The ongoing conversation in our industry surrounding the Trans-Pacific Partnership (TPP) came one step closer to an end this week as ministerial representatives from the 12 Pacific Rim TPP countries were on hand in Auckland, New Zealand, to sign and ratify the agreement.
The goal of the Trans-Pacific Partnership (TPP) is to eliminate U.S. tariffs on certain outdoor products not made in the United States, therefore lowering costs to import, while securing tariff phase-outs on outdoor products made domestically to open the door for more exporting.
The agreement was supported - though not unanimously - by outdoor and athletic apparel and footwear brands in order to facilitate trade among the U.S., Canada, Mexico, Chile, Australia, Japan, Peru, New Zealand, Singapore, Malaysia, Vietnam and Brunei.
Rich Harper, Policy Advisor for the Outdoor Industry Association (OIA) in Washington, D.C., said OIA was one of the original stakeholders in the trade agreement, working for its passage since 2010.
Each country still has to complete domestic legislative procedures before TPP can go into effect and Harper said he expects robust debate in several partner countries. OIA said the TPP is not likely to come before Congress for a vote until after the November elections, despite President Barack Obama’s best efforts.
The signing comes three months after negotiations concluded and the text was published for review by policymakers, interest groups, and the public. The TPP covers 40 percent of the global gross domestic product (GDP) and touches approximately 800 million consumers, making it one of the most ambitious free trade agreements in history. It could have a significant impact on the bottom lines of outdoor manufacturers, retailers and suppliers.
The clock starts once the agreement is ratified, that’s Day One. The agreement comes into effect in one of two ways, says Harper: (1) When all 12 parties ratify the agreement; or (2) After two years from the date the agreement was signed and at least six parties covering 85 percent of the GDP of the TPP region have ratified the agreement (In other words, the U.S. and Japan plus four additional partners).
The bottom line, said Harper, is lower costs for manufacturers, and ultimately consumers, of outdoor apparel and footwear. He said TPP will help create jobs and fuel innovation in new products, which the OIA hopes will get more people outside and driving the outdoor economy.
Harper also emphasized that “strong and enforceable” environmental and labor provisions are part of the TPP. Outdoor products sourced from abroad are among the most highly taxed when entering the U.S. market, which is why OIA has had such an interest in it. The average “bound tariff rate” on imported goods are less than 3 percent, but duties on outdoor products average 14 percent with some as high as 40 percent, according to OIA stats.
Here’s what Harper said the TPP really means for his constituents over the next 13 years:
--Most footwear is immediately duty-free upon implementation and all footwear will be duty-free by year 12.
--Most apparel is immediately duty-free upon implementation. All apparel lines will see some duty cuts on Day One and all apparel will be duty-free by year 13.
--Backpacks will go duty-free on Day One.
--Providing “reciprocal market access,” means new export markets for “Made in the USA” products by eliminating tariffs (taxes) on U.S. exports, as well as implementing stricter rules of origin. These protections are necessary to give domestic producers adequate time to adjust to post-TPP global trade, as well as protecting innovation on products designed, distributed or manufactured in the United States, OIA said.