• Abstract and Figures
• Public Full-text

Chapter Summaries of the Trans-Pacific Partnership Trade Agreement

Contents

Chapter 1 – Initial Provisions and General Definitions This chapter organizes and provides overall structure for the TPP Agreement; sets out the relationship between the TPP Agreement and other agreements already in place among the TPP Parties (in particular the World Trade Organization (WTO) Agreement, but also existing free trade agreements among the TPP Parties); and defines technical terms used in more than one chapter of the Agreement.

Overview Relation to Other Agreements The TPP Parties have obligations to each other under other agreements, such as the WTO Agreement. This chapter affirms that these other agreements remain in place. In addition, although we have been careful to ensure that TPP does not create any obligations that would be inconsistent with any of our existing agreements (including the WTO Agreement), a TPP Party may request consultations with another Party if it believes there is an inconsistency. In many cases, TPP will broaden or improve upon commitments in existing agreements. For example, the commitments Mexico, Canada, Chile, Singapore, Australia, and Peru have made in TPP’s Labor and Environment chapters broaden and improve upon NAFTA and previous FTAs. Regardless of the agreements, TPP Parties will be obligated to implement TPP’s more ambitious standards.

General Definitions The chapter provides definitions of terms that are used in more than one chapter of the Agreement. Specific chapters also provide definitions of terms that are only used in those chapters.

1 Chapter 2 – National Treatment and Market Access Through the TPP Agreement, the United States is seeking to create an economic architecture in the Asia-Pacific region that helps American businesses, workers, farmers and ranchers produce and sell their goods more easily. The National Treatment and Market Access for Goods Chapter (also known as the Goods chapter) helps us reach this goal by removing barriers to export of Made-in- America manufactures and farm products. Some TPP countries impose tariffs that translate into very high costs for buyers of American products. For example, Malaysia charges tariffs of 30 percent on American autos, while Brunei has tariffs as high as 20 percent on machinery. Japanese tariffs on leather footwear can rise as high as 189 percent out of quota and 17 percent on fruits and vegetables (or even higher for oranges in season); Vietnam imposes tariffs averaging 9.4 percent on manufactured goods, and those tariffs often rise higher, as high as 27 percent for auto parts and 68 percent for trucks. Vietnam also imposes high rates in agriculture, as high as 30 percent on cuts of pork. These disadvantages are magnified by free trade agreements (FTAs) that do not include the United States. For example, Vietnamese auto parts buyers pay a 27 percent tariff if they choose American parts, but only 5 percent or no tariff at all on similar Chinese- or Thai- made auto parts under the China-ASEAN FTA and the ASEAN Free Trade Area.

Reducing or eliminating these tariffs, and other barriers to American exports, in many fast-growing markets will help support economic growth and high-wage employment for Americans in the 21st century. In so doing, TPP will help secure America’s emerging role as the world’s most attractive site for manufacturing, support higher incomes and rural development, and help to ensure a future of sustained U.S. economic growth based on highwage employment, research, investment, and production.

Overview Tariffs and core obligations The Goods chapter includes fundamental obligations for the TPP Parties to eliminate customs duties on qualifying goods from the TPP region, and to provide treatment to the goods of other TPP Parties equivalent to that which they provide their own nationals (“national treatment”). This means elimination of all tariffs on American manufactured goods and nearly all farm products. The majority of the tariff elimination will be immediate, although some tariffs will be eliminated over agreed timeframes. In agriculture specifically, TPP will eliminate tariffs on almost all U.S. exports of food and agricultural products, and for the remaining products

2 will provide new and commercially meaningful market access and increased export opportunities through significant tariff reductions or changes to tariff rate quotas.

Import and export restrictions To ensure that countries do not maintain or expand other discriminatory trade barriers at the same time that they are eliminating tariffs or invent new barriers to circumvent TPP’s obligations, the Goods chapter incorporates the broad World Trade Organization (WTO) obligations regarding import and export restrictions into TPP as the fundamental framework for trade in goods between the Parties. In addition, the Goods chapter prohibits import licensing conditioned on performance requirements, as well as prohibiting requirements that exporters establish contractual relationships with domestic distributors as a condition of importation. For example, an exporter of U.S.-made farm equipment cannot be required by law in a TPP Party to use a local distributor to import its product into a TPP country.

Performance requirements Performance requirements impose obligations on companies, such as requiring that a certain level of goods or services be exported or that domestic goods and/or services be used in order to obtain preferential treatment for their imports. These requirements are used by some countries to unfairly discourage the use of imports even as tariffs are reduced. The Goods chapter prohibits Parties from using performance requirements as a condition of qualifying for reduced tariffs.

Import licensing Complicated and unclear import licensing procedures can create costs and obstacles for exporters and can result in significant barriers to trade. The Goods chapter includes requirements for Parties to notify each other of their import licensing procedures, including any conditions and eligibility requirements, and to regularly update these notifications. In addition, Parties cannot apply import licensing procedures to TPP goods without notifying all Parties of the license requirement and the reason for it.

Special regimes The Goods chapter requires Parties to provide duty-free treatment for repairs and alterations; the temporary admission of goods like professional equipment, commercial samples, goods for display and demonstration, and sports equipment; and commercial samples of negligible value and printed advertising material.

3 Duty-free treatment for these types of imports lowers costs for commercial activity within the TPP region, including for professional services that require ancillary goods.

Publication To ensure that traders understand the rules they will be required to follow in trading with each TPP Party, the Goods chapter includes a requirement that Parties publish all information related to import and export procedures and requirements, tariff rates, taxes and fees related to importation, tariff quotas, and import and export restrictions.

Agricultural export subsidies The Goods chapter contains a commitment by all TPP Parties to eliminate agricultural export subsidies — which are considered among the most trade- distorting agricultural trade measures — on goods sold in TPP markets. The United States — which does not use agricultural export subsidies — has long sought to eliminate the use of such subsidies at the multilateral level. TPP also supports the groundwork for global agricultural trade reform on export subsidies in the WTO.

Export credits in agriculture The Parties agree to work together in the WTO to develop multilateral disciplines on export credits, export credit guarantees and insurance programs. This commitment reflects the ongoing work of the United States and other TPP partners on agricultural trade reform in the multilateral arena.

Export restrictions in agriculture The Goods chapter limits export restrictions on foodstuffs to six months, requires notification of other TPP Parties in advance when a country imposes such restrictions, and mandates consultation with interested TPP importing countries if the restriction remains in place more than 12 months. This provision is intended to discourage countries from imposing export restrictions on food and agricultural products as a means of protecting their domestic market from changes in the world market. When countries do so with respect to staple food products like rice and wheat, poor countries relying on the international market to import food supplies can suffer immediate and sharp crises in access to food. TPP’s commitment in this area will help improve the stability of regional farm markets in general, and

4 provide additional food security to lower-income countries in the region such as Cambodia, Papua New Guinea, Bangladesh and others.

State trading enterprises Some countries have state trading enterprises that control exports of specific products. Through the Goods chapter, TPP partners have agreed to work together in the WTO to improve transparency around the operations of agricultural export state trading enterprises, and have agreed on rules preventing these enterprises from receiving special governmental financing or trade-distorting restrictions on exports.

Modern agricultural biotechnology Products derived from agricultural biotechnology are grown in 28 countries and are traded widely. TPP includes commitments to provide transparency on government measures on biotechnology trade. It also provides for information sharing, and procedures for Parties to follow when the low-level presence of biotech material is detected in a shipment of agricultural commodities or food products.

New Features TPP’s Goods chapter includes new commitments that address emerging industries and certain non-tariff barriers that U.S. companies face in foreign markets, breaking new ground in U.S. trade agreements. These new features include:

Remanufactured goods Remanufacturing is an important and growing sector in the United States. Remanufactured goods — that is, products not simply repaired but restored to ‘like new’ condition — are cost-effective, support skilled jobs in the United States and other TPP countries, and offer environmental benefits through efficient reuse of existing parts and resources. The United States is the largest remanufacturer in the world, with at least $43 billion in production and $11 billion in exports, supporting an estimated 180,000 American jobs. However, many countries have import restrictions on used goods, which they inappropriately apply to remanufactured goods, restricting market access for U.S. exporters. TPP specifies that Parties cannot apply restrictions on the importation of used goods to remanufactured goods, but they can require that remanufactured goods meet all technical requirements for equivalent new goods and/or be identified as remanufactured for sale or distribution.

5 Export licensing procedures The lack of transparency in export licensing procedures can be used to limit or restrict exports of key commodities and raw materials, distorting world prices and providing domestic processors in foreign countries with unfair competitive benefits against U.S. processors. TPP’s Goods chapter prevents export licensing procedures from being used as an unfair trade barrier. TPP is the first U.S. FTA to include a provision related to transparency in export licensing procedures, which requires Parties to publish their export licensing procedures, including any conditions and eligibility requirements, as well as references to the measures that the procedures are used to implement. These obligations do not affect the ability of Parties to adopt or maintain export control measures.

Impact Exports have been a center of strength for the U.S. economy, and TPP will help us sustain and build on this success. The Goods chapter is an essential part of this, removing over 18,000 individual tariffs and other barriers to the export of U.S. goods and farm products.

Since the recent financial crisis, the U.S. economy has rebalanced away from debt- financed, real estate-based growth toward more sustainable sources of growth driven by sectors like investment, research, and production in manufacturing and agriculture. Exports have contributed nearly one third of U.S. economic growth between 2009 and 2014, and our 11 TPP partners in turn have been an important part of this story. Together comprising a market of nearly 500 million people, an economy of over $10 trillion, and three of America’s five largest export markets (Canada, Japan, and Mexico), TPP countries import nearly $3 trillion per year in manufactured goods, farm products, and natural resource products. This includes $639 billion worth of American manufactured goods, representing nearly half of U.S. manufacturing exports, in sectors ranging from autos, satellites, and cosmetics, to semiconductor chips and sports equipment.

TPP partners bought 42 percent of our more than $150 billion in exports of grains, meats, dairy, fruits and vegetables, and other farm goods. 9 American farmers — as the most productive and scientifically advanced globally — can serve the world. Nowhere is the opportunity greater than in the Asia-Pacific region. By 2030 it will be home to 3.2 billion middle-class consumers, who will be the world’s largest buyers of staple grains, fresh fruits and vegetables, dairy, meats and other farm products. The United States is one of a few countries, but not the only one, with the

6 potential to provide these goods efficiently, safely, and economically. This market has the potential to be the foundation of American rural growth for a generation, bringing wealth and supporting jobs in rural areas, and encouraging rural young people to see their future in agriculture.

TPP will reduce barriers to trade for U.S. manufacturers and producers helping them grow their exports. While TPP countries are large buyers of American goods, some continue to impose high tariffs on certain American goods and maintain a wide array of non-tariff barriers that mean our exports fall below their potential. In some cases, these challenges are intensified by preferential access that these countries have under FTAs that do not include the United States, which place American factories and farms at a disadvantage vis-à-vis our competitors. With countries around the Asia-Pacific and beyond negotiating numerous bilateral and regional trade agreements, these disadvantages will grow even more significant without proactive American engagement. To secure sustained and high-quality economic growth, and the high-wage jobs that flow from it, we need an ambitious effort to open markets and promote exports to some of the fastest-growing markets in the world.

The Goods chapter of TPP will help us meet our goals by addressing the major barriers to American exports of manufactured goods and farm products from tariffs through non-tariff import barriers, export bans and subsidies, licensing and performance requirements, and more.

Chapter 3 – Rules of Origin and Origin Procedures TPP’s Rules of Origin and Origin Procedures chapter creates rules of origin defining what it means for a product to be originating from TPP partner countries and thereby eligible for TPP benefits. It also creates the mechanisms for enforcing these rules. Together, this makes sure the agreement’s benefits go to TPP Parties that are taking on the Agreement’s high-standard, ambitious obligations. TPP’s strong rules of origin will help remove incentives for U.S. companies to move production abroad and encourage them to keep high-paying jobs in the United States.

7 Overview Defining “TPP originating” The Rules of Origin chapter creates a fundamental commitment that only “originating goods” — that is, goods genuinely produced in TPP countries — will receive the lower tariffs of the TPP. A good cannot be produced in countries outside the TPP and be considered TPP originating These rules are specific to each product, defining the operations it must undergo in order to be considered a TPP good and receive TPP benefits.

Originating Goods The Rules of Origin chapter will have three ways to define how something is “made in the TPP”:

 Wholly Obtained or Produced Goods The Rules of Origin chapter defines goods grown, harvested or fished in TPP countries as TPP originating and eligible to receive lower tariffs. These rules allow farmers to get TPP benefits for their produce or crops grown in TPP countries, or for fish caught on TPP vessels.

 Goods Produced Exclusively from TPP Materials The Rules of Origin chapter defines goods produced exclusively from originating materials and that otherwise meet the TPP rules of origin as eligible to receive lower tariffs.

 Product Specific Rules The Rules of Origin chapter allows many goods to be considered TPP originating if they meet the agreement’s product-specific rules limiting the type or amount of non-TPP materials that can be used or if such materials have been substantially transformed into a “TPP product.” For example, chemical products often result from complex production processes that transform simple inputs into new or different products. These rules ensure that only businesses that make significant investments and source significant amounts of materials and components in the United States and other TPP countries are eligible to receive lower duties.

Cumulation

8 The Rules of Origin chapter allows TPP countries to treat materials from one TPP country in the same way they treat materials from any other TPP country when these materials are used to make a TPP good. This concept, called “cumulation,” strengthens incentives for TPP businesses to integrate production and supply chains within the TPP region, making it more attractive to do business with producers in the United States and other TPP countries than with producers in other countries.

Remanufactured goods Remanufacturing has important benefits, including supporting U.S. jobs and reducing stress on the environment. Recognizing these benefits, the Rules of Origin chapter ensures that recovered materials used in the production of a remanufactured product count as TPP materials, allowing more remanufactured goods to count as TPP originating. Because remanufacturing is a complex, high- value, and labor-intensive production process, these commitments reduce the need for companies to import materials and components from outside the TPP region and incentivize domestic production, benefitting U.S. and other TPP workers.

Transit and transshipment With TPP countries located across the Asia-Pacific, manufacturers in all TPP countries have to be able to transport their goods across oceans to get goods to consumers. The Rules of Origin chapter ensures that TPP goods do not lose preferential tariffs simply because of the routes they transit to reach consumers. At the same time, to prevent circumvention of the TPP rules, the chapter imposes strict limits on the production processes that can be conducted while in transit outside the TPP region in order for a product to still be eligible for TPP tariff preferences.

Origin Procedures TPP countries work in different ways with importers, exporters, and producers. Some companies can adapt to these differences, but others — particularly smaller firms or new traders — often find them difficult, complicated, and burdensome to deal with across countries. To make sure our businesses — especially small and medium-sized businesses — can easily operate across the TPP region, the Rules of Origin chapter creates a common TPP-wide system of showing and verifying that goods made in the TPP meet the rules of origin. This enables all traders to make a claim for preferential treatment, provided they have the ability and documentation to support that claim. In addition, the chapter provides customs authorities with the

9 tools they need to verify claims in the manner they deem most appropriate, allowing them to make information requests to the importer, exporter, or producer, or to requests visits to exporter or producer facilities.

Adaptation to Future Changes in Technology and Supply Chains Recognizing that production processes and the nature of supply chains change over time, the Rules of Origin chapter commits TPP Parties to meet regularly to consider improvements to the administration of the rules of origin.

New Features TPP’s expanded commitments on cumulation are an important innovation designed to help promote production and supply chains among the United States and other TPP countries, and to reduce incentives to shift production to producers outside the region. TPP also includes more detailed provisions than any previous U.S. Free Trade Agreement (FTA) for importers to make claims for preferential tariff treatment and for customs authorities to verify claims of preferential treatment. This enhancement will better inform U.S. exporters on what to expect during a verification, how to prove compliance, and how to respond if goods are denied preferential treatment.

Impact Rules of origin define what it means for a product to be considered TPP originating and therefore to be eligible for duty-free treatment under the agreement. Together with the enforcement provisions, this makes sure the 15 agreement’s benefits go to TPP countries that are taking on the agreement’s high-standard, ambitious obligations, rather than to non-TPP countries.

The Rules of Origin chapter also incentivizes investment in TPP economies by providing simple, clear rules for claiming preferential treatment. The many previous FTAs among countries in the world’s busiest trading region each have their own rules. This created a so-called “spaghetti bowl” of rules of origin with no coherence. This in turn often makes it difficult for traders to take advantage of these agreements’ benefits, especially as goods often undergo production in multiple countries that are party to different, unconnected FTAs.

As TPP helps to develop a single, integrated Asia-Pacific market, with one, common set of rules of origin, U.S. companies that might otherwise have relocated

10 to Asia in order to connect to Asia-Pacific production and supply chains may no longer need to do so. The United States is already emerging as the production platform of choice because of our large market, low energy costs, unmatched innovation, technological strength, educated workforce, and strong investment climate. If both TPP and T-TIP are concluded and passed by Congress, alongside our current FTAs, the U.S. would have free trade access to nearly two-thirds of the global economy. The TPP links our businesses and workers directly into these production and supply networks, providing opportunities to further increase U.S. exports and support U.S. jobs.

