalization has already occurred due to the existing U.S.
FTAs with 6 of the 11 TPP partners.
Japan’s entry into the negotiations increased the potential economic significance of the
agreement. Among U.S. negotiating partners in the TPP, Japan is the largest economy and trading
partner without an existing U.S. FTA (thus having greater scope for trade liberalization with the
United States). In 2014, Japan was the United States’ fourth-largest goods export ($67 billion)
and import ($134 billion) market. As high-income countries, U.S.-Japan trade differs
considerably from U.S. trade with most other TPP partners without U.S. FTAs, which generally
are not high-income nations. As a result, many U.S. industries are actively interested in Japan’s
participation in the TPP.
Malaysia and Vietnam also stand out among the 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 the potential
for future growth. Both economies have grown steadily and rapidly since the 1980s. Moreover,
Malaysia’s and Vietnam’s average applied tariffs on imports are 6.1% and 9.5%, respectively, two
of the highest levels among TPP members.7 Both nations also have a substantial presence of
SOEs in their economies, which may be affected by TPP outcomes among other trade barriers of
potential interest to the United States.
TPA requires that the U.S. International Trade Commission (ITC) prepare a report that estimates
the economic impact of the final TPP agreement within 105 days of its signing.8 Separate initial
estimates of the agreement’s economic impact are available from other sources, but these studies,
prepared before the release of the agreement, incorporate a number of assumptions and should be
interpreted with caution.
Strategic Implications
In addition to its potential economic implications, the TPP has a number of strategic implications
for U.S. trade policy and broader U.S. geopolitical interests in the Asia-Pacific region. The
Obama Administration has argued that the strategic value of a potential TPP agreement parallels
6 See also, CRS Report R42344, Trans-Pacific Partnership (TPP) Countries: Comparative Trade and Economic
Analysis, by Brock R. Williams.
7 Tariff data from WTO Tariff Profiles 2015.
8 The ITC has prepared a similar report for past U.S. FTAs. For example, the KORUS FTA report can be found at
http://www.usitc.gov/publications/pub3949.pdf.
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its economic value, contending that the agreement would strengthen U.S. allies and partners and
reaffirm U.S. economic leadership in the region.
Many Asian policymakers—correctly or not—could interpret a failure of TPP in the United States
as a symbol of declining U.S. interest in the region and inability to assert leadership. Some argue
that the geopolitical costs of TPP failure could be significant. For instance, many observers argue
that China is attempting to create a regional order that reduces U.S. presence and power. In this
line of reasoning, the TPP could serve as a counter to growing Chinese economic and political
influence. This could in turn imply that failure to conclude TPP could, in effect, allow China to
shape regional rules of commerce and diplomacy through its own trade and investment initiatives,
potentially creating regional rules and norms less beneficial for U.S. interests.9 Others argue that
past trade pacts have had a limited impact on broad foreign policy dynamics, that U.S. and
Chinese economic initiatives are not necessarily competitors, and that the TPP should be
considered primarily or solely for its potential impact on the U.S. economy.
U.S. participation in TPP negotiations also serves several strategic goals in U.S. trade policy,
most notably providing direction for and potentially revitalizing the rules-based global trading
system. The TPP arguably continues and expands a U.S. trade policy of negotiating, in the
Administration’s words, “comprehensive and high standard” bilateral and regional FTAs to open
markets and address new trade barriers, and potentially spark or otherwise influence multilateral
negotiations in the WTO and in other trade negotiations. The TPP may provide the United States
with the opportunity to project its trade interests by establishing disciplines that build on existing
U.S. FTAs and multilateral agreements, potentially updating trade rules to reflect the realities of
modern international commerce.
