Sunday, July 01, 2012

NAFTA & TPP: What Happens?

Here is an interesting fact. Canada and Mexico have now joined the negotiations aimed at creating a Trans-Pacific Partnership. That makes some sense. Both countries, like the United States, have pacific coasts and both countries do a lot of business in the Asia-Pacific region. The other countries currently involved in the negotiations include Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. Many breathless commentators have described TPP as the NAFTA of the Pacific or NAFTA on Steroids.

My question is fairly basic: Assuming there is a TPP Agreement at some point in the future, what happens to NAFTA? You probably remember that when NAFTA expanded free trade in North America to include Mexico, the pre-existing U.S.-Canada Free Trade Agreement was put on hold and kept alive only to be resurrected in the unlikely circumstance of NAFTA collapsing. Will the same thing happen with TPP? Will it completely supersede the NAFTA? This same question can be asked about U.S. FTA's with Australia, Chile, and Peru.

I have not seen a lot of discussion about this, but I know people are thinking about it. While companies that do a lot of business in the Asia-Pacific region have been focusing on TPP as an opportunity for market access, investment protection, strengthened intellectual property enforcement, etc., companies primarily engaging in North American trade may not have focused on TPP.

With the addition of Canada and Mexico to the TPP mix, that strategy might need to change. In fact, companies that engage in a lot of NAFTA-facilitated trade in North America might want to get involved in the process to ensure that TPP does not result in any new burdens on trade within the NAFTA region.

I point to this question out of genuine interest. It also happens that one of my partners is involved in the TPP process as an industry representative. So, if anyone has specific questions or concerns, we might have a way of helping to sort them out.

As always, feel free to contact me if you have a specific need.


Sarah said...

If TPP establishes a much-more-appealing trade partnership, how will that impact the US? I’m just interested in it, knowing our economy is barely recovering as-is.

David Trumbull, NTA said...

If and when a TPP that includes the US goes into effect the existing bilaterials (and in the case of NAFTA, trilateral) agreements will continue to be in force. So, say you want to export to Mexico, you could chose to claim either a NAFTA or a TPP benefit, depending on which set of rules was most favorable to you. It will not be, as was the case of the U.S.-Canada FTA which was superceded by NAFTA.