Policy Perspectives

Policy Perspectives

TPP 101: Five Things to Know about the New Trade Deal

Chances are good that you’ve heard of the Trans-Pacific Partnership (TPP). For starters, it’s the largest regional trade deal in history. It involves 12 nations — including the U.S. — that have a combined annual gross domestic product of nearly $28 trillion and account for roughly one third of world trade. Last October, after five years of negotiations, the countries agreed to a deal.

The TPP addresses a host of issues, everything from tariffs and quotas to intellectual property, environmental and labor standards to cross-border data flows and more. But how will the deal affect FedEx and our customers? Here are five key outcomes.

#1: Cutting tariffs

This is a critical change. Tariffs are taxes or duties that countries apply to imports or exports. Under the TPP, nearly 90 percent of tariffs will be completely eliminated. As a result, U.S. products will become much more competitive in TPP markets. And that will stimulate trade, which will create more business for FedEx, our employees and our customers. Remember, we’re all about trade. We enable it. We facilitate it. Trade is our business.

#2: Opening new doors

FedEx is a service company. There are two chapters in the TPP that cover investment and cross-border trade in services. In a nutshell, the provisions enable FedEx to provide our services around the world by removing investment restrictions.

On top of that, we get what’s called national treatment. That means we (along with service providers from the other partner countries) must be treated just like local delivery services.

#3: Streamlining the customs process

Another TPP provision will simplify the customs clearance process and make it more transparent. For example, it will require that all customs rules and forms be made available online so that small businesses can see them. It will establish expedited clearance for express packages. It will allow for pre-arrival clearance.

These are extremely important for our industry. Why? They allow a country to review data and perform risk analysis on incoming packages before they arrive. Once the packages arrive, they can be released into the country — and into commercial circulation — much faster. And that will allow FedEx to help our customers get packages across borders and into their customers’ hands more quickly and reliably.

#4: Protecting e-commerce and cross-border data flows

The TPP also takes tangible steps to protect the use of the internet for transmission of data and promote the growth of global e-commerce. For example, it prevents countries from putting restrictions on the movement of data, which is vital to any company doing business overseas. You can’t conduct international trade without transmitting data around the world. These protections will help facilitate all kinds of trade and investment, including e-commerce.

#5: Empowering small and medium-sized enterprises

One unique element of the TPP is that it is the first trade agreement with an entire chapter devoted to small and medium-sized enterprises (SMEs). All TPP countries are committed to finding ways to help SMEs engage more fully in global commerce, take advantage of global supply chains, access the internet and fully capitalize on the TPP. That will be an ongoing focus, and it will consider training, education, access to finance, finding partners, and more.

Of course, many of those global SMEs are FedEx customers. FedEx already devotes a lot of time to helping SMEs export and expand their business overseas. So this focus aligns with what we’ve been doing for years. Now that it’s part of a trade agreement, we plan to actively participate. We’ll continue to contribute to the discussions and help ensure countries take small-business empowerment seriously. As you can imagine, we’re extremely excited about getting the process started.

 

Source: From the Chairman January 2016