In addition, the TPP may present an alternative to less comprehensive models of FTAs
constructed by other countries, potentially including the Regional Comprehensive Economic
Partnership (RCEP), which does not include the United States.10 These agreements, even if open
to U.S. participation, could be seen as disadvantageous to U.S. businesses and workers because
they often exclude or have less extensive provisions on agriculture, services, investment, and
intellectual property rights, which some see as among the most important FTA provisions for
certain U.S. sectors. The President has repeatedly highlighted the importance of maintaining U.S.
leadership in crafting global trade rules, notably with reference to potentially alternative Chinese
initiatives.11 Some argue, however, that the various FTA proposals in the region, including those
backed by China, may be complementary rather than in competition with U.S. initiatives, and
ultimately could serve as building blocks for the future expansion of TPP or a comprehensive
Free Trade Area of the Asia-Pacific (FTAAP).12
9 For instance, see Takashi Terada, “Japan and the TPP Conclusion: Regional Order, Negotiations, and Domestic
Adjustment,” The Asan Forum, October 23,2015, http://www.theasanforum.org/japan-and-the-tpp-conclusion-regional-
order-negotiations-and-domestic-adjustment/#a5.
10 RCEP is an ongoing FTA negotiation including the 10 members of the Association of Southeast Asian Nations
(ASEAN) and 6 of their FTA partners including Australia, China, India, Japan, New Zealand, and South Korea. Six
countries are also in the TPP.
11 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.
12 Simon Lester, Chinese Free Trade is No Threat to American Free Trade, Cato Institute, April 22, 2015.
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Specific Issue Areas
There are 30 chapters in the TPP agreement, ranging from market access (such as the elimination
of tariff and nontariff barriers and quotas on agriculture), to specific rules on various trade-related
issues (such as intellectual property rights, regulatory issues, and labor and environmental
standards).13 Summarized below are some of the key issues in the TPP.
Market Access
A fundamental element of U.S. and other FTAs is a commitment among FTA partners to eliminate
most, if not all, tariffs and quotas on their trade in industrial goods and agriculture. Current
average most-favored-nation (MFN) tariff levels for TPP countries range from 0% to nearly 10%.
The United States negotiated market access in TPP on a bilateral basis, so tariff elimination
schedules on U.S. imports vary by country. According to the released elimination schedules,
tariffs on all manufactured goods would be eliminated. Some of these tariffs would be removed
immediately while others would be phased out over longer periods, up to a maximum of 30 years.
For agricultural goods, tariffs and quotas on some of the most sensitive products would remain in
place. On average across the 11 TPP partner countries, approximately 90% of U.S. tariff lines and
88% of partner country tariff lines would be duty-free when the agreement enters into force, with
a lower average (86% for U.S. imports and 84% for U.S. exports) across the five countries
without an existing U.S. FTA (Brunei, Japan, Malaysia, New Zealand, and Vietnam).14
Eventually, on average, approximately 99% of both U.S. and TPP partner country tariff lines will
be duty-free. The tariff schedules included in the agreement detail the degree and timeline of
tariff elimination for each country. Other TPP provisions affecting market access for industrial
goods and agriculture are discussed below.
Agricultural Products15
The TPP agreement reached in October 2015 would appear to significantly improve market
access for many U.S. food and agricultural products, potentially enhancing U.S. competitiveness
in a number of TPP markets, while also providing TPP partners with greater access to U.S.
product markets.
Non-U.S. FTA partners Japan, Vietnam, and Malaysia, likely offer the greatest potential for
expanding U.S. farm and food exports. Japan is considered the standout opportunity in this group,
owing to its highly protected agricultural markets, large population, and high per-capita GDP.
Key export expansion opportunities for U.S. food and agriculture interests will be phased in over
a period of years, if not decades, and safeguard measures allow for additional tariffs to be
imposed on certain sensitive products if imports exceed certain thresholds.
Without U.S. implementation of TPP, U.S. producers could lose competitive advantage in some
markets. 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.
13 Tariff schedules and the text of the agreement can be accessed at https://ustr.gov/trade-agreements/free-trade-
agreements/trans-pacific-partnership/tpp-full-text.