Chapter 4 – Textiles and Apparel TPP’s Textiles and Apparel chapter will create export opportunities for Made-in- America clothes, fabrics, and yarns and support jobs in the United States. This objective is advanced by a “yarn-forward” approach that requires use of yarns and fabrics from TPP countries in end products qual- 18 ifying for preferential treatment under TPP — with some flexibility so that American businesses and workers whose products depend on inputs not available within the TPP region can still benefit. The yarn-forward approach also will help to develop a regionally- integrated supply chain that will promote long-term growth and investment in this sector in the United States. The Textiles and Apparel chapter also secures close customs cooperation among TPP Parties to facilitate effective enforcement of the rules; and ensures that U.S. companies have access to temporary relief if an import surge causes, or threatens to cause, serious damage to their business.

Overview Eliminates tariffs on textile and apparel goods TPP will eliminate tariffs on U.S. exports of textiles and apparel to the other TPP markets, with many tariffs going to zero on day one, and others being phased out. We have reached a carefully crafted U.S. tariff elimination package with our TPP partners that takes into account the specific sensitivities of the United States.

Rules of Origin To ensure that the benefits of TPP go to TPP workers and businesses, TPP requires a “yarn forward” rule of origin, which means that to get the lower tariffs offered in TPP, a good must be made within the free trade area using U.S. or other TPP country yarns and fabrics. At the same time, we have carefully crafted exceptions to the general rules of origin. For example, the Textiles and Apparel chapter

11 includes a “short supply list,” which provides TPP partners with flexibilities in cases where the U.S. and other TPP members do not produce enough of a particular fabric or yarn to meet production needs. In such cases, the short supply list allows apparel using these specified materials from outside the TPP region to qualify for TPP’s reduced tariff rates. There is also a special feature for Vietnam, linking improved access to the U.S. market for cotton pants to the purchase of U.S.-made cotton fabric.

Customs Cooperation to Combat Duty Evasion and Fraud The Textiles and Apparel chapter’s strong enforcement provisions and customs cooperation commitments enable U.S. Customs officers to work with other TPP countries to make sure that when traders claim their goods should get the lower tariffs and better treatment available under TPP, those claims are genuine. This includes authority for U.S. Customs officials to work with TPP counterparts to fight customs offenses, such as duty evasion, smuggling, and fraud.

Safeguard for Textlies and Apparel The Textiles and Apparel chapter creates a special safeguard procedure for textiles and apparel. This provision allows us to temporarily restore higher duties on imports coming into the United States if imports from a TPP country cause or even threaten to cause serious damage to the U.S. industry. Enforcement of the TPP rules To prevent customs fraud, TPP enables our Customs officers to go directly to facilities of exporters or producers in other TPP countries to verify that the textile and apparel goods those companies send to the United States are genuine TPP goods, and to investigate whether importers are meeting our rules. These commitments include protections for U.S. exporters and producers to ensure that they have a fair chance to show their goods meet the rules and therefore qualify for the lower tariffs and better treatment available under TPP.

New Features The Textiles and Apparel chapter includes a carefully tailored short supply list, allowing flexibility to meet the rules of origin and strengthen regional integration. Building on past agreements, TPP provides for a variety of enforcement tools tailored to the textiles sector to allow customs authorities to investigate fraud and smuggling. These tools include robust verification procedures — with a focus on direct site visits — that apply to all countries in the TPP, as well as cooperation among TPP countries. U.S. Customs and Border Protection will use these tools to

12 make sure that everyone is playing by the rules and that only genuine TPP goods benefit from TPP.

Impact U.S. textile and apparel industry, having weathered the forces of globalization and the financial crisis of 2008, has emerged as strong and innovative, with an orientation toward exports. The industry is a major U.S. manufacturing employer, with employment in the U.S. totaling more than 370,000 jobs on average in 2014, and the value of industry shipments rising from $48.7 billion in 2009 to $56.7 billion in 2014. U.S. textile and apparel manufacturers sold nearly $11 billion worth of products to TPP countries in 2014, an increase of around 50 percent from 2009, helping to make the U.S. the world’s fourth-largest exporter of textile products.

TPP will help increase sales of Made-in-America yarns, fabrics, and clothing to some of the fastest-growing markets in the world. The TPP region is home to hundreds of millions of consumers — from the emerging middle class in Southeast Asia to the high-end consumers of Japan. And textile and apparel industries in the TPP region require many of the high-technology textile products in which U.S. producers are most competitive, including those using composite materials and carbon fibers. TPP’s Textile and Apparels chapter will help the U.S. capitalize on these strengths, with measures including:

Eliminating tariff barriers to U.S. exports Many Asia-Pacific economies maintain high tariffs on U.S. exports of yarns, fabrics, and apparel, ranging up to 30 percent in Japan and Malaysia.

Ensuring that TPP benefits go to genuine TPP textile and apparel products Customs fraud — including illegal transshipment, duty evasion, and improper or misleading country-of-origin marking — is always a risk. To address this issue, U.S. Customs and Border Protection has designated textiles and apparel as a priority trade enforcement issue in order to promote legitimate trade and safeguard U.S. manufacturing jobs. Close cooperation with trading partners also is needed to help ensure strong enforcement of the trade rules in this sector.

13 Valuing Existing Relationships Over 70 percent of U.S. textile exports go to our FTA partner countries. While we are looking to expand trade with new FTA partners under TPP, the TPP Textiles and Apparel chapter reflects careful consideration of U.S. business relationships with existing FTA partners given our strong interest in supporting economic activity in these countries.

Chapter 5 – Customs Administration and Trade Facilitation TPP’s Customs Administration and Trade Facilitation chapter will help ensure that goods trade among the TPP countries moves quickly across borders, with facilitative and transparent procedures that require customs authorities to treat goods fairly, and that reduce opportunities for conflicts of interest in customs administration. This is particularly important to small and medium-sized businesses, which often find complex customs and border procedures among the most serious obstacles to increasing their exports, and are particularly reliant on the quick movement of goods, through services such as express delivery, to reach individual customers as fast as possible. At the same time, the TPP will help enhance the ability of customs officials to prevent abuses more effectively and cooperate more efficiently against duty evasion, counterfeit trade, and other customs offenses.

Overview Publication of Laws, Regulations, and Procedures Transparent, widely understood rules are fundamental to efficient trade. To guarantee transparency, TPP’s Customs Administration and Trade Facilitation chapter requires each TPP country to publish its customs laws, regulations, and procedures — online and in English, if possible. TPP Parties agree to designate contact points to whom businesses can directly ask questions.

Release of Goods Through the Customs Administration and Trade Facilitation chapter, TPP countries commit to ensure that goods move through borders as quickly as possible and, to the extent possible, are released within 48 hours of arrival. To prevent delays in cases where customs officials have not made a decision on the amount of duties or fees owed, the chapter will ensure that such goods can be released on bond or payment of duties, subject to appeal.

14 Advance Rulings Recognizing that exporters need to know how their goods will be treated on arrival in a foreign port, the Customs Administration and Trade Facilitation chapter requires TPP countries to provide decisions on key customs matters, including customs valuation, before goods are shipped. It also includes commitments by the TPP countries to issue these rulings as quickly as possible — no later than 150 days — after receiving a request, and to ensure that these rulings remain in place for at least three years.

Express Shipments Because of the importance of express shipping to the competitiveness of U.S. businesses — especially small and medium-sized businesses — the Customs Administration and Trade Facilitation chapter requires expedited customs treatment to express shipments. This will help move express shipments more quickly across borders by streamlining documentation needed to move such shipments, and by ensuring timely release of those goods. Because express shipments come in all shapes and sizes, TPP Parties have agreed to remove any existing limitations on express customs treatment for goods beyond a certain weight or value. In addition, TPP Parties will not charge any customs duties for express shipments valued below an amount that each government will set in order to further expedite the movement of goods and reduce documentation.

Penalties Excessive or unpredictable penalties are a persistent and growing concern for U.S. exporters. To address this issue, the Customs Administration and Trade Facilitation chapter requires customs penalties to be administered in an impartial and transparent manner — as they are in the U.S. — and requires that countries avoid conflicts of interest in administering penalties.

Customs Cooperation To ensure that TPP Parties rather than other economies are the beneficiaries of TPP, the Customs Administration and Trade Facilitation chapter promotes provision of assistance between TPP countries, as needed, in order to enforce customs laws and regulations, including providing information when pursuing an investigation of unlawful activity.

15 New Features TPP’s Customs Administration and Trade Facilitation chapter develops specific, ambitious commitments to facilitate trade and deepen cooperative relationships among the customs authorities of the 12 TPP countries. As the TPP countries implement these commitments, we hope to set an example for trade facilitation throughout the region. TPP is the first U.S. trade agreement to include disciplines on the imposition of customs penalties — a problem U.S. exporters encounter in many foreign markets — to ensure that our businesses are not unfairly charged inappropriate or excessive penalties. TPP also expands on customs cooperation commitments in previous trade agreements by committing all TPP countries to cooperate on preventing duty evasion, smuggling, and other customs offenses, issues of concern to all TPP countries.

Impact The United States exports $4.5 billion worth of goods per day to the world. Clear, efficient customs procedures are essential to streamline such flows of goods across borders. The American manufacturers that deliver their products to customers by air freight, and the logistics firms that move them, count on getting their exports into those customers’ hands quickly and efficiently. The 170,000 U.S. small- and medium-sized businesses exporting to TPP countries, meanwhile, need simple, clear customs procedures, easily available on the Internet, to serve their customers. TPP’s state-of-the-art customs and trade facilitation obligations will greatly enhance the ability of American workers and businesses to export their products into Asia-Pacific production and supply chains.

TPP’s Customs Administration and Trade Facilitation chapter will help American businesses and workers take full advantage of the opportunities provided by TPP by addressing:

Delays at Borders Long delays in customs processing of goods, especially those needed for just-in- time manufacturing, can block high-value shipments and weaken the functioning of regional supply chains.

Costly and burdensome customs procedures

16 Exporters, especially small businesses, need to be able to understand customs laws and procedures and electronically complete import and export requirements in order to save time and help them compete.

Inequitable treatment and conflicts of interest In many other countries, inequitable treatment of traders by customs authorities is a serious problem. Transparent systems with clear and enforceable rules reduce the opportunities for officials to charge duties far in excess of the duties owed on a shipment or to charge penalties with no clear basis. Addressing these issues through TPP will make it easier for exporters, especially small businesses, to sell their products across the region.

Duty evasion and circumvention TPP rules will reduce the risk that some will seek to evade customs duties or to illegally transship goods from non-TPP Parties to take advantage of the lower duties or other benefits of TPP. Strong enforcement of customs rules and cooperation among the TPP Parties allows U.S. businesses and workers to benefit, while other countries who are not part of TPP cannot.

Chapter 6 – Trade Remedies TPP’s Trade Remedies chapter ensures that U.S. producers remain fully able to use trade remedy laws, including safeguards, anti-dumping, and countervailing duties, to address injury resulting from a sudden surge in imports, the sale of exports below a country’s domestic price, or the provision of subsidies to producers of exported products. At the same time, the chapter ensures that U.S. exporters facing trade remedy measures initiated by other countries — which are increasingly common and affect over $1 billion in U.S. exports annually — are provided procedural due process, and that procedures used by other TPP countries are transparent.

Overview Antidumping and Countervailing Duty The TPP Agreement will not affect the rights and obligations under the World Trade Organization (WTO) agreements relevant to anti-dumping and countervailing duties (AD/CVD), nor confer additional rights or obligations. It promotes certain well-recognized transparency and due process practices in trade

17 remedy proceedings, such as written notification to another Party of receipt of an AD/CVD application, transparency and due process notifications, maintenance of public files providing availability to all non-confidential documents in the administrative record, and disclosure of key facts on which the decision on whether to apply AD/CVD measures was based. Nothing in this chapter affects our ability to use and enforce U.S. anti-dumping, countervailing duty, or safeguard laws.

Global safeguards The TPP Agreement will not affect the rights and obligations of TPP Parties under the WTO agreements relating to safeguards, confer additional rights, or impose new obligations. It requires, however, that TPP countries provide for notification electronically of the notifications already required by the WTO once a Party initiates a WTO safeguard investigation. It also prohibits Parties from imposing more than one safeguard on a product at the same time, whether it be a global safeguard, a transitional safeguard, or another special safeguard set out in the TPP Agreement.

Transitional safeguard mechanism The Trade Remedies chapter allows TPP Parties to apply a transitional safeguard measure to one, some, or all other TPP Parties during the period in which a tariff is being phased out if imports from those Parties have increased as a result of the tariff cuts. These measures can be maintained for up to two years, with a one-year extension. So as to facilitate adjustment, transitional safeguard measures must be progressively liberalized if they last longer than a year.

Notification and Consultation When conducting a transitional safeguard investigation, TPP Parties must notify the other Parties of the key milestones in the investigation: initiation, making a finding of serious injury, a decision to apply or extend the measure, and a decision to modify the measure. Parties also must notify the other Party should they decide to apply or extend the transitional safeguard.

Compensation A Party applying a transitional safeguard measure must provide mutually-agreed compensation in the form of concessions having equivalent trade effects or equivalent to the additional duties expected to result from the measure. Alternatively, a Party facing a transitional safeguard may suspend equivalent

18 concessions, after notification to the other Party or Parties, if the Parties cannot agree on compensation.

New Features While maintaining current U.S. laws on trade remedies, TPP enhances our efforts to promote best practices in foreign AD/CVD investigations consistent with the strong due process and transparency U.S. law guarantees to exporters in other countries. These provisions will help ensure that U.S. exporters facing trade remedy investigations initiated by other countries are provided procedural due process and can defend themselves in a transparent environment. Another new feature in this chapter is the opportunity it presents for a TPP industry to request that transitional safeguard measures be imposed against one, some, or all of the other TPP countries where imports are believed to be a cause or threat of serious injury.

Impact While the United States maintains an open market, U.S. policy has recognized for over 120 years that industries and their workers at times may be confronted with unfair trade practices and many other disruptions that require a rapid but temporary response through import relief. An important example, dating from 2009, was the Obama administration’s use of a “special safeguard” to impose temporary, three- year tariffs on certain Chinese-made automobile tires to provide relief after a sharp and sudden increase in imports threatened jobs and production in the United States. Accordingly, we have ensured that TPP provisions do not weaken U.S. trade remedy laws.

At the same time, TPP will ensure that trade remedies laws in our partner countries will offer due process and transparency. This is a principle embedded in U.S. trade law. It is important that foreign trade remedy systems reflect the same fair principles. This is particularly essential as U.S. exports face frequent cases abroad, with 62 of the 982 anti-dumping cases filed outside the U.S. from 2010 to 2014 targeting U.S. products.

Chapter 7 – Sanitary and Phytosanitary Measures TPP’s chapter on Sanitary and Phytosanitary (SPS) measures gives American farmers and ranchers a fair chance to feed the region’s people; ensures that America’s food supply remains among the safest in the world; and helps all TPP

19 partners — including developing country TPP Parties — better protect the health and safety of their food through modern, science-based food safety regulation. This involves ensuring that our partners use science and risk analysis as a foundation for SPS measures, which mirrors U.S. food and agricultural safety policy. As examples, they must use appropriate import check and restriction policies focused on direct threats to health and safety, avoid duplicative or unnecessary testing requirements where food already meets accepted international standards, and use transparent procedures for developing regulations — including opportunities for public comment. Nothing in this chapter in any way lessens or compromises our right and ability to protect U.S. consumers or U.S. agriculture, or to enforce our food safety rules. On the contrary, it will help TPP partners better ensure the health and safety of their food.

Overview The SPS chapter designs new rules that will ensure that science-based SPS measures are developed and implemented in a transparent, predictable, and non- discriminatory manner, while at the same time preserving the ability of U.S. and other TPP regulatory agencies to take necessary steps to ensure food safety, and protect plant and animal health.

Science and Risk Analysis Mirroring U.S. regulatory procedures, the SPS chapter in TPP establishes rules for identifying and managing SPS risks, while preserving the ability to maintain regulations that are not more trade restrictive than necessary and consistent with World Trade Organization (WTO) principles. For example, TPP:

 Provides that SPS measures are based on science and that SPS measures either conform to the relevant international standards, or are based on documented, objective, scientific evidence;

 Requires that each risk assessment conducted is appropriate to the circumstances of the risk and that the risk management measure is no more trade restrictive than required to achieve the country’s appropriate level of protection;

 Ensures that SPS measures do not arbitrarily or unjustifiably discriminate between Parties where identical or similar conditions prevail between one TPP Party and that of other Parties; and

20  Encourages Parties to use risk communication techniques to share information and explain measures to consumers and other stakeholders. Transparency Because not all countries have a transparent process for the public to comment on proposed regulations, the SPS chapter includes commitments to ensure that the public can comment on proposed measures and that producers understand the requirements they must meet in each country. The approach is similar to the U.S. rulemaking process.

Import Checks The SPS chapter commits TPP Parties to ensure that import checks for SPS requirements are based on the actual potential risk posed by the import. In addition, the chapter requires Parties to inform importers or exporters within seven days if a shipment is being prohibited or restricted entry for a reason related to food safety or animal or plant health.

