TradeLane

Recently the United States Trade Representative released the full text of the Trans-Pacific Partnership (TPP).

Many news articles have been covering the TPP concerns revolving around intellectual property, environment concerns and the loss of jobs. All for good reason. With the introduction of NAFTA, these are some of the issues that came to the forefront of the national conversation regarding free trade. These issues are definitely addressed in the agreement where collective bargaining rights and “acceptable conditions of work with respect to minimum wages” are demanded. However, in the words of the infamous Mike Tyson – everyone has a plan until they get punched in the face.

But, what does this mean for the international trade community and tariff rates? Let’s jump right to the good stuff and focus on some of the largest duty rates to be eliminated.

When traveling between the United States and Europe, one of the most startling differences that I observe is the concoctions that we put on our French fries. First of all, we can’t agree whether or not these delicious fried potatoes should be called fries, chips, or “freedom fries.” Once served to us, Americans love their ketchup, continental Europeans love their mayonnaise, and the occasional Brit won’t eat their chips without a particular brand of brown sauce named after Parliament. However, we all can agree that, while bad for you, fried potatoes are delicious. 

The EU and U.S. also mostly agree that international trade is a good thing. Trade stimulates job creation and incentivizes economic growth. Markets are often opened by the implementation of preferential trade agreements between two jurisdictions. The U.S. and EU are currently negotiating the Transatlantic Trade and Investment Partnership (TTIP) to strengthen the ties between the two continents and to stimulate growth. 

When I was growing up my father had a few signs posted on the door of his office and one that said ‘There is no such thing as a free lunch’. As a young child, I remember being confused by it and once I understood its implication as a teenager I was annoyed by it. It implied that I was going to have to actually do something to get something good. When seeing what often happens with Free Trade Agreements (FTA) usage in Asia, I sometimes think of that phrase and wonder how companies, and trade compliance officers, forget that they have to actually do something to reap the benefits of the FTA. 

In the past couple months there have been a few public announcements by Customs agencies in Asia related to investigations into misuse of some of the FTA in the region as well as other preferential duty programs. In Thailand, a special investigation is trying to collect over $400 million USD in retroactive duties and penalties from a couple of global automotive companies. This is an unprecedented amount of money. In India, a global consumer electronics company is on the line for over $45 million USD due to apparent violations of the ASEAN-India FTA. 

The ChAFTA will also open doors for investment projects and create new jobs thus boosting the economy.

The jobs, however, seem to be creating serious concerns amongst Australian labor force. The Australian Union, who was campaigning against ChAFTA, is arguing that the easing of labor market restrictions will inevitably jeopardize Aussie jobs and flood the country with unskilled workers. This is of course is a political debate that continues as I type these words; not for a humble trade consultant to comment on!

The long discussed, debated, and awaited China-Australia Free Trade Agreement (ChAFTA), which was first proposed in 1999 and since then has been in the works, was finally signed on June 17, 2015 in Canberra.

With China-Australia Free Trade Agreement having been the third in the quick succession of three Free Trade Agreements Australia signed with its major trading partners, Korea, Japan and China in almost one year, Australia's exports and GDP are predicted to grow significantly.