14 Based on CRS calculations; many U.S. tariffs are already zero.
15 For additional perspective on TPP and U.S. agriculture see CRS In Focus IF10301, The TPP Agreement: What’s in It
for U.S. Agriculture?, by Mark A. McMinimy. In addition, the USDA has compiled market access summaries on
various commodities, see http://www.fas.usda.gov/data/tpp-benefits-specific-agricultural-commodities-and-products.
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participation. Also, the EU, though not a participant in TPP, is negotiating FTAs with Japan,
Malaysia, and Vietnam and, if successful, may enhance its competitive position in those markets.
The list that follows includes some of the many product-specific changes in the agreement.
Beef. Lowers Japanese tariffs on fresh, chilled, and frozen beef from 38.5% to
9% over 16 years, and would lower tariffs on other beef products as well, while
Vietnam would eliminate such tariffs over three to eight years. Eliminates U.S.
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 cases.
Pork. Cuts Japanese tariff of 4.3% on fresh, chilled, and frozen pork cuts to 2.2%
immediately, phasing out the residual over nine years. A separate duty on pork
under Japan’s “gate price system,”16 which acts as a minimum import price,
would be lowered immediately to 125 (eventually to 50) yen per kilogram, from
482 yen now, but subject to a safeguard. Immediately eliminates U.S. tariffs on
such products and Vietnamese tariffs as high as 34% within 10 years.
Poultry. Allows incremental increases to Canada’s highly protected poultry and
egg markets over five years via new duty-free tariff-rate quotas (TRQs) ranging
from 1.5%-2.3% of domestic production. Thereafter, the quotas would be raised
moderately each year until plateauing in year 19. Eliminates Vietnamese tariffs
(currently up to 40%) within 13 years and U.S. tariffs (currently up to 18.6% ad
valorem equivalent) within 10 years.
Dairy. Allows incremental additional access to Canada’s highly protected dairy
markets amounting to 3.25% of its annual output under TRQs phased in over five
years, with moderate annual increases thereafter. Increases Canadian TPP-wide
TRQs for products, including milk and butter, for between 14 and 19 years,
which then remain fixed. In-quota dairy products would enter Canada duty free.
Eliminates Canada’s over-quota tariff of 208% on whey powder in annual
reductions over 10 years. Eliminates numerous Japanese tariff lines on cheese
imports within 16 years and on whey within 21 years. Gradually phases out U.S.
tariffs and establishes U.S. TRQs for dairy products from Australia and New
Zealand that would be increased annually. Existing U.S. preferential access for
Australian dairy products under the U.S.-Australia FTA would be transferred to
perpetual TRQs. Establishes new U.S. TRQs for Canadian dairy products that
would be raised gradually until year 19 and fixed thereafter.
Rice. Creates a new Japanese duty-free quota for U.S. rice at an initial level of
50,000 tons, rising to 70,000 tons in year 13, and requires Japan to allow a
broader range of domestic entities to participate in rice tenders. 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. Eliminates U.S. rice product tariffs within 15 years.
Cotton. Eliminates U.S. cotton tariffs (up to $0.314 per kg) by 2022.
Sugar. Establishes new U.S. TRQs for sugar and sugar-containing products
totaling 86,300 tons, with 65,000 tons allocated to Australia, 19,200 tons to
Canada, and the residual split between Japan, Malaysia, and Vietnam. Both
16 For additional detail on the operation of Japan’s “gate price system” for pork, see http://webarchives.cdlib.org/
sw1tx36512/http://www.ers.usda.gov/Publications/LDP/mar03/LDPM10501/.
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Australia’s and Canada’s TRQs include the potential for further expansion.
Provides new Japanese TRQs 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 eliminates tariffs on various sweetener products over time.