Emergency Measures The SPS Chapter enables TPP Parties to take the emergency measures they deem necessary to protect food safety, and human, animal, and plant health. To discourage the use of such measures just as a means to block market access, it requires Parties to disclose the scientific basis for them.

Certification Most Parties maintain certification requirements for import into their market. The SPS chapter ensures that SPS certificates only require information related to SPS issues.

Equivalency and Regionalization TPP’s SPS chapter will improve the communications and information exchange between governments when a TPP country is considering equivalency or regionalization requests, and in doing so, will improve the predictability and the scientific basis for other countries’ decisions.

Food Safety Audits

21 The SPS chapter promotes the use of audits to assess the adequacy of another country’s food safety regulatory system, consistent with the U.S. approach. In addition, the chapter establishes a process of communication between Parties regarding the requirements, processes, and procedures for conducting audits.

Cooperative Technical Consultations (CTC) To help encourage the early and expeditious resolution of SPS matters, the SPS chapter establishes a consultative mechanism under which relevant agencies will work to find science-based solutions to SPS issues that emerge between TPP countries.

Dispute Settlement Where the CTC mechanism does not resolve a matter, Parties may use the agreement’s dispute settlement mechanism to enforce most of the SPS commitments. However, to ensure that Parties have sufficient time to align their SPS procedures with the TPP requirements, the application of dispute settlement will be phased in for certain provisions. The underlying WTO-based SPS obligations upon which the commitments in this chapter are based also remain subject to WTO dispute settlement.

New Features TPP includes new obligations that build on the WTO’s 1994 SPS agreement rather than simply reaffirming the commitments of the WTO SPS agreement as previous U.S. Free Trade Agreements (FTAs) have done. TPP includes important new features supporting the roughly $70 billion in U.S. food and agricultural exports to the TPP partners, while safeguarding the strong food safety regulatory system we already have in the United States:

 New obligations that promote science-based and transparent regulation should lead to improvements in the food safety and animal and plant health regulatory systems of other TPP countries, ensuring that U.S. food safety is maintained, and animal and plant life protected. The provisions requiring documented, objective, scientific evidence better align other countries’ regulatory systems with U.S. safety and regulatory systems, helping to provide a safer food supply and protecting American agriculture, while supporting improved food safety generally.

22  TPP commitments promote the use of risk analysis to improve the scientific basis of SPS regulations and the use of risk communication to exchange information and opinions concerning risk and risk-related factors among regulatory authorities, consumers, and other stakeholders.

 TPP promotes transparency by requiring publication of SPS regulations for public comment. Allowing public comment strengthens the ability of regulatory agencies to develop science-based regulations that facilitate trade and helps broaden public understanding of these agencies’ work.

 New TPP obligations require all TPP countries to notify importers or exporters of shipments being detained for SPS concerns. This rapid notification will help importers and exporters address concerns, which is particularly important for perishable products.

 TPP commitments permit an importing country to conduct an audit of an exporting country’s food safety regulatory system to determine whether the exported food meets the importing country’s requirements. This will mean that the U.S. can use systems audits to enhance confidence in the safety of imported food, while minimizing the need for inspections by multiple foreign countries of tens of thousands of U.S. food processing plants.

 TPP provides a new consultative mechanism for seeking quick resolution of measures related to U.S. food and agricultural exports, which will allow regulatory agencies to ensure that these issues are resolved based on safety and science. Impact Demographic and economic trends suggest that the Asia-Pacific region will be home to 3.2 billion middle-class consumers by 2030. They will be the world’s largest buyers of staple grains, fresh fruits and vegetables, dairy products, meats, and other farm products, and the United States is wellplaced to provide them with these goods. This requires both access to markets and fair regulations for food safety, and animal and plant health, known technically as sanitary and phytosanitary, or “SPS” measures.

The United States has one of the strongest regulatory systems in the world to ensure safe food for American consumers, as well as to protect animal and plant health for America’s farmers and ranchers. Internationally, however, SPS policies

23 are often weaker. In some countries, SPS barriers are based on political considerations, not science, and are used to replace tariffs as trade barriers protecting domestic producers and prohibiting imports of U.S. food and agricultural exports. In others, antiquated or inefficient regulatory systems have not kept up with the increasing consumer demand for imported products. This reduces opportunities for American producers and also erodes the capacity of governments abroad to focus on genuine threats to human, animal, and plant health. Therefore, as we work to reduce and eliminate tariffs in TPP, we also are seeking to ensure the removal of unwarranted SPS barriers, which are among the most significant challenges faced by U.S. agricultural exporters.

The WTO’s SPS Agreement, concluded in 1994 and now in force for 161 economies around the world, is the foundation of modern SPS policy. However, in areas where the WTO rules are less clear, American producers and their foreign customers continue to face challenges, including:

 Duplicative or unnecessary testing requirements;

 Inefficient or non-transparent border measures that lead to delays and spoilage at the port of entry. To address these issues, the United States has approached TPP’s SPS chapter committed to ensuring that TPP governments: (1) fully retain their right to determine the level of protection they deem appropriate and that nothing in the agreement prevents regulatory agencies from doing what they deem necessary to protect food safety, and animal and plant health; (2) that they adopt the scientific standards that focus resources based on risk; and (3) that the assistance programs associated with TPP offer lower-income partners opportunities to build their capacity in this area. Ultimately, TPP’s SPS chapter will support the efforts of all TPP countries to meet their responsibility to guarantee the safety of their food — in a manner consistent with science — while at the same time ensuring that nothing in TPP lessens or compromises our ability to ensure the safety of the U.S. food supply.

Chapter 8 – Technical Barriers to Trade TPP’s Technical Barriers to Trade (TBT) chapter helps create an open, transparent, stakeholder-based system of standards-setting in the Asia-Pacific. It ensures that technical standards-setting, conformity assessment procedures, and technical regulations are fair and transparently developed, with opportunities for meaningful

24 input and “bottom-up” participation in standards-setting. The TBT chapter also has specific annexes covering particular issues in information and communications technology, cosmetics, medical devices, pharmaceuticals, wines and spirits, formulas for certain food products, and organics. While making it easier for U.S. companies to export “into” Asia-Pacific supply chains and lead in innovation, the chapter preserves the full rights of governments to regulate products and manufacturing processes for public health, environmental quality, and other public- policy goals.

Overview Technical Regulations TPP Parties will cooperate to ensure that international standards and recommendations likely to form the basis for technical regulations do not create unnecessary barriers to trade.

Conformity Assessment TPP parties will provide “national treatment” to one another’s conformity assessment bodies — that is, testing and certification performed by another Party’s qualified conformity assessment body will be accepted as confirmation that its products, services, or systems meet requirements of the other Party. This will make it easier for U.S. exporters to have their goods tested or certified only once before accessing other TPP markets, reducing costs and burdens for U.S. businesses, especially small firms. In no case will this alter U.S. regulations for health, food safety, product safety, or other substantive public policy goals.

Transparency The TBT chapter ensures that stakeholders and interested parties from TPP countries have the opportunity to participate in the development of technical regulations, standards, and conformity assessment procedures by government bodies. This reflects the U.S. approach to standards-setting. As in the United States, TPP countries will publish new technical regulations and conformity assessment procedures, offer opportunities for public comment, explain how a TPP country’s final regulations and conformity assessment procedures meet the objectives sought; and provide responses to substantive issues raised by comments.

Compliance Period

25 The TBT chapter ensures a reasonable interval between publication of regulations and entry into force so that stakeholders have sufficient time to meet the new requirements. Similarly, TPP countries have committed to provide producers a reasonable amount of time to demonstrate the conformity of their goods with the relevant requirements.

Annexes The TBT chapter also includes several sector-specific annexes to promote common regulatory approaches across the region, including the following:

 Cosmetics, Medical Devices, and Pharmaceuticals The annexes on cosmetics, medical devices, and pharmaceuticals promotes transparent and open practices when regulating products in these sectors. For example, TPP Parties will have to consider relevant scientific and technical guidance when developing regulations, grant marketing authorizations based on specified and publically available criteria, provide reasons for rejecting applications, and establish due process procedures that allow for appeal so that U.S exporters are not unfairly or arbitrarily discriminated against in TPP markets.

 Information and Communications Technology (ICT) Products The ICT annex covers commercial products containing cryptography and that promote the electromagnetic compatibility of information technology equipment products. With respect to ICT products that contain cryptography, TPP Parties will be prohibited from disclosure of proprietary information in order to comply with technical regulations or conformity assessment procedures, a requirement that some governments could use to expropriate proprietary information and disseminate it to competitors. Exceptions are granted for government production, sale, or use of a product as well as for requirements a TPP government maintains related to the networks it owns or controls or measures it takes related to financial institutions or markets. In cases where a TPP country requires assurance that a product complies with a technical regulation or standard for electromagnetic compatibility, Parties must accept a supplier’s declaration of conformity for unintentional electromagnetic emitters, as in the United States.

26  Wine and Distilled Spirits The annex on wines and distilled spirits establishes parameters for the labeling of products, while preserving the ability of regulators to ensure consumer protection. It creates a common definition of “wine” and “distilled spirits,” to facilitate trade in these products, and also provide for supplementary labeling of wine and distilled spirits. TPP Parties commit not to reject imports solely because they use certain descriptive terms and adjectives related to wine or winemaking.

 Formulas for Food Products The annex on formulas for food products will ensure that TPP countries retain full rights to require companies to provide information about prepackaged food and food additives. At the same time, it will ensure protection for the legitimate commercial interests and proprietary information of TPP companies by requiring TPP Parties to ensure the confidentiality of information regarding proprietary formulas that it requires companies to provide in order to meet its technical regulations and standards related to prepackaged food and food additives.

 Organic Products The annex on organic products will promote trade in organic products and will encourage cooperation between the Parties on issues related to the production, processing, or labeling of products as organic. New Features TPP’s TBT chapter includes many new features, building on those in the World Trade Organization (WTO) TBT Agreement and earlier Free Trade Agreements (FTAs). These include: new transparency requirements, including public consultation requirements early in the development of new measures, enabling trade-related concerns to be vetted and addressed before new measures are finalized; requirements ensuring that information on regulatory decision making is publicly available; and greater clarification that companies will need to have their goods undergo conformity assessment procedures only once before being able to sell them in TPP markets. In addition, TPP — for the first time in a U.S. FTA — includes annexes on specific products.

Impact Product standards facilitate commerce by providing assurances to consumers and businesses that the products they are considering purchasing are safe and effective.

27 Without such a system, commerce would be thwarted as consumers and businesses alike find themselves unable to determine whether products worked as advertised, met specifications, and were safe to use. Measures related to standards fall into three areas. The first, standards set by business and professional standards associations, make sure products are compatible, reliable, and otherwise meet business needs. An example is the design of electrical plugs, where standards- setting among businesses ensures that they fit securely into sockets, delivering electrical current safely and without risk. A second is the technical regulations governments develop to ensure that products do not pose risks to public health or safety and environmental quality, or to address other public policy concerns. An example is components for autos or airplanes, where specific safety standards must be assured. The third is conformity assessment procedures, or objective testing to verify that the products meet the standards and technical regulations set by governments or private standard setting bodies. Such testing may be conducted by governments or by private conformity assessment bodies, depending on the product.

The U.S. standards-setting system, both public and private, places high value on transparency and stakeholder participation. The U.S. Government sets technical regulations with input from stakeholders, but sets such regulations mainly in areas that could pose public health or safety risks, while leaving other standards setting to the private sector to promote efficiency and innovation. U.S. private standard- setting bodies operate from ‘the bottom up,’ with participation by businesses, engineering and scientific associations, academics, government agencies, and the broader public. This creates a system that encourages engineers and technical experts to find innovative ways to improve products and to work with companies across a sector to develop appropriate standards that are consensus-based. The scale of the opportunities a good standards-setting system can create is illustrated by the fact that in 2009, about $118 billion of TPP countries’ exports were U.S. value-added — that is, products exported “into” supply chains by specialized U.S. firms.

Some major economies in the Asia-Pacific and elsewhere, however, rely heavily on government-mandated approaches that require particular standards that all companies must meet. Such an approach can deter innovation, create unnecessary “technical barriers to trade” that reinforce or substitute for tariffs, and serve as surreptitious ways to build invisible advantages for ‘national-champion’ firms closely linked to governments, to the detriment of American workers and businesses. TPP’s TBT chapter accordingly addresses several systemic challenges:

28  Transparency Unlike in the U.S., some countries limit public participation in the development of standards, technical regulations, and conformity assessment procedures. Enabling a broad range of stakeholders to participate in the development of standards-related measures in TPP countries will help ensure that standards do not discriminate against U.S. manufactured goods, and will encourage wider acceptance of U.S. approaches to standards in the Asia-Pacific region.

 Fair Conformity Assessment Overly-restrictive conformity assessment procedures can hinder U.S. exports, for example by requiring testing procedures to be conducted in the importing country after American labs have already validated a product, or by imposing burdensome requirements on foreign testing facilities as a means of discouraging imports.

 Promoting U.S. Exports in Key Sectors In many industries — medical and information technologies, foods and wines, medicines and cosmetics, and others — countries have not yet established their own standards-setting procedures or may follow the standards of U.S. competitors, such as the EU, which has aggressively promoted its standards to support its exports. TPP can help promote U.S. standards and bring consensus on the best approaches, creating opportunities for U.S. businesses and civil-society groups to participate as our TPP partners set standards and ensure that the tariff reductions we are negotiating in TPP are not undermined through discriminatory and burdensome standards.

Chapter 9 – Investment TPP’s chapter on Investment strengthens the rule of law in the Asia-Pacific region, deters foreign governments from imposing discriminatory or abusive requirements on American investors, and protects the right to regulate in the public interest. To this end, it ensures that American investors have effective remedies in the event of a breach of their rights, while reforming the investor-state dispute settlement (ISDS) system by providing for tools to dismiss frivolous claims and instituting a range of other procedural and substantive safeguards.

Overview Core Obligations

29 TPP’s Investment chapter includes a set of core obligations that provide basic protections in TPP markets for U.S. and other investors or investments — the same types of protections we already provide to foreign investors under U.S. law , including:

 Providing for national treatment (i.e., treatment no less favorable than a TPP country provides, in like circumstances, to its own investors or investments); and most-favored-nation treatment (i.e., treatment no less favorable than a TPP country provides, in like circumstances, to another country’s foreign investors or investments).

 Providing a “minimum standard of treatment” for investments, defined narrowly based on customary international law, including protections against denial of justice and failure to provide police protection.

 Ensuring that if a TPP government expropriates an investment, it does so for a public purpose, in accordance with due process of law, and subject to prompt, adequate and fully realizable and transferable compensation.

 Allowing for transfer of funds related to an investment covered under the agreement — such as contributions to capital, transfers of profits and dividends, payments of interest or royalties, and payments under a contract — to be made freely and without delay, subject to exceptions. These exceptions ensure that governments retain the flexibility to manage volatile capital flows, including permitting countries to impose non-discriminating temporary safeguard measures (i.e., capital controls) restricting investment-related transfers in the context of a balance of payments crisis, and certain other economic crises, or in the context of prudential measures to protect the integrity and stability of the financial system.

 Barring specified “performance requirements,” including local content requirements, export requirements, and technology transfer or technology localization requirements.

 Ensuring investors have the ability to appoint senior managers without regard to nationality, and ensuring that any nationality-based restrictions on the appointment of board members do not impair an investor’s control over its investment.

30 Non-conforming measures TPP countries have agreed to accept these core obligations on a “negative-list basis,” meaning that all obligations apply to all sectors and activities, apart from limitations negotiated and explicitly set out in a list of specific reservations describing the nature of any “non-conforming measures” that would be permissible even after the agreement enters into effect. These are recorded in two annexes:

 Annex I contains a list of current measures that would otherwise violate one or more of the core obligations of the chapter, but which the country has determined that it needs to maintain. In listing a measure in Annex I, the country commits to a “standstill,” which ensures that the measure will not become more restrictive in the future, as well as a “ratchet,” which means that if the measure is amended in the future to become less restrictive, the new, more favorable treatment will set the benchmark for the standstill requirement.

 Annex II contains a list of reservations that enable a country to have full discretion to maintain existing non-conforming measures or adopt new restrictions without any limitation under the agreement. Denial of Benefits The Investment chapter allows a TPP Party to deny benefits to “shell companies” owned by persons of that Party or a non-Party that establishes in another TPP country in order to take advantage of treaty rights but that lack substantial business activities in that country. It also allows the denial of benefits to companies that invest in a TPP country, but are owned by persons of non-Parties with whom a TPP Party prohibits certain transactions, such as under sanctions regimes.

Investor-State Disputes TPP investors will have the right to pursue neutral, international arbitration in the event of a dispute between an investor of a TPP Party and another TPP Party over a violation of one of the commitments of the Investment chapter. The chapter specifies these proceedings will be conducted in a transparent manner, with opportunities for public participation and safeguards to prevent abuse and help deter frivolous or otherwise non-meritorious claims. The safeguards include:

 Transparency of arbitral proceedings Ensuring that arbitration hearings and documents are open and available

31 to the public. For investor-State cases against the United States under TPP, all submissions, hearing transcripts, and other key documents will be available on the U.S. State Department website.

