How Will The TPP Impact SMBs?
The TPP has dominated the news as of late. With opinions ranging all over the spectrum, from the super positive to the extremely dire. Coupled with contradictory opinions circulating through the media, you may be wondering if the TPP will affect you as the owner of an SMB.
What is the TPP?
The Trans-Pacific Partnership (TPP) is probably one the most ambitious free trade agreements of our time. It has been in the works for over 5 years and includes 12 countries spanning 4 continents. Together they are responsible for a whopping 40% of the world’s economic output. Some say the TPP is a shiny new, expanded version of NAFTA.
The agreement is aimed at strengthening economic ties between the participating nations. They collectively, hope to reduce the barriers for trade and boost economic growth. The agreement is between the following countries:
- New Zealand
Which industries will be affected the most?
The Auto Industry:
Under NAFTA, a Canadian-made automobile’s make-up must contain 62.5% of North American parts in order to avoid tariffs. Under the TPP this drops to 45%, and Canada will allow vehicles from Japan to enter the country duty-free within the next 5 years.
The Agriculture Industry:
Canada’s agricultural sectors are expected to benefit from the new export markets introduced by the TPP, with access to the Japanese market as the crown jewel. Japan will also illuminate tariffs on 32% of its agricultural imports.
The Beef & Pork Industry:
Access to the Japanese market is beneficial for the Canadian beef and pork industry. Within 10 years, Japan will eliminate its import tariffs on many pork products. The now 50% tariff on beef products will also be reduced to 9% within 15 years.
The Dairy Industry:
TPP members will gain duty-free access to 3.25% of Canada’s dairy market and 2.1% of its poultry market.
Forestry product exports are expected to increase under the TPP, which is much more than previously under NAFTA.
The Heavy Industry:
The Heavy Industry denotes industrial products like farming, construction, and aerospace equipment. These types of products would allow quicker access to participating markets under the TPP. You can thank the elimination of all tariffs from all participating nations for this recent development.
The Pharmaceutical Industry:
Under the TPP, pharmaceutical companies will only get 5 years of exclusive use with regards to new biotechnology. After 5 years they will be required to share with generic drug manufacturing companies.
How will the TPP impact your business specifically?
The TPP impact on business is not likely to do harm to your small business. Unless you operate in one of the aforementioned sectors, you will likely not feel the impact of the TPP at all. However, one of the biggest perks to the TPP is that it will make it easier for your business to access new global markets. How? By removing the red tape that currently mires customs. Fewer document requirements will mean reduced delays and more reliable delivery to customers. Also, the reduced tariffs will smoothen out the entire process. Tariffs are applied to the gross value of a good each time it crosses the border. By removing or reducing tariffs – time, cost, and complexity of trade are reduced as well.
There is an entire TPP chapter focused on addressing trade barriers that disproportionately challenge small businesses. Complex trade paperwork requirements, murky customs regulations, and slow delivery for small shipments will no longer be a problem.
All TPP countries will be required to create a website to provide small businesses with the information they need to import or export from another TPP partner. Ultimately, the TPP's impact for owners of SMB’s will be positive in terms of importing and exporting goods to new markets. Beyond that, you likely won’t be impacted at all.
Want to know more? Here’s where you can read the full agreement.