Tobacco. Eliminates U.S. tobacco tariffs (as high as 350%) within 10 years,
Japanese smoking tobacco and cigar tariffs over 11 years, Malaysian tobacco and
tobacco product tariffs over 16 years, and Vietnamese blended tobacco, cigar, and
tobacco product tariffs over 16 years. Creates a Vietnamese TRQ of 500 metric
tons for unmanufactured tobacco that increases gradually Eliminates in-quota
tariffs on unmanufactured tobacco over 11 years and on tobacco leaf in 21 years.
Autos
Eliminates tariffs on autos and auto parts in TPP countries over various phase-out periods,
including the 2.5% U.S. auto and 25% U.S. truck tariffs over 25 and 30 years, respectively, with
Japan-specific safeguards in case of import surges. Special provisions target U.S.-Japan trade,
requiring Japan to address nontariff barriers relating to transparency and distribution among other
issues.
Textiles and Apparel17
Eliminates all TPP country import tariffs on textile and apparel products over various phase-out
periods. Better access to the U.S. market has been a key interest for Vietnam, which would be
granted an earned import allowance exempting, up to a given threshold, certain U.S. apparel
imports from Vietnam from the TPP rule of origin, contingent on a specific quantity of
Vietnamese imports of certain U.S. fabrics.
Customs and Trade Facilitation
Access to foreign markets depends on facilitating the movement of goods and services across
borders. TPP includes commitments on efficient release of goods, handling of express shipments,
electronic processing of customs documentation, and inspections based on risk-management
techniques, as well as enhanced transparency.
Digital Trade/E-Commerce
TPP contains language that would prohibit countries from blocking cross-border flows of data
over the Internet, a primary objective of high technology companies opposed to localization
requirements that require data or servers to be located in-country. E-commerce chapters have
traditionally provided for nondiscriminatory treatment of digital products.
Provisions. Bars customs duties on digital products. Adopts and maintains
consumer protection laws against online fraud, measures to stop unsolicited
online commercial messages (spam), and protecting online privacy. Prohibits
forced disclosure of software source code with governments or commercial
rivals. Prohibits forced localization of data centers, and requires that parties
17 For more information see CRS Report R42772, U.S. Textile Manufacturing and the Trans-Pacific Partnership
Negotiations, by Michaela D. Platzer.
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“allow the cross border transfer of information by electronic means, including
personal information, when this activity is for the conduct of the business of the
covered person.” Encourages cooperation on cybersecurity and assistance to
SMEs.
Exceptions. Allows data localization requirements and limits on data transfer
under limited circumstances. Financial services are not covered, but have explicit
provisions on data flows in the financial services chapter (see below).
General and Institutional Provisions
General and institutional provisions that broadly apply to the agreement include:
Accession. Includes language addressing how countries may accede to the
agreement. Such accession is potentially open to any country but ultimately
requires the consensus of each of the current parties and any necessary domestic
legal procedures.
Dispute Settlement. Establishes dispute settlement mechanisms by which TPP
commitments are enforced. All aspects of the agreement are subject to state-state
dispute settlement unless specifically excepted. A separate investor-state dispute
settlement (ISDS) applies to certain investment and financial services provisions.
Entry into Force. Requires ratification by all 12 TPP countries within two years
of signing for the agreement to enter into force, or, after two years, requires
ratification of six countries accounting for 85% of TPP GDP, a condition that
would require both U.S. and Japanese participation. Congress must pass
implementing legislation for the agreement to apply to the United States.
TPP Commission/Living Agreement. Similar to past U.S. FTAs, creates a
senior-level TPP Commission to administer the accession process of new
countries and consider potential amendments to the agreement. Requires
consensus among the parties and adherence to necessary domestic legal
procedures for changes.
Government Procurement
Government procurement disciplines aim to ensure transparent, predictable, nondiscriminatory
treatment toward domestic and foreign firms when a covered government entity makes
purchasing decisions above a certain threshold. They provide for an open tender process,
evaluated under clear and transparent rules, and a mechanism to review or appeal a decision.