 Amicus curiae submissions Ensuring that interested stakeholders, including labor unions, civil society organizations and other interested stakeholders, can submit amicus curiae or “friend of the court” briefs.

 Non-disputing party submissions Ensuring that an investor’s home government and other TPP Parties are able to make submissions to panels on the interpretation of the Agreement.

 Expedited review of frivolous claims and possible award of attorneys’ fees Ensuring, as under the U.S. Federal Rules of Civil Procedure, that panels are able, on an expedited basis, to review and dismiss frivolous claims and award costs and attorneys’ fees to the respondent government.

 Interim review and award challenges Ensuring that disputing parties will be able to review and comment on proposed arbitral awards prior to their issuance, and to allow both disputing parties the option to challenge a tribunal award.

 Binding joint interpretations Ensuring that TPP Parties, at any time, can agree on interpretations of the agreement that are binding on tribunals.

 Time limits The time period during which an investor can bring an investor-State claim is limited to three and a half years from the date of actual or constructive knowledge of an alleged breach.

 Claimant waiver To prevent “forum shopping,” a claimant pursuing a claim in investor- State arbitration must waive the right to initiate parallel proceedings in other fora challenging the same measures New Features TPP’s Investment chapter includes innovations going beyond previous U.S. Free Trade Agreements (FTAs) to address new and emerging investment issues. These

32 include obligations to address the growing problem of discriminatory measures that provide advantages to foreign SOEs, national champions, and others by forcing U.S. investors to favor another country’s domestic technology. They also include clarifications that TPP investment disciplines apply to SOEs and other persons exercising delegated government authority — whether delegated formally or informally — so that SOEs, acting on behalf of governments, cannot take actions that discriminate against foreign investors and then evade challenge by asserting that they are not covered by the disciplines of the agreement.

At the same time, the chapter includes stronger safeguards to close loopholes and to raise the standards of investor-State dispute settlement above virtually all of the other 3,200 plus investment-related agreements in effect around the world. These include underscoring that countries can regulate in the public interest, including on health, safety, financial stability, and environmental protection; expanding the rules discouraging and dismissing frivolous suits; clarifying that the claimant bears the burden to prove all elements of its claims; allowing governments to issue binding interpretations of the agreement; making proceedings fully open and transparent; and providing for the participation of civil society organizations and others parties not a direct party to the dispute. In addition, the chapter will for the first time clarify key concepts in the non-discrimination and minimum standard of treatment obligations, for example, clarifying the significance of legitimate public welfare objectives in the non-discrimination analysis and addressing the concern that frustrating investor expectations in and of itself could result in a minimum standard of treatment claim. The chapter will also require the Parties to provide detailed guidance on arbitrator ethics and issues of arbitrator independence and impartiality.

 Explicit language underscoring right to regulate in the public interest. TPP includes new language underscoring that countries retain the right to regulate in the public interest, including to protect public health, safety, financial stability, and the environment. TPP will also include a separate, explicit recognition of health authorities’ right to adopt tobacco control measures in order to protect public health.

 Burden on claimant. A new provision in TPP clarifies that the claimant — the investor bringing the case against the government — bears the burden to prove all elements of its claims, including claims of breach of the minimum standard of treatment (MST) obligation, an obligation which guarantees

33 investors due process and certain other protections in accordance with customary international law.

 Dismissal of frivolous claims. TPP expands existing rules discouraging frivolous suits by permitting governments to seek expedited review and dismissal of claims that are “manifestly without legal merit.”

 Investor “expectations” aren’t enough. TPP explicitly clarifies that an investor cannot win a claim for breach of the MST obligation merely by showing that a government measure frustrated its expectations (for example, its expectations of earning certain profits).

 Arbitrator ethics/code of conduct. TPP countries will establish a code of conduct for ISDS arbitrators that will provide additional guidance on issues of arbitrator independence and impartiality. Impact International investment is a key driver of U.S. economic growth, benefiting the entire U.S. economy by boosting exports of goods and services and supporting high-paying jobs in the United States. Today, the U.S. is the world’s largest destination for foreign direct investment (FDI), with an inward FDI stock of $5.4 trillion in 2014 (on a market value basis). We have been the largest recipient of FDI flows in 8 of the last 10 years. The foreign-based companies making these investments employed 5.8 million Americans in 2012, including 2.2 million in the manufacturing sector. With more than 95 percent of the world’s consumers and key natural resources outside the United States, investment abroad is often an important factor in supporting production at home in order to serve foreign customers and other purposes. U.S. companies with operations abroad employ 23 million Americans — roughly one private-sector worker in every five. These companies pay their workers 28 percent more on average than other private-sector jobs, and they account for nearly half of U.S. goods exports and 76 percent of U.S. research and development.

While valuable to U.S. workers and businesses, U.S. investments in other countries can encounter severe challenges. For example, since the 2000s, many countries — including in the Asia-Pacific — have begun experimenting with “forced localization” policies designed to force the transfer of technology, or deter investors from importing products from the United States by requiring purchase of

34 local goods and services. In other cases, foreign governments have resorted to the full-scale expropriations of investment.

Investment protections have been a principal vehicle to guard against such policies in the Asia-Pacific and elsewhere. Over the last 50 years, 180 countries have negotiated over 3,200 agreements with investor protections. These provide assurance of basic rule of law protections and recourse to neutral, international arbitration in the event of an investment dispute.

Chapter 10 – Cross-Border Trade in Services Tradable services such as software, R&D, cloud-based computer services, engineering and architecture, logistics and express delivery account for about a third of all U.S. exports, and the U.S. runs a global services trade surplus of more than $230 billion as of 2014. TPP’s Cross-Border Trade in Services chapter will open markets for American exporters of these products, ensure fair and transparent regulatory treatment for Americans seeking to provide services abroad, and bar requirements that Americans invest in a TPP country in order to provide services there. This will foster an open Asia-Pacific services environment that helps American workers and businesses take advantage of one of our country’s signal strengths.

Overview Core obligations The Cross-Border Trade in Services chapter includes four core obligations found in all U.S. Free Trade Agreements (FTAs) (subject to country-specific exceptions that must be negotiated and agreed): (1) national treatment, providing that no country shall discriminate in favor of its own suppliers; (2) most-favored nation treatment, which provides that no country shall discriminate in favor of one TPP country over another TPP country, or a non-TPP country; (3) market access, which provides that no country may impose quantitative restrictions on the supply of services (e.g., a limit on the number of suppliers or number of transactions) or require a specific type of legal entity or joint venture; and (4) local presence, which provides that no country may require a supplier from another country to establish an office or affiliate, or to be resident, in its territory in order to supply the service.

Non-conforming measures

35 TPP countries have agreed to accept these core obligations on a “negative-list basis.” This means, for all countries, full access to their markets, apart from those sectors included in a country-specific list of specific reservations describing the nature of any “non-conforming measures” permissible even after the agreement enters into effect. These reservations are recorded in two annexes to the agreement:

 Annex I contains a list of current measures that would otherwise violate one or more of the chapter’s core obligations, but which the country has determined that it needs to maintain in force. In listing a measure in Annex I, the country commits to a “standstill,” which ensures that the measure will not become more restrictive in the future, as well as a “ratchet,” which means that if the measure is amended in the future to become less restrictive, the new, more favorable treatment will set the benchmark for the standstill requirement.

 Annex II contains a list of reservations that enable a country to have full discretion to maintain existing non-conforming measures or adopt new restrictions without any consequence under the agreement. Domestic regulation The chapter ensures that TPP Parties develop and administer measures of general application, including licensing processes, in a fair and reasonable manner, while fully recognizing the right to regulate and to introduce new regulations.

Transparency The chapter sets certain requirements for transparency in the development of new services regulations, including establishing mechanisms for responding to stakeholder inquiries on regulations related to the chapter; processes for notice and comment on new regulations; and allowing for reasonable time between publication of final regulations and their effective date.

Recognition The chapter ensures that TPP Parties have the flexibility to recognize the credentials of service suppliers of another Party without needing to recognize those of all Parties.

Denial of benefits

36 The chapter ensures that a TPP Party can deny benefits to a TPP supplier owned or controlled by an entity from a non-TPP country in cases where either the Party has sanctions on the non-TPP country, or where the TPP supplier is only a shell company for the non-TPP entity.

Payments and transfers The chapter allows for transfer of funds related to the cross-border supply of services to be made freely and without delay, subject to exceptions. These exceptions ensure that governments retain the flexibility to take measures, including non-discriminating temporary safeguard measures such as capital controls, in the context of economic crisis, or to take prudential measures to protect the integrity and stability of the financial system.

Annexes In addition to an annex covering specific exceptions, the Cross-Border Trade in Services chapter includes two annexes on specific sectors:

 Professional services A professional services annex to encourage cooperative work on licensing recognition and other regulatory issues in order to enhance opportunities for trade in professional services.

 Express Delivery Services An annex on express delivery services to address the unique challenges private suppliers face when competing with national postal entities in express delivery. New Features The Cross-Border Trade in Services chapter builds on the coverage and quality of services commitments under recent U.S. FTAs — which in turn build on those guaranteed by the World Trade Organization (WTO) — including new commitments that address longstanding issues for U.S. services suppliers. In addition, it includes:

Express Delivery Services Annex The enhanced disciplines for express delivery services help ensure fair competition in a sector in which private suppliers often compete with government-owned or

37 government-authorized postal monopolies. These enhancements, consistent with the U.S. Postal Accountability and Enforcement Act of 2006, support TPP initiatives for small and medium-sized enterprises, which are often highly dependent on express delivery services for integration into global supply chains and distribution networks.

Domestic regulations The process of applying for authorization to supply a service should be as fair and transparent in other TPP markets as it is in the United States. To this end, the chapter includes new good-governance guidelines — based on U.S. practice — for providing processing timelines, informing applicants of their status, charging application fees, and other application issues.

Impact Services account for the majority of U.S. and world economic output. In the United States, the services sector supports 4 out of 5 jobs. [1] Services, including information and communication services, transportation and logistics, wholesale and retail services, energy services, health care, entertainment, software, and professional services, are important contributors to growth and productivity in the U.S. and global economies.

Increased services trade has the potential to significantly help the U.S. economy. America is already the world’s largest services trading nation, with approximately $711 billion in exports and $477 billion in imports in 2014. Looking ahead, the Internet is making cross-border exports of services easier than ever before, as the user population grows and telecommunications prices fall. This means the U.S. has remarkable prospects both in traditional services exports, and in new ones like the many new health, education, business, and entertainment services developed every year as smartphone “apps.” The number of export-supported, high wage services jobs — with trade barriers reduced — is thus poised to grow significantly.

But even for the United States, services trade is far lower than it might be. Despite already accounting for a significant portion of U.S. and world economic output, services industries account for only about 20 percent of world exports and 30 percent of American exports. This reflects the fact that services trade is hampered by complex restrictions and bans on access that have a significant impact on global trade in services. [2] While affecting American exports in general, they often

38 disproportionately hurt small businesses and push American businesses to move abroad rather than export from home. Examples include:

 Requirements that a U.S. business establish an office overseas before it can supply a service. This hits small businesses much harder than larger firms, given the expense necessary to set up foreign offices, and more fundamentally tilts business choices towards foreign investment over exports and employment within the United States.

 Markets restricted to government monopolies or tilted by favoritism toward a government monopoly provider, often found in industries such as transport and logistics.

 Regulatory systems which favor domestic firms, are opaque, or otherwise reduce export opportunities without achieving particular valid policy goals.

 Prohibitions on cross-border provision of legitimate ‘content,’ such as videos or music. By addressing these issues in some of the fastest-growing markets in the world, TPP will create generation-long opportunities for growth and support for high- wage jobs.

[1] United States International Trade Commission, Recent Trends in U.S. Services Trade, 2014 Annual Report. http://www.usitc.gov/publications/332/pub4463.pdf [2] World Trade Organization, World Trade Report 2012. https://www.wto.org/english/res_e/publications_e/wtr12_e.htm

Chapter 11 – Financial Services TPP’s Financial Services chapter opens markets for U.S. financial services providers and workers in the world’s fastest-growing region. Equally important, it makes sure that the United States and other TPP members have the ability to fully regulate financial markets so as to ensure financial stability that contributes to sustainable growth, providing TPP governments with broad latitude for prudential regulation, including emergency measures in the event of financial crisis, and full ability to perform robust oversight of financial service providers.

39 Overview Scope TPP’s Financial Services chapter includes commitments relating to (1) regulated financial institutions (e.g., in the case of the United States, that means financial services suppliers regulated and supervised by regulators such as the Federal Reserve or the Securities and Exchange Commission); (2) any investors or investments in financial institutions; and (3) cross-border trade in financial services. It does not apply to public retirement plans or social security systems.

Core obligations The chapter includes several core obligations found in all U.S. FTAs (subject to country-specific exceptions that are negotiated and agreed):

 National treatment for investors and investments in financial institutions in TPP countries — that is, the agreement provides that no country shall discriminate against foreign providers of services in favor of its own nationals;

 Most-favored nation treatment, which provides that no country shall discriminate in favor of one TPP country over another TPP country, or a non-TPP country with regard to the cross-border supply of specifically listed financial services (such as marine, aviation, transportation insurance and financial advisory services);

 Market access, which provides that no country may impose quantitative restrictions on the number of financial institutions, total value or number of financial services transactions or assets or restrictions on the type of legal entity through which a financial institution may supply a service in another TPP market. Minimum Standard of Treatment The chapter includes provision of the minimum standard of treatment (e.g., allowing for claims for denial of justice or failure to provide police protection) bounded by customary international law (i.e., those limited actions governments take out of sense of legal obligation), as well as claims for damages due to civil strife (i.e., losses suffered as a result of armed conflict or civil strife); and

Cross-Border Trade

40 Access to cross-border trade is critical to U.S. competitiveness, and ensures that TPP will promote employment and growth in the United States as well as access to financial products abroad. Reflecting these goals, the Financial Services chapter includes a general commitment that each Party permit the sale of financial services across borders from suppliers located in the United States or other TPP Party. At the same time, the chapter allows a TPP Party to require registration or authorization of cross-border financial services suppliers of another TPP Party in order to help assure appropriate regulation and oversight.

New Financial Services The chapter includes rules that would allow a Party’s financial institution to supply a new financial service in the territory of another Party when that Party already permits the supply of that service by its local financial institutions. It also includes provisions that allow a Party to determine the institutional and juridical form through which the new financial service can be supplied and/or to require authorization for prudential reasons to supply the new service.

Treatment of Confidential Information The United States is committed to the safeguard of financial information. Consistent with this principle, the Financial Services chapter includes rules that clarify that TPP Parties will not be required to furnish or allow access to information related to the financial affairs and accounts of individual customers, or any confidential information that would impede law enforcement, damage the public interest, or prejudice legitimate commercial interests of particular firms.

Senior Management and Board of Directors TPP Parties agree not to impose nationality requirements on senior management or other essential personnel, or impose nationality or residency requirements on more than a minority of the board of directors of a financial institution of another TPP Party.

Non-conforming measures (NCMs) In two annexes to the chapter, Parties have negotiated country-specific exceptions to the core obligations:

 Annex A allows countries to maintain a current measure inconsistent with specified obligations of the TPP, but not to make that measure more

41 restrictive. Any future liberalization of measures listed in Annex A will be subject to the rules of the agreement.

 Annex B allows countries to maintain certain existing or future measures that are inconsistent with TPP in the specific sectors it lists in the Annex. Exceptions Two critically important exceptions preserve broad discretion for TPP financial regulators to take measures to promote financial stability and the integrity of their financial systems.

 Prudential Measures The prudential exception provision ensures that a Party may adopt or maintain measures for prudential reasons, including for the protection of investors, depositors, policy holders, persons to whom a fiduciary duty is owed by a financial institution or cross-border service supplier, or to ensure the integrity and stability of the financial system. The prudential measures exception applies to the entire TPP Agreement except for the goods and goods-related chapters.

 Monetary exception The monetary exception provides that certain chapters of the agreement (in particular those relating to services and investment) do not apply to non-discriminatory measures of general application in pursuit of monetary and related credit policies. Expedited Availability of Insurance Services The chapter includes rules that formally recognize the importance of regulatory procedures to expedite the offering of insurance services by licensed suppliers and procedures to achieve this outcome.

Specific Commitments Beyond these general provisions, the Financial Services chapter includes a set of specific commitments:

 Portfolio Management Allows a portfolio manager located outside its territory (other than a trust company) to provide advice to an asset manager located in its territory.

42  Supply of Insurance by Postal Entities Obligates Parties not to give preferential treatment to postal entities selling direct insurance, including by giving them preferential rights to distribution channels or subjecting them to less stringent enforcement.

 Electronic Payment Card Services Requires TPP Parties to allow the cross-border supply of electronic payment services, creating new opportunities for U.S. suppliers of electronic credit and debit payment services, a major new growth area in financial services.

 Transfer of Information Obligates Parties to permit cross-border transfer of information for data processing where such processing is required in a financial institution’s ordinary course of business.