They provide that technical specifications of a tender are flexible and nondiscriminatory, based on
international standards where applicable, to assure nondiscriminatory evaluation.
Access. The United States gains new reciprocal access to the procurement
markets of Malaysia, Brunei, and Vietnam with some exceptions and transitional
periods. The United States and the other eight countries of the TPP already have
made reciprocal commitments under the WTO and bilateral FTAs. Canadian
companies can participate in procurements by six major regional U.S. power
authorities (such as the Tennessee Valley Authority).
Tenders. The United States, Canada, and Mexico have agreed to harmonize the
tendering procedures and procurement thresholds of the North American Free
Trade Agreement (NAFTA) with the TPP.
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Buy American. Exempts TPP firms from Buy American provisions. However,
transportation and infrastructure-related Buy America, Berry Amendment, and
other restricted defense and agriculture procurements would continue to be
excluded. New “buy local” provisions would not apply to TPP countries. U.S.
commitments exclude state and local government procurement.
Intellectual Property Rights (IPR)18
Provisions governing IPR protect innovations in various forms. TPP provisions seek to boost the
level of IPR protections beyond current WTO provisions in the 1994 Trade-Related Aspects of
Intellectual Property Rights (TRIPS) Agreement, in areas such as patents, copyrights, trademarks,
and trade secrets. Some U.S. FTAs differ in the scope and strength of their IPR provisions based
on the economic development of the FTA partner country. Determining the transition mechanism
for developing countries with certain IPR obligations in the TPP was reportedly a significant
challenge, intersecting with concerns, for example, about access to medicines. Transition periods
vary by country and provision, ranging up to 10 years with possible additional extensions for
Vietnam at the discretion of the parties through the TPP Commission.
Biologics. Provides countries a choice between an eight-year data exclusivity
period for biologic medicines or, alternatively, at least five years with possible
additional measures that could “deliver a comparable market outcome.”
Pharmaceutical Patents. Requires countries to provide a five-year data
exclusivity period for pharmaceuticals, patent linkage, and patent term extension
in their domestic law, and an additional three years of data exclusivity for new
clinical information for an existing drug covering a new indication, formulation,
or administration. Includes phase-in periods for developing countries to adopt
these provisions and allows countries to take measures to protect public health
consistent with the WTO TRIPs agreement.
Copyright. Increases copyright terms to 70 years with phase-in periods for
countries currently providing 50 years of protection. Includes civil and criminal
penalties for circumventing TPM (technological protection measures), and
prohibits selling devices and services for breaking TPM with exceptions for non-
infringing uses. Requires criminal penalties for camcording in movie theatres.
Includes nonbinding language encouraging countries to achieve appropriate
balance between users and rights-holders in copyright systems—known as “fair
use” in the United States. Adopts U.S.-style “notice and takedown” provisions to
address Internet Service Provider (ISP) liability. For specific countries, allows
certain existing alternative systems.
Trademarks. Requires Ex Officio authority for customs agents to seize
counterfeit and pirated goods. Provides discretion to authorities to seize “in
transit” goods or share information concerning such goods with the country of
final destination and to seize goods with “confusingly similar” trademarks.
Provides disciplines on the use of geographical indications.
18 For more information, see CRS In Focus IF10033, Intellectual Property Rights (IPR) and International Trade, by
Shayerah Ilias Akhtar and Ian F. Fergusson.
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Trade Secrets. Requires criminal penalties for those gaining unauthorized access
to a computer system. Countries may retain provisions relating to good faith law
disclosures by whistle-blowers.
Investment19
In addition to provisions governing goods and services, U.S. FTAs include provisions governing
investment flows based on the model U.S. Bilateral Investment Treaty (Model BIT), and typically
include measures related to nondiscriminatory treatment, minimum standard of treatment, rules
on expropriation, and prohibitions on performance requirements, among others.