 Investment Disputes in Financial Services The chapter establishes important safeguards in the event of investment disputes involving financial regulatory measures, including provisions regarding the financial expertise of potential arbitrators. Most significantly, the chapter establishes a special procedure whereby any dispute relating to a prudential measure can immediately be removed from an investor-State arbitration proceeding and placed under the review of the financial regulatory authorities of the concerned TPP Parties. Any differences between those authorities as to the application of the prudential exception can then be resolved through a separate, State-to-State arbitration between relevant TPP governments, rather than in an investor-State proceeding. New Features The Financial Services chapter contains several new features:

 Specific commitments allowing for the cross-border delivery of electronic payment card services, a service in which U.S. firms are globally competitive, but which some countries are seeking to restrict.

 Stronger disciplines regarding postal entities selling insurance in order to ensure a level playing field for U.S. insurers competing with such entities in TPP markets.

43  Multiple safeguards to help ensure that TPP Parties may apply the prudential measures exception provision or the other exceptions under the Financial Services chapter. Impact U.S. financial services and insurance firms help Americans to secure and grow wealth, finance opportunities, and prepare for retirement. These firms provide services critical to every sector of the economy, including small- and medium- sized businesses. Financial services exports contribute a $68 billion surplus to the U.S. balance of payments, reflecting the competitiveness of the American financial and insurance industries. TPP partner countries, with available data, accounted for about one quarter of total U.S. services trade, including purchasing $16 billion worth of U.S. financial services in 2013.

The Asia-Pacific is an important region for financial services exports. It is the center of global investment in infrastructure, requiring exceptionally large commitments of financial resources for governments and large businesses. High- standard rules for trade and investment in the financial services sector in the TPP will ensure that American businesses and workers can serve all these varied markets, promoting economic growth and job development in the United States and throughout the Asia-Pacific region.

At the same time, the United States and other TPP countries have faced serious financial crises in recent years. These crises have heightened the focus on ensuring governments’ right to regulate the financial services sector in order to protect consumers and ensure the integrity and stability of the financial system. TPP’s Financial Services chapter fully protects and ensures the right to regulate of all TPP parties. Nothing in TPP’s Financial Services chapter will require changes to U.S. law, regulations, policy, or practice.

Chapter 12 – Temporary Entry for Business Persons As businesses seek to establish and develop opportunities across the region, they need to obtain visas. The Temporary Entry for Business Persons chapter ensures efficient visa processing procedures and transparency related to requirements for the temporary entry application process. No provision in TPP will require changes to U.S. immigration law, regulations, policy, or practice because our system already operates in a manner consistent with the provisions in the Temporary Entry chapter. In addition, while the other 11 TPP Parties have agreed upon country-

44 specific reciprocal commitments on access for each other’s business persons, the United States is not undertaking any commitments in this area.

Overview Application Procedures The Temporary Entry for Business Persons chapter encourages TPP authorities to promptly provide information on applications for temporary entry, to ensure that application fees are reasonable, and to make decisions on applications and inform applicants of decisions in a timely manner, as we already do in the United States.

Transparency The chapter includes commitments to ensure that information on requirements for temporary entry are readily available to the public, including by publishing information promptly and online if possible, and providing explanatory materials and specifying where inquiries should be directed relating to temporary entry measures. This is fully consistent with U.S. practice.

New Features TPP’s Temporary Entry for Business Persons chapter provides enhanced transparency and opportunities for enhanced cooperation among the TPP countries on these issues.

Impact The Asia-Pacific region is already the largest business travel region in the world, based upon travel spending, and according to one industry group, business travel is expected to grow by around six percent annually over the next five years. For Americans, the importance of personal connections, small-business contacts, and coordination for building successful business relationships is highlighted by the fact that Americans made more than 61 million foreign trips in 2013.

As businesses seek to establish and develop opportunities across the region, they need to obtain visas efficiently. To address this issue, the Temporary Entry for Business Persons chapter ensures efficient visa processing procedures and transparency-related requirements for the temporary entry application process. While the other 11 Parties have agreed upon country-specific reciprocal commitments on access for each other’s business persons, the United States is not

45 undertaking any commitments in this area. Nor will any TPP provision require changes to U.S. immigration law, regulations, policy, or practice, as our system already operates in a manner consistent with the temporary entry chapter. In addition, TPP will explicitly affirm the ability of TPP Parties to regulate the entry of foreign nationals into their territory.

Chapter 13 – Telecommunication TPP’s Telecommunications chapter will help build a strong framework of trade rules to help ensure the competitive supply of telecommunications services across the TPP region, benefiting U.S. telecommunications operators who seek to operate in TPP markets, and all those industries in the U.S. that stand to gain from hundreds of millions of potential new customers accessible to them by such networks. This framework ensures that competition can take root and that anticompetitive conduct is discouraged. It also encourages innovative market- based solutions, to promote experimenting with new technologies and allow market forces to deliver services more quickly, more effectively, and more economically. And it extends pro-competitive principles to mobile services — the fastest-growing sector of the industry, which will be the major point of access to Internet and other services for most of the world’s people in coming years.

Overview Reasonable access to networks of other suppliers In a competitive environment, telecommunications depends on the ability of suppliers to access each other’s facilities and services. Operators need to interconnect with each other, which often requires access to a competitors’ physical infrastructure where the two networks can meet. But an incumbent operator often has an incentive not to cooperate, and instead to hinder a competitor. TPP’s Telecommunications chapter accordingly includes provisions intended to ensure that companies offer such access on a reasonable and timely basis.

Fair access to government-controlled resources Telecommunications services are impossible to provide without access to resources usually controlled by a government: spectrum, rights of way, and phone numbers, among others. The Telecommunications chapter ensures that U.S. suppliers will have equal access to such necessary resources — that the regulator does not favor local suppliers by offering preferential access, and thus impedes competition.

46 Transparency in rulemaking Where services are regulated, a transparent process for developing and enforcing rules, with rights of appeal, are critical to ensuring vibrant competition. The Telecommunications chapter ensures the opportunity for stakeholders on all sides to provide input, including for innovative suppliers to demonstrate how they can meet policy objectives more efficiently, for example through the use of technology, or innovative service offerings.

Suppliers’ freedom to innovate Restrictions on technology, often imposed to favor domestic suppliers or technical standards, have hurt U.S. service companies and equipment makers in many markets. The Telecommunications chapter ensures that regulation is impartial across different technologies, helping to ensure that freedom to innovate is the rule. Given U.S. companies’ long experience in bringing cutting-edge technologies to market, and the comparative advantage they possess in this sector, this provision will help ensure that U.S. suppliers can compete effectively in foreign markets.

Principle of market-based approach to regulation TPP countries agree to adopt the principle that in telecommunications, reliance on market forces and commercial negotiations are the preferred means of achieving policy goals, absent market failure or monopolistic behavior. This reflects the approach of the United States. In many cases, this approach provides more freedom for new entrants to innovate.

Cooperation of International Mobile Roaming To promote competition in the telecommunications sector, the chapter secures commitments from TPP Parties to facilitate the use of alternatives to roaming (i.e., preventing operators from blocking of voice over the Internet (VoIP) services, or disabling Wi-Fi services). In addition, while the United States does not regulate mobile services, where Parties seek to negotiate bilateral roaming rates between two markets, TPP Parties agree to permit operators from the United States or other third countries to benefit from the lower rates.

New Features For the first time in a Free Trade Agreement (FTA), TPP extends pro-competitive network access rules to mobile suppliers. While not directly applicable to the

47 United States because of the competitive nature of our mobile market, this step closes a loophole that has prevented the use of trade disciplines in markets where a dominant mobile operator has been able to thwart competition. Given the interest among U.S. suppliers in entering this subsector in foreign markets and the interest of consumers in accessing innovative products at competitive rates, we expect this to be an important innovation.

In addition, consumer complaints about unreasonable mobile roaming rates, affecting both voice and data services, spurred TPP Parties to seek greater cooperation in helping bring competitive forces to bear on such rates, which are the bane of tourist and business travelers alike, and are often a disincentive to using telecommunications services. TPP is the first FTA to address this issue.

Impact Robust networks and competitively priced telecommunications services are essential to a 21st-century economy — and the quality and innovative capacity of American telecommunications should enable American workers and businesses to serve consumers across the Asia-Pacific region. High-quality telecommunications drive growth and innovation; allow supply chains and precision logistics to function, provide a platform for the digital economy, which is especially important to small and medium-sized companies; and connect American producers — and consumers — directly to consumers and industrial, agricultural, entertainment, and services markets. The growth and innovation of the U.S. telecommunications sector has derived from pioneering policies of promoting competition and giving both services suppliers and equipment-makers freedom to introduce new technologies. These policies have helped create, in the United States, the largest market by far (by revenue) for information and communications technologies (ICT). [1]

TPP countries are a natural growth opportunity for the American ICT sector, in both goods and services. Telecommunications services alone are worth over $300 billion annually in our 11 TPP partners’ markets — on average 3 percent of their GDP — providing a gateway to Internet-enabled services and products that have enormous growth and revenue potential, from social networking, to gaming, to cloud computing. Looking ahead, these countries include some of the world’s fastest-growing rates of telecom use — from 2009 to 2014, mobile subscription totals have risen from 98 million to 136 million in Vietnam, and Internet access rose from 27 percent to 48 percent of the Vietnamese public. Mexico’s figures are

48 comparable, with mobile subscription totals rising from 83 million to 102 million in Mexico, and Internet access from 26 percent to 44 percent of the public. Nor are these figures unique to developing countries: Japanese mobile subscriptions rose from 116 million to 153 million over the same period. And beyond the TPP countries themselves, TPP offers an opportunity to promote competition and support innovation in areas from Internet services to smartphones and tablets and their associated applications and content.

Building these networks means overcoming a range of potential impediments that appear in TPP countries, the Asia-Pacific region, and worldwide, often as a result of government policies. These include prohibitions on investment, or constraints on access to key resources such as spectrum, numbers or rights of ways; or anti- competitive conduct pursued by incumbent players, who can use control over key bottlenecks such as interconnection, roaming arrangements, and access to specific facilities to disadvantage competitors. TPP accordingly addresses both barriers to entry to markets, and policy challenges within markets:

Entry to Markets Even when a market is nominally open to investment in the telecommunications sector, new entrants often face enormous challenges in getting a foothold. In addition to obtaining a license, a new entrant typically has to rely, in part, on existing operators to reach customers. In such circumstances the opportunities to thwart a competitor are legion. Some of these obstacles are physical — access to buildings, rights of ways, and particular equipment necessary to lay down lines and physically interconnect one network with another. Other obstacles are financial or operational, including lack of access to leased lines and interconnection arrangements.

Policy Barriers Other obstacles relate to a governments’ willingness to offer fair access to scarce resources — spectrum, numbers, and government-controlled rightsof-ways that a new entrant may need in order to offer its services. And finally, both existing operators and government regulators may see new technologies as a threat or as something they cannot adequately control or oversee, hurting the ability of innovative operators to introduce offerings for which technology is their competitive advantage.

49 [1] See OECD, Key ICT Indicators http://www.oecd.org/sti/broadband/oecdkeyictindicators.htm

Chapter 14 – Electronic Commerce TPP will help preserve the open Internet and prevent its breakup into multiple, balkanized networks in which data flows are more expensive and more frequently blocked. The Electronic Commerce chapter will ensure the free flow of data (subject to public-interest regulation, for example to prevent spam, protect privacy, and fight cyber-crime); prevent the spread of ‘forced localization’ of technologies and servers; and help to more effectively guarantee the security and privacy of internet users. All this will help to unlock the promise of digital trade through rules that keep the Internet free and open, set digital trade rules-of-the-road, and provide the incentives and a stable framework that can nurture a healthy environment for companies and individuals as they create and use content.

Overview Cross-Border Data and Information Flows TPP’s Electronic Commerce chapter includes commitments ensuring that companies and consumers can access and move data freely (subject to safeguards, such as for privacy), which will help ensure free flow of the global information and data that drive the Internet and the digital economy. These commitments, along with others on market access and national treatment, combine to help prevent unreasonable restriction, such as the arbitrary blocking of websites.

Location of Computing Facilities The chapter includes guarantees that companies will not have to build expensive and unnecessarily redundant data centers in every market they seek to serve. The economies of scale of the digital economy, where capitaland energy-intensive data centers serve multiple countries, depend on this flexibility.

Customs Duties and Other Discriminatory Measures The chapter prohibits the imposition of customs duties on digital products, to ensure that products distributed electronically, such as software, music, video, e- books, and games are not disadvantaged. A companion provision prevents TPP countries from favoring national producers or suppliers of such products through

50 measures such as discriminatory taxation or outright blocking or other forms of content discrimination.

Consumer Protection and Privacy To protect consumers, the chapter includes commitments by TPP Parties to adopt and maintain consumer protection laws related to fraudulent and deceptive commercial activities online. It also includes commitments ensuring that privacy and other consumer protections can be enforced in TPP markets. Governments have different ways of implementing privacy protections, and TPP recognizes that diversity and promotes interoperability between diverse legal regimes. The chapter also includes provisions requiring Parties to have measures to stop unsolicited commercial electronic messages (spam).

Facilitating Electronic Transactions and Trading To facilitate digital trade, the chapter includes provisions encouraging TPP countries to promote paperless trading between businesses and the government, such as customs forms being put in electronic format; as well as providing for electronic authentication and signatures for commercial transactions.

Software The chapter prohibits requirements that force suppliers to share valuable software source code with foreign governments or commercial rivals when entering a TPP market.

Cooperation The chapter ensures close cooperation among TPP Parties to help businesses, especially small- and medium-sized enterprises, overcome obstacles and take advantage of electronic commerce. It also encourages cooperation on policies regarding personal information protection, online consumer protection, cybersecurity threats and cybersecurity capacity, especially given the rise of cyber- attacks and the global diffusion of malware.

New Features As the Internet plays an increasingly vital role in global commerce, TPP will establish a framework of rules for digital trade in the Asia-Pacific that will benefit both businesses and consumers, and support U.S. economic growth, employment,

51 and innovation. In addition to barring customs duties on digital products and building a consensus on other important commitments related to digital trade, the TPP’s Electronic Commerce chapter includes significant new elements that reflect new technological developments and address concerns regarding electronic commerce that have emerged over the past several years. These include:

 First-ever commitments addressing the twin concerns over requirements that data be stored locally and prohibitions on the flow of data or information across borders. Together, these are among the most serious threats to an open Internet. These commitments will help guarantee that key inputs to digital trade are not arbitrarily impeded by governments, and reduce the threat of “balkanization” of the Internet.

 Ensuring that consumers have access to an open Internet, while requiring online consumer protection laws and ensuring that privacy and other consumer protections can be enforced.

 Encouraging cooperation of TPP countries on consumer protection, including privacy and cybersecurity.

 First-ever commitments underscoring the need to maintain consumer protection, for measures to stop unsolicited commercial electronic messages, and to ensure that privacy protections can be enforced in order to build consumer confidence and trust in the use of the Internet.

 Barring forced sharing of software code with governments or commercial rivals when entering a TPP market.

 Comprehensive commitments on cooperation related to digital trade, particularly to help small- and medium-sized enterprises take advantage of digital trade.

 First-ever commitments in an FTA on cooperation on cybersecurity threats and cybersecurity capacity, a significant problem, on which TPP countries will benefit from working collectively. Impact In the past six years, the world’s Internet-using population has nearly doubled from just over 1.5 billion to 3 billion, with the fastest rates of growth in developing regions like Southeast Asia. The TPP region is now home to close to 600 million Internet users, or almost one in every five global internet users. Transfers of data

52 are rising even more rapidly: an estimated 80 terabytes of data per minute (equivalent to eight times the print content of the Library of Congress) now enters and leaves the United States, and this number grows rapidly each year as ever- faster broadband networks proliferate globally, the global fiber-optic cable network expands, and computer technologies improve.

Americans benefit from this in countless ways. An open Internet makes us more able to access ideas, products, and entertainment — whether one of the billions of “apps” downloaded onto a smartphone, one of the billions of songs, movies, games or books downloaded or streamed onto a digital device, or one of the ubiquitous and now indispensable services digital consumers and businesses around the globe use every day. America’s leadership position in the areas of IT research, the Internet industry, and entertainment makes an open Internet a vastly important asset as we export ideas, digital products, and services to the world. The United States is home to the world’s most innovative companies in the digital environment U.S. digitally-enabled service exports alone were nearly $400 billion in 2011, up from $273 billion in 2007, with small businesses in particular finding the Internet a uniquely powerful way to find customers and sell products worldwide. Over time, the Internet will help Americans take maximum advantage of our economy’s strengths in creativity and technology, enable tens of thousands of small businesses to participate in trade; and facilitate the emergence of non-traditional exporters in fields from health care to the arts and research labs.

However, the Internet is still new and there is a risk that countries could seek to regulate the digital environment in a way that jeopardizes a free and open internet. This would significantly undermine U.S. interests and innovation across the Asia- Pacific region, and would also do incalculable harm to future global growth and technological progress. That is why it is so important to ensure that these technologies remain open to new innovations, which TPP does by addressing, among other issues:

Barriers to cross-border data flows Such data flows are the building blocks for all digital trade, and barriers to them are among the most serious impediments to the future of digital trade. Impediments to such flows affect not only technology companies, but almost every sector of the economy from manufacturing to farming and small businesses — all of which now depend on digital technology to provide the innovation and efficiency that drive economic growth.

53 Requirements that companies must store data locally Such policies, which have been implemented in China and are being proposed by many other governments, undermine the architecture of the Internet, preventing the use of all “cloud” based services — from business software, to online music, e- mail, and travel services. They also affect the ability of companies, particularly small and medium-sized enterprises, to use the Internet as a global platform for delivery of goods and services. This is because small and medium-sized enterprises, which need information from customers in all of their markets, are generally unable to afford to build data centers in every market they serve. Where data localization requirements are instituted, commitments to provide access to specific services on a cross-border basis can become all but meaningless. In addition, even if a company wants to invest in a foreign market, it may still want to use its data processing facilities established in the United States or elsewhere.

TPP’s Electronic Commerce chapter, joining some of the world’s most sophisticated Internet economies with rapidly growing developing nations across four continents, will answer these concerns as the most ambitious trade policy ever designed for the Internet and electronic commerce. Resting both on America’s long-held commitment to the free flow of ideas and on the value of the future digital economy to American growth, prosperity, and employment, it will address the emerging challenges to the integrity and efficiency of the global Internet, ensuring that it remains an open space for commerce, that consumers and Internet users have confidence in regulation for privacy and security, and that electronic commerce achieves its vast future potential.

Chapter 15 – Government Procurement TPP’s Government Procurement chapter will help create export opportunities for American producers of manufactured goods and services which support high-wage employment in the United States, ranging from information technology to transport machinery, medical technologies, professional services, and many other products. At the same time, it will support U.S. businesses and workers, including by maintaining current Buy America requirements and small business and other set asides.

Overview Core Commitments and Definitions

54 The Government Procurement chapter includes core commitments on national treatment, which require that a TPP Party extend to bidders on covered government procurement contracts the same treatment it extends to its own firms; and on most- favored-nation treatment, which require a Party to provide U.S. and other TPP firms at least as good treatment as it extends to any other Party’s firms. These procurement provisions do not apply to loans and grants or other forms of assistance from a government. For example, this means federal loans and grants provided by the Department of Transportation and the Environmental Protection Agency to U.S. states and local entities, to which Congress has attached “Buy America” requirements, will not be covered by the chapter.

Provision of Complete and Timely Information Timely and complete information is essential if American businesses are to compete successfully for foreign government procurement contracts. For all covered procurements, TPP Parties will publish information in a timely manner on the procuring entity, the specific procurement, the time frame for submission of bids, and a description of conditions for participation of suppliers.

Fair and Transparent Procurement Procedures The chapter ensures that TPP governments allow sufficient time for suppliers to obtain the tender documentation and submit a bid. It also includes guarantees that tenders will be treated fairly and impartially, and that confidentiality of tenders will be maintained. In addition, it includes commitments that contracts will be awarded based solely on the evaluation criteria specified in the notices and tender documentation. To ensure fairness and due process, TPP rules allow an unsuccessful bidder to request an explanation of the contract award decision and require each TPP country to have an impartial administrative or judicial review authority to review a complaint, similar to what already is provided for in U.S. law.

Non-discriminatory and Flexible Specifications For U.S. exporters to be able to compete on an even footing for a foreign government procurement opportunity, technical specifications must be fair and objective. The Government Procurement chapter ensures that technical specifications focus on performance and functional requirements rather than design or descriptive characteristics, are based on international standards where available, and do not create unnecessary barriers to trade. It also includes rules that allow the conditions for participating in a covered procurement to ensure that a supplier has the legal and financial capacities, and the commercial and technical abilities, to

55 fulfill the requirements of that procurement. At the same time, the chapter allows for flexible and fair technical specifications and conditions for participation, and preserves wide latitude for U.S. procuring entities to set the requirements they consider appropriate.

Coverage The commitments in the Government Procurement chapter apply only to procurement that each country has agreed to cover. Eight of the 11 TPP Parties have already agreed to ambitious coverage of their government procurement in past trade agreements with the United States. With those Parties, TPP’s Government Procurement chapter reflects or expands past commitments. For the remaining three countries, we are seeking comparable commitments, recognizing that each is opening its government procurement market for the first time in TPP.

Buy America and Other Exclusions Every country, including the United States, has particular programs that TPP government procurement commitments will not cover. The United States in TPP continues to exclude from coverage the same elements of procurement that are excluded from our past agreements: Buy America requirements attached to federal funds for state and local mass transit and highway projects and water projects; small business and other set-asides; procurement of transportation services; human feeding programs; and sensitive elements of Department of Defense procurement, including defense systems, materials and textiles. In addition, we are making no commitments to cover state or local government procurement at this time

New Features TPP marks the first government procurements commitments to the United States ever made by Vietnam, Malaysia, and Brunei, while also including additional commitments from other TPP partners beyond previous agreements. Moreover, to date, only four agreements in the world — the U.S. Free Trade Agreements (FTAs) with Peru, Panama, Colombia and Korea — clarify, for greater certainty, that technical specifications for a tender, or conditions for participation in procurement, can be designed to promote both compliance with laws regarding international labor rights and protection of the environment. TPP extends that flexibility to procurement with ten other countries. In addition, it clarifies that those procurement specifications or conditions can also be designed to promote compliance with laws related to worker safety and workplace conditions.

56 Impact Government contracting is a key export opportunity for U.S. goods producers and services suppliers. Covering goods and services where American products are the world’s standard — health equipment and supplies, information technology equipment and services, transportation machinery, infrastructure equipment, professional services, engineering, and others — government procurement purchases are estimated to represent up to 15 percent of a country’s gross domestic product.

Reaching these markets, however, can be exceptionally difficult. Many governments in the Asia-Pacific and elsewhere have formal policies that put foreign bidders at a disadvantage. They also have informal barriers such as a lack of transparency, predictability and fairness in tender procedures, as well as uncertain, variable rules, which can create further challenges. By contrast, the U.S. has a transparent procurement process, where procurement information and rules for participation, including for foreign bidders, are widely available. This means U.S. companies seeking to compete in foreign government procurement markets face several challenges. To address these, the Government Procurement chapter will help:

 Create fair, transparent, predictable, and non-discriminatory rules to open foreign government procurement to U.S. exporters.

 Enable U.S. exporters to compete for procurement opportunities by ensuring that timely and accessible information is available on upcoming procurements; technical specifications and qualifications are fair and non-discriminatory; tender procedures are transparent, and adequate time is provided for foreign bidders to participate.

 Support U.S. businesses, including small and medium-sized enterprises, by maintaining Buy America requirements and our small business and other set-asides. In addition, we are avoiding any commitments covering U.S. state or local procurement at this time. Any future commitments could only be made if these state or local governments explicitly agree to such coverage.

57 Chapter 16 – Competition The Competition Policy chapter will help ensure that Asia-Pacific markets have a foundation in principles of fair competition, consumer protection, and transparency through rules that require TPP partners to maintain legal regimes that prohibit anticompetitive business conduct, as well as fraudulent and deceptive commercial activities that harm consumers. This will help to guarantee that markets in TPP members are genuinely open to made-in-America manufactured goods, farm products, and services, as it simultaneously promotes consumer protection in all TPP countries.

Overview Effective Competition Laws Through the Competition Policy chapter, TPP members agree to adopt or maintain national competition laws that proscribe anticompetitive business conduct and work to apply these laws to all commercial activities in their territories. To ensure that such laws are effectively implemented, TPP Parties will establish or maintain authorities responsible for the enforcement of national competition laws. This chapter will not require any U.S. laws and regulations to be changed, as we already meet these commitments.

Consumer Protection TPP members agree to adopt or — as in the case of the United States — maintain laws that proscribe fraudulent and deceptive commercial activities that cause harm or potential harm to consumers. Parties also agree to cooperate, as appropriate, on matters of mutual interest related to competition activities, including in the enforcement of consumer protection laws.

Procedural Fairness As TPP countries strengthen their competition policy laws and their enforcement, the Competition Policy chapter includes a range of obligations related to procedural fairness, including rules that ensure a person subject to an enforcement action has a reasonable opportunity to be represented by counsel, to provide evidence in its defense, and that the enforcement authority adopt a series of transparency procedures.

Private Rights of Action

58 TPP Parties agree to provide an independent right to seek redress for injury caused by a violation of a Party’s competition law or, to provide persons with a right to request that a Party’s competition authority initiate an investigation and to seek redress after the finding of a violation of competition law.

Cooperation and Transparency TPP Parties agree to cooperate in the area of competition policy and competition law enforcement, including through notification, consultation and exchange of information. They also agree to ensure that final decisions finding a violation of competition law are made publicly available, while ensuring that business confidential information is protected.

Dispute Settlement Consistent with previous U.S. Free Trade Agreements (FTAs), dispute settlement will not apply to competition policy provisions. However, the TPP Parties do agree to enter into consultations on issues related to the chapter, upon the request of another Party

New Features Establishing a regional standard on competition policy will benefit U.S. companies and consumers, providing for fair competition and promoting consumer protection. New features in TPP’s Competition Policy chapter include establishing detailed rules on procedural fairness in competition law enforcement, consistent with U.S. law and practice. Similarly, it provides a regional standard requiring Parties to adopt or maintain laws proscribing fraudulent and deceptive commercial activities

Impact Competition policy systems vary widely in the Asia Pacific. Some countries have advanced systems of anti-trust law and guarantee consumer rights, but take different approaches to achieve these ends. Some have no competition policy laws at all; others use opaque systems in which case filings can appear to be arbitrary or designed to reduce the market share of U.S. or other foreign businesses. This issue appears to be a rapidly growing challenge to American exporters, especially, but not only, in sectors where U.S. businesses and workers are perceived to be world technological leaders.

59 TPP’s Competition Policy chapter encourages effective and transparent competition policy systems that encourage market-based competition and protect consumers against monopoly tactics. These principles are meant to be the foundation of transparent laws ensuring fair competition in the Asia-Pacific region, and ensuring that regulatory actions rest on objective and transparent criteria and are taken in a manner that does not discriminate against foreign or specifically U.S. businesses. As we create this larger environment of fair competition and consumer protection, the United States will retain full authority over the administration of American laws applied to competition within the United States

Chapter 17 – State-Owned Enterprises and Designated Monopolies TPP’s State-Owned Enterprise (SOE) chapter ensures that businesses, regardless of ownership, compete fairly through enforceable rules to ensure that foreign-owned SOEs compete on the basis of quality and price, not on the basis of discriminatory regulation, subsidies, or favoritism. This will ensure that their trade and investment activities do not place private American businesses and their workers at a disadvantage.

Overview Coverage TPP’s State-Owned Enterprise chapter provides broad coverage of SOEs that are principally engaged in commercial activity. At the same time, to avoid an outcome in which a government could easily evade its obligations by delegating its authority to an SOE, it includes rules requiring SOEs that operate under delegated authority to abide by the obligations of the TPP Agreement.

Commercial considerations and non-discriminatory treatment The SOE chapter includes commitments by TPP Parties to ensure that their SOEs make commercial purchases and sales on the basis of commercial considerations, except when doing so would be inconsistent with any mandate under which an SOE is operating that would require it to provide public services. TPP governments also agree to ensure that their SOEs or designated monopolies do not discriminate against the enterprises, goods, and services of other Parties.

Immunity and impartial regulation

60 The SOE chapter includes obligations requiring TPP countries to provide their courts with jurisdiction over commercial activities of foreign SOEs so that a foreign SOE operating in a TPP country could not evade legal action regarding its commercial activities merely by claiming sovereign immunity. At the same time, it includes rules requiring Parties to ensure that administrative bodies regulating both SOEs and private companies do so in an impartial manner and do not use their regulatory authority to provide preferential treatment to their SOEs.

Non-commercial assistance The SOE chapter ensures that, in providing any non-commercial assistance to SOEs, TPP Parties agree to not cause adverse effects to the interests of other TPP Parties. This includes a commitment from TPP Parties to not cause injury to another Party’s domestic industry by providing non-commercial assistance to a SOE that produces and sells goods in the territory of another Party.

Transparency Having access to information about the SOEs of the TPP Parties and their activities is critical to ensuring the outcomes we hope to achieve through this chapter. Toward this end, the chapter requires TPP Parties to share a list of their SOEs with the other TPP countries and provide, upon request, additional information about the extent of government ownership or control and the non-commercial assistance they provide to SOEs.

Exceptions The chapter establishes exceptions to the commitments on SOEs. For example, nothing in this chapter would prevent a Party from taking prudential measures or other measures to respond temporarily to an economic emergency.

Dispute settlement SOE rules are fully enforceable, subject to State-to-State dispute settlement. Investor-state dispute settlement does not apply to the SOE rules.

Annexes In addition to the exceptions that apply to all Parties, a set of country-specific Annexes define narrowly-tailored and country-specific exceptions to specific

61 obligations as well as transition periods to provide certain countries additional time to meet the obligations of the chapter.

New Features TPP goes beyond previous agreements in addressing the distortions SOEs can cause in the market. It is the first Free Trade Agreement (FTA) to seek to address comprehensively the commercial activities of SOEs that compete with private companies in international trade and investment. Most of the key elements in the SOE chapter are new, and we expect them to blaze the trail for work on this issue throughout the Asia-Pacific region. The chapter’s commitments build on principles in the World Trade Organization (WTO) and on previous U.S. FTAs, but go beyond them in important ways, including by applying subsidies rules to services exports of SOEs and to the operations of SOE manufacturers outside their home territory. The TPP Agreement also broadens and strengthens non-discrimination rules to apply to all commercial purchases and sales of SOEs wherever they operate in the TPP trade area.

Impact SOEs have grown rapidly as actors in global trade, in cross-border investment, and in major American export markets over the past decade. Whereas in 2000, there was only one SOE in the Fortune Global 50 list of the largest companies in the world, now there are close to a dozen. Their international activity has raised new concerns about government influence, potential trade distortions, and unfair competition. In addition, some TPP countries that maintain many SOEs are already considering reforms to enhance the efficiency and productivity of their economies.

SOEs exist in all TPP countries, are used for different purposes, and are regulated and managed in widely varying ways. Some SOEs provide public services, but other times, extensive government participation in economies through SOEs can distort competition to the detriment of private American firms and their workers. This can occur through SOEs that receive advantages from governments, such as preferential financing, including through State-owned banks; provision of goods or services from the government or from other SOEs at preferential prices or free of charge; direct subsidies and debt forgiveness, or other preferences. These preferences can tilt the playing field in favor of SOEs and against U.S. workers and businesses. Even where enforcement against SOEs in foreign markets has been pursued for anti-competitive behavior or other unlawful behavior, commercial SOEs have avoided prosecution by claiming sovereign immunity.

62 Concerns about the role of SOEs have grown in recent years because SOEs that had previously operated almost exclusively within their own territories are increasingly engaged in international trade of goods and services or acting as investors in foreign markets. Their coverage in a specific TPP chapter is a new feature in U.S. trade agreements that will help us address emerging concerns, including financing and subsidization of SOEs involved in exporting, domestic competition for business and contracts; and regulatory policies which, by design or because of lack of transparency, create inherent advantages for SOEs favored by home governments. At the same time, TPP recognizes, defines, and ensures legitimate roles for SOEs in provision of public services.

Chapter 18 – Intellectual Property TPP’s Intellectual Property (IP) chapter will help Americans take full advantage of our country’s innovative strengths and help to promote trade and innovation, as well as to advance scientific, technological and creative exchange throughout the region. The chapter combines strong and balanced protections with effective enforcement of those protections, consistent with existing U.S. law. This will promote high standards of protection, safeguard U.S. exports and consumers against IP infringement, and provide fair access to legal systems in the region to enforce those rights. Drawing from and building on other bilateral and regional trade agreements, it includes commitments to combat counterfeiting, piracy and other infringement, including trade secret theft; obligations to facilitate digital trade, including in creative content; and provisions to promote development of, and access to, innovative and generic medicines.

Overview Common Understanding Relating to IP Systems The Intellectual Property chapter creates a set of shared understandings regarding IP systems, including that the protection and enforcement of IP rights should contribute to innovation and the dissemination of technology, to the mutual advantage of diverse stakeholders and in a manner conducive to social and economic welfare.

Patents  Effective and Clear Patent Standards The Intellectual Property chapter defines a robust standard for patentability, consistent with international norms drawn from the WTO

63 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) as well as other international best practices, including relevant exclusions. TPP Parties also agree to adopt the best practice of allowing a grace period in which certain public disclosures of the invention (e.g., in papers published by university researchers or small inventors) will not be used to deny a patent application.

 Cooperation and Transparency Cooperation and transparency provisions on patenting in the IP chapter help facilitate the processing of patent applications in multiple jurisdictions, with a minimum of red tape. These features should particularly benefit small- and medium-sized enterprises.