Minimum Standard of Treatment. Defines minimum standard of treatment and
clarifies that an investor cannot claim a breach of minimum standard of treatment
by showing a frustration of expectation.
Screening Mechanisms. Establishes preferential monetary screening thresholds
for TPP countries maintaining review regimes for significant or sensitive
investments. Malaysia is allowed to retain existing “best interest” screening
mechanism for financial services investment.
Exceptions. Reaffirms a country’s right to regulate in the public interest,
including to promote prudential or financial stability and protect public health,
safety, and the environment; includes an explicit recognition of the right of public
health authorities to adopt tobacco control measures. Permits the imposition of
short-term capital controls for balance of payments reasons. Allows denial of
benefits to shell companies, companies which lack substantial business interests,
from using the provisions of the agreement.
Investor-State Dispute Settlement (ISDS). Allows private foreign investors to
seek international arbitration against host governments to settle claims over
alleged violations of the investment provisions. Allows governments to decline to
accept ISDS challenges over tobacco control measures. Provides procedures to
allow for transparency of arbitral proceedings, submission of amicus curiae briefs
by interested stakeholders, binding joint interpretations, expedited review of
frivolous claims and possible awards of attorney fees to the respondent
government, joint interpretations of TPP parties binding on the tribunals, interim
review of an award by disputing parties, and challenges to tribunal awards.
Labor and Environment20
Labor and environment provisions address concerns over the protection of worker rights and the
environment that may be affected by FTAs. Such provisions have evolved in U.S. FTAs.
Originally included as side-letters in NAFTA with their own dispute settlement mechanisms, TPP
and more recent U.S. FTAs include these provisions within the body of the agreement subject to
the same dispute settlement procedures as other aspects of the agreement. TPP requires parties to
19 For more information, see CRS In Focus IF10052, U.S. International Investment Agreements (IIAs), by Martin A.
Weiss and Shayerah Ilias Akhtar; and CRS Report R44015, International Investment Agreements (IIAs): Frequently
Asked Questions, coordinated by Martin A. Weiss.
20 For more information, see CRS In Focus IF10046, Worker Rights Provisions in Free Trade Agreements (FTAs), by
Mary Jane Bolle and Ian F. Fergusson, and CRS In Focus IF10166, Environmental Provisions in Free Trade
Agreements (FTAs), by Richard K. Lattanzio and Ian F. Fergusson.
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The Trans-Pacific Partnership (TPP): In Brief
affirm obligations, and adopt and enforce laws consistent with relevant international labor
principles and certain environmental agreements. Countries shall not fail to enforce labor and
environmental laws in a manner affecting trade and investment nor waive nor derogate from such
laws to attract trade and investment.
Labor. Affirms International Labor Organization (ILO) core labor principles to
adopt and maintain laws consistent with internationally recognized labor
standards. Includes obligations to adopt and maintain laws and practices related
to “acceptable conditions of work.” Sets out separate compliance agreements
with Vietnam, Malaysia, and Brunei, countries of particular concern for the
Unites States in terms of labor protections. Discourages importation of products
produced by forced or compulsory labor.
Environment. Affirms commitments to implement multilateral environmental
agreements to which TPP countries are a party and includes specific obligations
for agreements to which all members are a party.21 Obligates countries to address
illegal trade in flora and fauna in their own countries. Prohibits the “most
harmful” fisheries subsidies and includes commitments on sustainable use of
biodiversity, conservation and management of fisheries, and liberalizes trade in
environmental goods and services.
Side Agreement on Exchange Rates22
For some Members of Congress, a key issue in the TPP negotiations has been how to combat “unfair” currency
practices of other countries. The June 2015 TPA included, for the first time, principal negotiating objectives
addressing currency manipulation, calling on negotiators to seek related provisions. Concurrent with the TPP text
release, the TPP country monetary authorities released a declaration on unfair currency practices with three parts:23
Commitment to Avoid Manipulation: Reaffirms IMF commitments to avoid manipulating exchange rates to
gain an unfair competitive advantage, and commits countries to exchange rate policies that reflect underlying
economic fundamentals, to avoid persistent exchange rate misalignments, and to refrain from competitive
devaluations and exchange rate targeting for competitive purposes.