 Promoting the Development and Availability of Innovative and Generic Medicines The Intellectual Property chapter also includes commitments to foster not only the development of innovative, life-saving drugs and treatments, but also robust generic medicine markets. Drawing on the principles underlying the “May 10, 2007” Congressional-Executive Agreement,included in agreements with Peru, Colombia, Panama, and Korea, the chapter includes transitions for certain pharmaceutical IP provisions, taking into account a Party’s level of development and capacity as well as its existing laws and international obligations.

 Enabling Public Health Protections The chapter incorporates the Doha Declaration on the TRIPS Agreement and Public Health, and confirms that Parties are not prevented from taking measures to protect public health, including to respond to epidemics such as HIV/AIDS. Protection for Regulatory Test Data  Promoting Investments in the Development and Testing of Safe and Effective Medicines and Agrochemical Products The Intellectual Property chapter includes commitments related to protection of undisclosed test and other data generated to obtain marketing approval of pharmaceuticals and agricultural chemicals. Trademarks and Geographical Indications  Clear and Predictable Trademark Disciplines The Intellectual Property chapter includes commitments clarifying and

64 strengthening protection of the brand names and other signs or symbols businesses use to distinguish their goods in the marketplace.

 Keeping Generic Terms Available For U.S. Producers The chapter helps address the potential for inappropriately “overprotecting” geographical indications in ways that shut out U.S. agricultural and food producers, including by providing opportunities for due process and requiring guidelines on how TPP partners should determine whether a term is generic in its market, as well as safeguards for owners of pre-existing trademarks.

 Fair, Efficient and Accessible Procedures The TPP Parties agree to efficient and transparent procedures governing trademark applications, including through electronic trademark registration mechanisms, reduction of red tape, ensuring respect for certification and collective trademarks, and promotion of regional harmonization of trademark systems. Copyright  Strong and Balanced Copyright and Related Rights The Intellectual Property chapter’s copyright provisions establish commitments drawn from international norms to respect the rights of creators and establish clear protection of works such as songs, movies, books, and software programs. They also include strong and balanced provisions on technological protection measures and rights management information, and advance transparency in systems for copyright royalty collection. As a complement to these commitments, the chapter also includes an obligation to promote balance in copyright systems through exceptions and limitations to copyright for legitimate purposes, such as criticism, comment, news reporting, teaching, scholarship, and research.

 Internet Service Provider Safe Harbors The Intellectual Property chapter requires Parties to establish copyright safe harbors for Internet service providers. In the United States, safe harbors allow legitimate Internet Service Providers (ISPs) to develop their business, while also helping to address Internet copyright infringement in an effective manner. Safe harbors have contributed to the flourishing of the most vibrant Internet, entertainment and e-commerce industries in the world. TPP does not include any obligations on these ISPs to monitor content on their networks or systems. TPP also provides for safeguards against abuse of such safe harbor regimes.

65 Trade Secrets  The Intellectual Property chapter requires TPP Parties to provide for the legal means to prevent misappropriation of trade secrets, including misappropriation conducted by State-owned enterprises. It also requires TPP Parties to establish criminal procedures and penalties for trade secret theft, including by means of cyber-theft. IP Enforcement  Effective IP Enforcement Systems The IP chapter’s commitments on enforcement ensure the availability of mechanisms to enforce intellectual property rights, including civil and administrative procedures and remedies, provisional measures, border measures, and criminal enforcement. For example, these measures include disciplines on camcording in movie theaters and theft of encrypted program-carrying satellite and cable signals.

 Counterfeit Goods in Cross-Border Supply Chains The chapter includes robust commitments to tackle the challenges of trafficking in counterfeit trademark goods and pirated copyright goods within supply chains in the Asia-Pacific region. These provisions aim to close loopholes used by counterfeiters and to enhance penalties against trafficking in counterfeit trademark products that threaten health and safety.

 Effective Border Protection The chapter ensures that border officials may act on their own initiative to identify and seize imported and exported counterfeit trademark and pirated copyright goods New Features Criminal Penalties for Trade Secret Theft TPP is the first Free Trade Agreement (FTA) to require criminal penalties for trade secret theft, including by means of a computer system. This is a significant step forward for TPP Parties, and an important precedent in a region in which U.S. companies are facing significant challenges involving trade secret theft.

Clarifications Regarding State-Owned Enterprises

66 TPP is the first trade agreement to prohibit Parties from excluding Stateowned enterprises from IP enforcement rules, including trade secret enforcement procedures, subject to certain TRIPS Agreement disciplines.

Tackling the Challenges of Asia-Pacific Counterfeit and Pirated Goods Supply Chains TPP builds on previous U.S. FTAs that establish criminal penalties against trademark counterfeiting and copyright piracy consistent with U.S. law, breaking new ground by including new provisions aimed at addressing concerns about cross-border supply chains of counterfeit and pirated goods, including those activities that threaten to consumer health and safety.

Enforcement in the Digital Environment TPP is the first FTA to clarify that IPR enforcement should be available against infringement in the digital environment and not just against physical products. Some countries in the WTO have asserted that existing IP enforcement commitments do not apply online or to digital products.

Promoting New Online Business Models for Delivering Content TPP takes additional steps toward promoting legitimate digital trade, including the delivery of movies, music, software, and books online. In particular, the ISP copyright safe harbor section helps to provide certainty and predictability about the scope of the safe harbors, as in prior FTAs, while also reflecting the diversity of approaches in the TPP countries, and ensuring that existing effective systems, such as ones upon which rights holders, ISPs, and consumers have come to rely in the course of digital trade, can stay in place. TPP also recognizes the important role of collective management societies for copyright and related rights in collecting and distributing royalties that are fair, efficient, transparent, and accountable, which promote a rich and accessible digital marketplace for content.

Copyright Exceptions and Limitations As a complement to the TPP provisions aimed at providing effective protection and enforcement of copyright in the digital age and those aimed at ensuring respect for the rights of creators, for the first time in any U.S. trade agreement, the TPP requires that Parties seek to achieve an appropriate balance in their copyright systems through providing copyright exceptions and limitations for purposes such as criticism, comment, news reporting, teaching, scholarship, and research.

67 Preventing Domain Name Cyber-Squatting In an effort to reduce domain name cybersquatting, the TPP ensures that, in connection with a Party’s country-code top-level domain name registration system, appropriate remedies are available in cases of bad faith registration of domain names that are confusingly similar to registered trademarks.

Biologics and Pharmaceutical IP The TPP includes additional specific rules related to biologic medicines, reflecting the growing importance of these cutting-edge technologies. These commitments are intended to promote innovation and ensure access to affordable medicines in developing countries. TPP gives partner countries two ways to meet a strong standard for effective market protection. One way is to provide a minimum standard of 8 years of data protection; the other way is to deliver a comparable outcome through a combination of at least 5 years of data protection measures and a country’s other measures (e.g. regulatory procedures or administrative actions). Both paths will result in the first extended term of market protection for biologics medicines in a trade agreement, both paths create further incentive for innovators to develop lifesaving medicines, and both paths will meet the balance we have been seeking between innovation and access in TPP. TPP also specifies the types of biologic products subject to the enhanced protection, and ensures that the Parties can review the provisions to keep pace with technological changes and other developments and recommend modifications, if appropriate. None of these provisions will change any U.S. healthcare program or the data protection that’s in existing U.S. law.

Geographic Indications (GIs) The TPP will enhance due process and other disciplines on the use of GIs to address growing concerns of U.S. exporters, whose access to foreign markets can be undermined through overly expansive GI protections advocated by certain countries whose agricultural producers compete with U.S. exporters.

Cooperation Activities Building on cooperative work in other fora, the TPP Parties agree to endeavor to cooperate, which may cover areas such as IP issues relevant to small and medium- sized enterprises, technical assistance for developing countries, and exchanging information on patent office search and examination results.

68 Impact The United States, as an intellectual property-driven economy, is a center and global model for the development of 21st-century innovation, including in the Internet, medical, pharmaceutical technology, entertainment, agricultural, apparel, aerospace, and other rapidly advancing industries. American businesses, universities, and government labs conduct over $450 billion per year in research and development — 30 percent of the global R&D spending measured by the OECD. The United States is the world’s leader in fiber-optics, satellite technology, and aviation. It has developed thriving arts and entertainment, Internet, and digital industries. It is a center for the development of new medicines and biotechnology resulting in groundbreaking treatments and cures.

These industries thrive and rely on a sophisticated IP system, which creates incentives for investment in research and innovation not only through strong and balanced copyright, trademark, trade secret, and patent laws, but also through effective enforcement of IP rights. The data are striking — nearly 40 million American jobs were estimated to be directly or indirectly attributable to “IP- intensive” industries in 2012. American artists, inventors, and other innovators received $128 billion in IP royalties, license fees, and payments for audiovisual services in 2013–39 percent of the world total. In 2014, the United States had an $88.2 billion surplus in services trade with respect to IP-related licensing, which is, in turn, the driving force behind the U.S. trade surplus in services.

The Asia-Pacific region presents unique opportunities for U.S. innovators and creators. By 2030, estimates suggest, the region will be home to a middle class of 3.2 billion people. As such it will be the world’s fastest-growing market for a wide variety of innovative and creative products — from film, medicines, and new digital products for consumers, to civil aircraft and satellites for governments and businesses. America’s ability to serve this demand will help to underwrite a generation of growth in the United States, provide the revenue that will keep the United States at the leading edge of innovation and creativity in the future, and promote improvements in daily life, health, and safety throughout the region. Many of the TPP participants are already major markets for U.S. IP-intensive goods and services, and their companies are partners for U.S. creators and innovators. TPP offers a critical opportunity to deepen these relationships and create new ones.

69 The Asia-Pacific also presents critical challenges from an IP policy perspective. Regional piracy rates remain high, and cyber theft of trade secrets is rapidly growing. The region is also a thriving environment for the counterfeit industry. The trafficking in counterfeit goods drains revenues from innovative firms and threatens public health and safety through the proliferation of potentially adulterated medicines, unsafe auto parts, and other products. As home not only to a large and growing middle class, but also to over one billion people earning $5 per day or less, the Asia-Pacific region is one in which promoting both the development of, and affordable access to, innovative and generic medicines requires effective and creative policies.

TPP’s IP chapter helps address these and related challenges, including through:

 Improving strong and balanced protection of rights and enforcement of laws;

 Bolstering incentives for the development of, and trade related to, IP- intensive products;

 Addressing common threats, including piracy, counterfeiting, and other related infringements, as well as misappropriation (including cyber theft) of trade secrets;

 Promoting transparent, efficient, and fair regulatory systems, including for patent and trademark application and registration;

 Promoting development of and access to innovative and generic medicines;

 Facilitating legitimate digital trade, including in creative content; and

 Preventing the spread of overly-restrictive geographical indication policies, including by safeguarding the rights of prior trademark owners and rules clarifying the use of generic terms.

Chapter 19 – Labour TPP has the strongest protections for workers of any trade agreement in history, requiring all TPP Parties to adopt and maintain in their laws and practices the fundamental labor rights as recognized by the International Labor Organization (ILO), including freedom of association and the right to collective bargaining;

70 elimination of forced labor; abolition of child labor; and the elimination of employment discrimination. It also includes commitments, again required for all TPP Parties, to have laws governing minimum wages, hours of work, and occupational safety and health. All these are fully enforceable and backed up by trade sanctions.

This is vitally important in a part of the world where workers continue to face significant challenges, from inability to organize and join unions of their own choosing, to forced labor and child labor, and poor working conditions. These practices not only hurt workers in the countries with which we trade, but they also have significant impacts here in America, as a competition with workers who do not have the most basic of labor rights is fundamentally unfair, and creates incentives for a race to the bottom. TPP will create a fairer and more level playing field for American businesses and American workers by raising labor standards across the Asia-Pacific.

Overview Labor rights The Labor chapter establishes broad commitments that require all TPP Parties to adopt and maintain in their laws and practices the fundamental labor rights as recognized by the ILO, including freedom of association and the right to collective bargaining; elimination of forced labor; abolition of child labor; and the elimination of employment discrimination. It also includes commitments, again required for all TPP Parties, to have laws governing minimum wages, hours of work, and occupational safety and health.

Implementation and enforcement of labor laws The Labor chapter bars TPP Parties from waiving or derogating from laws implementing fundamental labor rights in a manner affecting trade or investment. In addition, for export processing zones, which present heightened concerns, it includes additional commitments not to waive or derogate from laws governing acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. The chapter also includes commitments by TPP Parties not to fail to effectively enforce their labor laws in a sustained or recurring pattern that would affect trade or investment between the TPP Parties.

Dispute Settlement

71 Commitments in the Labor chapter are subject to the same dispute settlement procedures available for other chapters of TPP, including the availability of trade sanctions.

Forced labor In addition to commitments by Parties to eliminate forced labor in their own countries, the Labor chapter includes commitments to discourage importation of goods that are produced by forced labor or that contain inputs produced by forced labor, regardless of whether the source country is a TPP country.

Transparency The Labor chapter includes expansive commitments on transparency related to its own implementation and enforcement. These include commitments by TPP countries to ensure access to fair, equitable and transparent administrative and judicial proceedings, as guaranteed in U.S. law; and to provide remedies for violations of TPP countries’ labor laws. It also includes commitments related to public participation in its implementation, with TPP countries establishing mechanisms to obtain public input and to accommodate requests for information.

Cooperation Mechanisms and Capacity-Building Recognizing the importance of cooperation to achieve our goals, the Labor chapter establishes a mechanism for cooperation and coordination on labor issues, including opportunities for stakeholder input in identifying areas of cooperation and participation, as appropriate, in cooperative activities. Areas of cooperation will be determined by the TPP countries jointly, with the range of issues including job creation and promotion of entrepreneurship; promotion of productivity, including in small- and medium-sized enterprises; awareness of and respect for ILO fundamental labor rights; eliminating discrimination, including against migrant workers, women and other workers; and other areas.

Labor Dialogue To promote the rapid resolution of labor issues between TPP countries, the Labor chapter establishes a labor dialogue mechanism that countries can use to try to resolve any labor issue between them. This dialogue will allow for expeditious consideration of matters and help TPP countries to agree mutually to a course of action to address issues, such as through action plans, cooperative programs or

72 capacity building. Whether or not TPP countries use the dialogue route, dispute settlement would always remain available to them.

New Features To date, only four trade agreements in the world provide for strong, fully- enforceable requirements to adopt and maintain fundamental ILO labor rights and to effectively enforce labor laws — the U.S. Free Trade Agreements (FTAs) with Peru, Panama, Colombia, and Korea. TPP’s Labor chapter extends these requirements to 10 new countries, more than quadrupling the number of people around the world covered by enforceable labor rights. TPP is also the first-ever trade agreement to include the following:

 Commitments to discourage trade in goods produced by forced labor, including forced child labor.

 Commitments on adoption and maintenance of laws on acceptable working conditions, including minimum wage, hours of work, and occupational safety and health.

 Commitments to require countries not to weaken labor protections in export processing zones. In addition, the United States has concluded bilateral implementation plans with several individual TPP countries to ensure that their laws and practices are consistent with international standards, including through reforms of laws, regulations, institutions, and practice. The commitments in the implementation plans are subject to TPP dispute settlement procedures, meaning they are fully enforceable and backed up by trade sanctions. The implementation plans also establish bilateral mechanisms beyond those in the labor chapter to ensure ongoing engagement, monitoring, and reporting on the implementation of those commitments. They include:

 Vietnam The Vietnam implementation plan includes historic commitments on the part of Vietnam to allow workers the autonomy to form and operate unions of their own choosing. Currently, all trade unions must be affiliated with the government-connected trade union confederation. Under TPP, Vietnam will allow workers to establish and join an independent union, with full autonomy to elect their leaders, adopt a

73 constitution and rules, manage their affairs, bargain collectively, and strike. This comprehensive implementation plan includes legal, regulatory and institutional changes that strengthen the protection of all fundamental labor rights. These include protections against employer interference in union activity, protections for peaceful union activity, removal of certain restrictions on strikes, strengthened penalties against forced labor and protections against forced labor in drug rehabilitation centers, and increased protections against employment discrimination. Vietnam also commits to build the capacity of its institutions to enforce these laws, including the labor inspectorate. To ensure the continued implementation of these reforms over time, the plan establishes a review mechanism, including an independent labor expert committee that will monitor implementation and identify any challenges that may arise for at least the first ten years. The review mechanism includes a provision whereby the United States may withhold or suspend tariff reductions for Vietnam if Vietnam does not comply with its commitment to provide the right to form labor unions across enterprises and at higher levels within five years.

 Malaysia The Malaysia implementation plan commits Malaysia to significant legal and institutional reforms, in particular in the areas of forced labor and freedom of association. Related to forced labor, Malaysia commits to fully implement the recently passed amendments to the Anti-Trafficking law to allow trafficking victims to travel, work, and reside outside government facilities, including while under protection orders. Malaysia also commits to increasing protections related to the withholding of workers’ passports, recruitment fees and practices, contract substitution, decent housing and freedom of movement, and increase cooperation with sending countries to improve recruitment practices. Related to freedom of association and the right to bargain collectively, Malaysia commits to remove restrictions on union formation and strikes that have been in place for decades; to limit governmental discretion in registering and canceling a trade union; to allow foreign workers to assume leadership positions in unions (after working in the country for a period of time); and to remove restrictions on the subjects on which workers can collectively bargain with their employers. Malaysia also commits to address concerns that outsourcing or subcontracting may be used to undermine freedom of association or collective bargaining rights. The bilateral implementation plan creates a government-to-government

74 review mechanism for at least seven years to oversee implementation of the commitments in the plan. This comprehensive package of reforms will help address the risks of exploitation that foreign workers face when migrating to another country to work.