Transparency and Reporting: Requires public release of relevant data, including interventions in foreign
exchange markets and foreign reserve holdings, as well as IMF’s annual assessment of their exchange rate.
Multilateral Dialogue: Establishes a group of TPP macroeconomic officials, with possible IMF participation, to
meet at least annually to discuss macroeconomic and exchange rate policy issues, including transparency or
reporting, and policy responses to address imbalances.
The joint declaration wil take effect once TPP enters into force and wil apply to countries that accede to the TPP in
the future, subject to additional transparency or other conditions determined by the existing TPP countries. The
Treasury Department emphasizes that this declaration, for the first time in the context of a free trade agreement,
addresses unfair currency practices by promoting transparency and accountability. However, the declaration does not
include any enforcement mechanism, which some Members were advocating.
Regulatory Barriers
Regulatory and nontariff barriers can affect companies’ ability to access foreign markets. TPP
includes provisions in various chapters that seek to address these issues by ensuring transparent
21 Montreal Protocol on Ozone Depletion, the Montreal Protocol on Substances that Deplete the Ozone Layer, the
International Convention for the Prevention of Pollution from Ships (MARPOL), and the UN Convention on Trade in
Endangered Species (CITES).
22 Section prepared by Rebecca Nelson, Specialist in International Trade and Finance, x7-6819. For more on currency,
see CRS In Focus IF10049, Debates over “Currency Manipulation”, by Rebecca M. Nelson.
23 See Treasury Department website: http://www.treasury.gov/initiatives/Pages/joint-declaration.aspx.
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The Trans-Pacific Partnership (TPP): In Brief
regulatory processes with notice and public comment periods on proposed new regulations,
similar to U.S. practices, and guaranteeing that foreign and domestic companies are treated
equally (national treatment).
Regulatory Coherence. Encourages regulatory consistency across agencies and
recognition of trade implications in new regulations.
Sanitary and Phytosanitary Measures (SPS).24 Addresses measures concerning
agricultural products and actions taken to protect human, animal, and plant
health. Commits parties to base SPS measures on international standards or
objective scientific evidence and risk management measures that are no more
trade-distorting than necessary; allows for public comment on the development
of SPS measures; and provides rapid notification of shipments held on
importation. Generally subject to dispute settlement with additional consultative
requirements and specific exceptions.
Technical Barriers to Trade. Addresses standard-setting procedures in TPP
countries. Provides for transparency in TBT rulemaking, with opportunities for
stakeholder participation in development of product standards. Allows for mutual
recognition of conformity assessment procedures.
Transparency and Anti-Corruption. Provides measures to assure transparency
and provide opportunity for public input with regard to laws and regulations
governing market access. Bribery is criminalized in the context of trade and
investment. Annex specifically addresses national healthcare agencies in the
listing of new pharmaceutical or medical products, but is not subject to dispute
settlement.
Rules of Origin
TPP rules of origin (ROO) determine whether a product is eligible for preferential treatment
under the agreement. They can differ by product but generally relate to the degree of
transformation a product undergoes in an FTA partner country or the share of a product’s value
that is produced within the FTA region. More restrictive rules of origin generally ensure that TPP
tariff benefits accrue primarily to countries inside the agreement, but they may also constrain the
tariff benefits for TPP producers by limiting their ability to use diverse supply chains, including
non-TPP countries.
General. Provides a single set of rules of origin with cumulation allowed.
Textiles and Apparel. Applies “yarn-forward” rule of origin to textile and
apparel products, requiring components be sourced within the TPP region,
including the yarn or fabric. A short supply list allows exemptions from this rule
for products made of yarns and fabrics in limited supply within the TPP region.
Autos. Requires 45% or 55% regional value content for finished vehicles,
depending on the method of calculation, and 35%-45% for auto parts.
24 For more information on SPS see CRS Report R43450, Sanitary and Phytosanitary (SPS) and Related Non-Tariff
Barriers to Agricultural Trade, by Renée Johnson.
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The Trans-Pacific Partnership (TPP): In Brief
Services25
TPP includes provisions that address services in a number of chapters and annexes, including
through greater market access and specific disciplines for trade in financial, professional, e-
commerce, telecommunications, and express delivery services, among other provisions.
Commitments are generally on a “negative-list” basis; that is, they apply to all services except
those specifically excepted through nonconforming measures. Barriers to services are nontariff in
nature, on issues such as licensing, investment restrictions, and the regulatory environment.
Cross-Border Services. Includes core obligations of national treatment, most-
favored-nation treatment, market access (i.e., prohibitions on requiring joint
ventures or limiting number of suppliers), and local presence (prohibitions on in-
country establishment requirements to supply services) with additional
commitments on impartial regulation, transparency, and free payment transfers.
Express Delivery. Prohibits a postal monopoly from cross-subsidizing express
delivery services, prohibits universal postal service preconditions for express
delivery, requires independent and impartial regulation of express delivery, and
maintains current market access.
Financial Services. Requires national and most-favored-nation treatment of
service providers and ensures market access (i.e., prohibitions on requiring joint
ventures or limiting number of suppliers). Incorporates certain investment
chapter provisions for access to investor-state dispute settlement and a modified
state-to-state mechanism. Requires parties to permit information transfers for
data processing, but unlike the e-commerce chapter, which does not apply to
financial services, it does not prohibit computing facility localization.
Professional Services. Provisions on recognition of professional qualifications.
Telecommunications. Requires reasonable and nondiscriminatory access to
public telecommunications services for TPP country enterprises. Includes
requirements for interconnections, number portability, unbundling of network
elements, as well as independence, impartiality, and transparency in the
regulation of telecommunications services.
State-Owned Enterprises
For the first time in a U.S. FTA, the TPP includes a chapter on state-owned enterprises (SOEs)
with provisions regarding activities that affect trade or investment. They address potential
commercial disadvantages to private sector firms from state-supported foreign competitors
receiving preferential treatment. This could necessitate economic reforms in members with
substantial state sectors, such as Malaysia and Vietnam, and may make it more challenging for
others, including China, to join at a later date.
Definition. Covers designated monopolies and SOEs principally engaged in
commercial activities if the government owns more than 50% of capital share,
controls more than 50% of voting rights, or selects a majority of board members.
Disciplines. Provides transparency and reporting requirements that aim to ensure
SOEs make purchase and sale decisions in a nondiscriminatory manner and on
25 For more information see CRS Report R43291, U.S. Trade in Services: Trends and Policy Issues, by Rachel F. Fefer.
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The Trans-Pacific Partnership (TPP): In Brief
the basis of commercial considerations. Prohibits noncommercial assistance to
SOEs that adversely impact another TPP party. Requires TPP country courts to
have jurisdiction over foreign SOEs operating in their territory and administrative
bodies to regulate in an impartial manner with regard to SOEs and private firms.
Exceptions. Includes numerous exemptions ranging from general exceptions
(such as SOEs with revenue below a certain threshold, or for a government’s
supply of goods and services to its own party for government functions) to
various country-specific exceptions in the form of nonconforming designations.
Author Contact Information
Ian F. Fergusson
Brock R. Williams
Specialist in International Trade and Finance
Analyst in International Trade and Finance
ifergusson@crs.loc.gov, 7-4997
bwilliams@crs.loc.gov, 7-1157
Mark A. McMinimy
Analyst in Agricultural Policy
mmcminimy@crs.loc.gov, 7-2172
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