 Brunei Darussalam Brunei only recently joined the ILO and had labor laws that lacked certain protections and guarantees that a modern labor-relations system would normally provide. Thanks in large part to pressure from TPP, Brunei recently passed legislation amending its labor laws to remove broad discretion of the government to register or cancel a trade union’s registration, prohibit anti-union practices, remove certain restrictions on union operations, and strengthen certain child labor protections. The Brunei implementation plan commits Brunei to additional reform of its trade union act and employment order that further limits the discretion of the government to register or cancel a union’s registration, establishes protections against interference in union activities, allows for international affiliation, provides procedures for collective bargaining and strikes, strengthens protections against child labor and forced labor, and ensures independent review of administrative decisions. Brunei also commits to implementing a minimum wage for the first time and to ensuring protections against employment discrimination. The implementation plan creates a government-to-government review mechanism for at least seven years to oversee implementation of the commitments in the plan. In addition, Mexico is in the process of developing parallel reforms, including concerning its system for protecting collective bargaining and union representation rights.

Impact The rapid development of the Asia-Pacific clearly produces great benefits for American consumers, and great opportunities for American exporters as the Asian middle class grows. But it also creates great pressure on American workers, who need and deserve confidence that international competition rests on productivity and creativity, and labor laws that respect and protect workers’ rights, and not on exploitation, denial of rights, dangerous factories and child labor. Likewise, when workers’ rights are not respected development is ultimately slowed, and the gains of trade are spread unevenly.

75 TPP is a chance to address these issues on a scale never before attempted. Several of our 11 TPP partners are countries, such as Vietnam and Malaysia, with which we have no trade and labor agreements at all. In other cases, the Labor chapters and side-agreements of existing agreements with TPP partners– i.e. the North American Free Trade Agreement (NAFTA) of 1993, and the U.S.-Chile and U.S.- Singapore agreements of 2003, and the U.S.-Australia agreement of 2004 — are weak in comparison to TPP and their substantive labor commitments are less enforceable than their obligations in other areas. Labor rights were in fact not included at all in the body of NAFTA. Rather, they were incorporated, after the fact, into a side agreement called the “North American Agreement on Labor Cooperation” under which a single provision — countries’ requirement to enforce their own labor laws related to child labor, occupational health and safety and minimum wage — was enforceable, but through the levy of a capped “monetary assessment.” NAFTA’s dispute settlement procedures did not apply. It was not until the groundbreaking “May 10, 2007” Congressional-Executive Agreement that countries were required to adopt and maintain the fundamental ILO rights in their laws and that all labor obligations were subject to full dispute settlement and trade sanctions.

TPP is therefore a unique opportunity to create the first enforceable standards for our new partners; to reform and modernize several of our existing agreements; and, ultimately, to set the foundations of a region-wide commitment to labor practices which meet international standards, ensure a level playing field for competition, and share the benefits of trade fairly.

To address these issues, TPP will require all signatory countries to afford their workers the rights that have been recognized as “fundamental” by the ILO: (1) freedom of association; (2) the right to bargain collectively; (3) freedom from forced labor; (4) freedom from child labor; and (5) freedom from discrimination in employment. The ILO has recognized these as “enabling” rights — rights that all others build upon and that make it possible to promote and realize decent and dignified work.

In addition, TPP signatories commit to take on a number of first-ever commitments:

 A commitment to discourage imports made with forced labor, no matter what the origin of the goods. This addresses a growing global

76 problem that, according to the ILO, currently affects 21 million men, women, and children and in industrial sectors generates about $43 billion in illegal profits worldwide annually. The United States has strong laws prohibiting trade in goods produced by forced labor, but in many other countries, more needs to be done to address this global challenge.

 A commitment to put in place laws on acceptable working conditions, including a minimum wage, limits on hours of work, and occupational safety and health, which are well established in the United States, but less so in many other countries around the world.

 Special commitments to protect labor standards in export processing zones (EPZs). These “EPZs” are special zones in which governments offer businesses special benefits to establish operations in the zones, such as exemptions from certain taxes or regulations. In some cases, governments also lower or provide exemptions from labor laws to attract investment, leading to poor and deteriorating labor standards. As the number of export processing zones has grown, the concern about workers’ rights and working conditions in these zones has also increased.

 Together, these provisions not only set the high-water mark for labor protections in a trade agreement, but mark a sea-change from early U.S. FTAs. TPP provides an opportunity to lock in those gains for nearly 40 percent of the global economy, bringing us closer to establishing a new global norm for labor rights in trade agreements. In particular, applying these standards to Mexico and Canada delivers on the President’s promise to renegotiate NAFTA.

Chapter 20 – Environment The Asia-Pacific region faces an array of environmental challenges, including wildlife trafficking, illegal logging, illegal fishing, and marine pollution — which threaten human health, habitat and biodiversity. TPP’s Environment chapter, the most far-reaching ever achieved in a trade agreement, takes on these challenges by:

 Creating enforceable commitments across a range of environmental issues and trans-national challenges such as wildlife trade, enforcement of national environmental laws, implementation of multilateral environmental agreements, elimination of environmentally destructive

77 subsidies, and elimination of tariffs and other barriers to trade in environmentally-beneficial products and technologies.

 Developing closer cooperation among TPP governments to address trans-national threats and police environmental crimes such as endangered species trade and illegal fishing more effectively, and to help lower-income countries raise their capacity to administer environmental laws and conservation programs.

 Supporting inclusive and transparent future policymaking through rules requiring publication of laws and regulations, and through promoting broad public participation in policymaking and the TPP implementation. Overview Coverage and General Commitments The Environment chapter includes commitments by all TPP Parties to effectively enforce their environmental laws and not to waive or derogate from environmental laws in order to attract trade or investment.

Dispute Settlement Commitments in the Environment chapter will be enforced through the same dispute settlement procedures and mechanisms available for disputes arising under other chapters of the TPP Agreement, including the availability of trade sanctions.

Wildlife Trade All TPP countries are parties to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the world’s preeminent agreement to protect endangered species. The Environment chapter requires each TPP Party to implement its CITES obligations and effectively enforce its laws and regulations that achieve that end. The chapter also includes commitments to combat trade in wildlife, plants and fish — whether or not protected under CITES — if they have been taken illegally. These include commitments for TPP members to cooperate by sharing information relevant to the investigation of criminals engaged in wildlife trafficking. In addition, the chapter includes commitments to protect and conserve wildlife and plants in the TPP region, including through action by Parties to conserve specially protected natural areas, such as wetlands; to promote sustainable forest management; and to conserve wild fauna and flora.

78 Marine Fisheries TPP caps decades of work in partnership with TPP members, including Peru and New Zealand, to reform fisheries subsidies and promote sustainable fishing, and brings others in the region to the effort — including Japan, operator of one of the world’s largest fishing fleets. The Environment chapter’s commitments for the protection of marine fisheries build on the obligations of certain regional fisheries management organizations, but generalize them beyond particular fishing areas and in some cases break new substantive ground.

For example, TPP countries agree to prohibit some of the most harmful fisheries subsidies, such as those given to illegal fishermen. They also agree to restrain new subsidy programs and enhancements to existing subsidy programs, and create enhanced transparency requirements related to such programs. In addition, the chapter includes commitments to promote sustainable fisheries management; to promote the long-term conservation of species at risk, such as sharks, sea turtles, seabirds and marine mammals; and to combat illegal fishing, including by implementing port state measures and by supporting increased monitoring and surveillance.

Environmental Goods and Services TPP countries have worked together in the Asia-Pacific Economic Cooperation (APEC) forum to increase trade in environmental goods and services. The TPP includes commitments by all Parties to eliminate tariffs on environmental goods upon entry into force of the agreement, and to facilitate trade in environmental services. Under the Environment chapter, the Parties will work together to address non-tariff barriers on these products and services to further promote trade in environmental goods and services.

Multilateral Environmental Agreements (MEAs) TPP countries are signatories to many MEAs covering a wide range of environmental issues. However, these agreements may lack binding enforcement regimes. By requiring MEA implementation, TPP provides valuable reinforcements to these commitments. The Environment chapter requires Parties to reaffirm their commitment to implement those MEAs they have joined, effectively enforce their implementing legislation for all MEAs to which they have joined, and work together as they negotiate and implement new MEAs. The chapter highlights and reinforces the commitment to implement common MEAs of particular importance to the Asia-Pacific, including CITES, the Montreal Protocol on Ozone

79 Depleting Substances and the International Convention for the Prevention of Pollution from Ships (MARPOL). Several MEAs are not common to the TPP Parties. For those MEAs dealing with marine species and conservation of wetlands, TPP includes broader, stand-alone commitments for the sustainable management of fisheries, combatting illegal fishing, promoting conservation of marine mammals, and protecting and conserving all specially protected natural areas including wetlands, but also glaciers and other fragile ecosystems. By establishing consistent, enforceable commitments that apply to all TPP Parties equally, we are advancing the basic objectives of the original MEAs and providing for similar levels of environmental protection across the region. And in several cases, TPP goes beyond any previous MEA commitments to establish pioneering new commitments, such as commitments to prohibit harmful government handouts to illegal fishermen, and to take enhanced actions to combat wildlife trafficking — regardless of whether the wildlife is protected under CITES.

Transparency The chapter establishes expansive commitments on transparency related to the implementation and enforcement of the environment chapter, including commitments by TPP Parties to encourage full public participation in the implementation of the Environment chapter.

Access to Remedies for Environmental Harm The chapter includes commitments by TPP Parties to ensure access to fair, equitable and transparent administrative or judicial proceedings for enforcing their environmental laws, and to provide appropriate sanctions or remedies for violations of their environmental laws.

Cooperation Collectively, TPP countries have a wealth of knowledge and experience to share with one another on environmental and conservation issues. TPP will help take full advantage of this by establishing a framework for conducting, reviewing, and evaluating cooperative activities that support implementation of the Environment chapter, and for public participation in these activities.

Biodiversity The TPP region includes several countries known as biodiversity ‘hot spots’ such as Peru, Vietnam, and Malaysia; and several likewise with unique and sensitive

80 habitat, including Australia, New Zealand, and Alaska and the Canadian Arctic. TPP’s cooperative commitments will promote conservation and sustainable treatment of biodiverse areas, and recognize the importance of maintaining indigenous knowledge and practices.

Transition to a Low-Emissions Economy TPP countries recognize that the world is in the midst of an energy revolution. The agreement includes commitments to cooperate to address issues such as energy efficiency; the development of cost-effective, green technologies; and alternative, clean and renewable energy sources.

Corporate Social Responsibility and Public-Private Partnerships The Environment chapter includes commitments to encourage companies to voluntarily adopt corporate social responsibility policies, and to use mechanisms, such as public-private partnerships, to help to protect the environment and natural resources.

Implementation The Environment chapter establishes a senior-level Environment Committee, which will meet regularly to oversee implementation of the chapter, with opportunities for public participation in the process.

New Features TPP’s Environment chapter builds on previous agreements and introduces pioneering commitments in key environment areas, including:

 Prohibitions on some of the most harmful fisheries subsidies, as well as enhanced transparency requirements for fisheries subsidies programs.

 Broad commitments to promote sustainable fisheries management, which can support measures being developed or implemented through relevant regional fisheries management organizations and other arrangements in the Asia-Pacific region; and to address illegal fishing, as well as species-specific protections for ecologically critical and iconic marine species, such as whales and sharks.

 Broad commitments to combat wildlife trafficking beyond CITES.

81 These provisions enable TPP Parties to work together to address international challenges such as wildlife trafficking and overfishing — issues which do not respect borders and require stepped-up domestic actions combined with enhanced cross-regional cooperation– more effectively than has been possible in any previous Free Trade Agreement (FTA).

Impact As centers of biodiversity, TPP countries cover environmentally-sensitive regions from tundra to island ecosystems, and from the world’s largest coral reef to its largest rain forest. The Asia-Pacific region more broadly is also home to some of the fastest-growing markets in the world, the fastest-growing consumer of natural resources and fisheries, and a significant transit point for trade of all kinds — including illegal wildlife, timber, and fish products — from both inside and outside the region, such as elephant ivory and rhinoceros horn. In no region are challenges greater, and in no region is joint action so necessary. TPP’s Environment chapter address these challenges in detail, through improving the substance of policies, transparency of policymaking procedure, and cooperation against common threats:

Oceans TPP countries account for more than one-quarter of global seafood trade, and four out of the top 15 global producers of fisheries products by volume. They are uniquely placed to address policies damaging to the health of the marine environment, including the subsidization of overfishing.

Forests TPP countries also account for approximately one-quarter of global timber and pulp production. Timber-producing countries, including TPP countries, reportedly lose as much as $6 billion per year to illegal logging, including unauthorized logging in protected areas or indigenous lands, exceeding timber concession limits, removal of protected timber species and other violations of national laws.

Wildlife Five of the TPP countries rank among the world’s top 10 most biologically diverse countries, and the Asia-Pacific region encompasses major consumer, transit and export markets for threatened and endangered wildlife. This illicit trade is a threat to the planet and, increasingly, to global security due to links to organized crime.

82 Compliance with MEAs MEAs, like those protecting wildlife and plants and the marine environment from ship pollution, contain important commitments to which all TPP countries have signed up. However, these agreements may lack binding enforcement regimes.

Domestic Environmental Protection and Enforcement The level of enforcement of domestic environmental laws addressing air pollution, water pollution, endangered species, and other environmental matters varies, and some of TPP’s lower-income members may require support to strengthen the scientific and regulatory agencies that administer and enforce these laws.

Policy Processes In the environment as in other areas, TPP is an opportunity to address and reform opaque policymaking processes that can miss critical issues or overlook the interest of marginalized groups. In some TPP countries, scientific and environmental regulatory agencies may need capacity-building and technical assistance to fulfill their missions both for local environmental protection and for implementation of multilateral rules.

Chapter 21 – Cooperation and Capacity Building T PP includes some of the most ambitious commitments ever reflected in a trade agreement. It will also join together countries of differing levels of development, some of which have never undertaken high-standard trade commitments. The Cooperation and Capacity Building chapter will help ensure that all of our partners can fulfill their obligations, draw their maximum potential benefit from the agreement, and emerge as strong and sustainable markets for U.S. exports of goods and services. It does not establish an assistance program, but rather creates a framework to identify needs and resources for capacity building assistance, on a voluntary basis, to ensure full implementation of the TPP Agreement and to maximize its benefits

Overview Promoting Cooperation and Capacity Building The Cooperation and Capacity Building chapter recognizes the value of cooperation and capacity building activities, as mutually agreed between two or more Parties, in helping all Parties to fully implement the TPP Agreement.

83 Procedures for Cooperation and Capacity Building The chapter establishes a Committee on Cooperation and Capacity Building to identify and review areas for potential cooperative or capacity building efforts, on a voluntary basis and subject to the availability of resources. This Committee will facilitate exchange of information and identify contact points to help with requests related to cooperation and capacity building.

New Features The United States and other developed TPP countries have been providing technical assistance and trade capacity building during the negotiations, and intend to provide ongoing support to developing country participants during the implementation phase as well. While previous agreements have included capacity- building programs, TPP is the first U.S. agreement to create a formal and permanent framework of cooperation to build the capacity needed in developing countries to fully implement a high-standard agreement. This is especially important as the TPP will be the largest and most diverse Free Trade Agreement the United States has ever negotiated.

Impact TPP includes a broad range of commitments, covering tariff reductions, trade facilitation, non-tariff barriers, investment, agriculture, sanitary and phytosanitary standards, intellectual property rights, cross-border services trade, labor standards, environmental standards, disciplines on State-Owned Enterprises and a framework for trade related to the digital economy. Realizing these benefits, however, depends not merely on negotiating the commitments, but on fully implementing them.

Especially for TPP’s lower-income members, this will require significant effort. Given scarce resources, it is important to ensure that capacity building resources are used as efficiently and effectively as possible. Over time, coordinated approaches to capacity-building will conserve resources while deepening cooperative relationships among TPP technical experts, reinforcing our efforts to expand high-standard rules across TPP.

Chapter 22 – Competitiveness and Business Facilitation The chapter on Competitiveness and Business Facilitation will help TPP reach its potential to improve the competitiveness of all participating countries, and in

84 particular to ensure that U.S. workers and businesses are dealt into regional supply chains, not left on the sidelines. The chapter creates formal mechanisms to review the impact of TPP on its members’ competitiveness, through dialogues among governments and between government, business, and civil society, with a particular focus on deepening of regional supply chains, to assess progress, take advantage of new opportunities, and address any challenges that may emerge as the agreement goes into effect.

Overview The Competitiveness and Business Facilitation chapter creates mechanisms by which governments can make the assessments and get the information they need to assess the agreement’s overall contribution to its participants’ competitiveness. To do so, it establishes means to regularly review whether implementation of the agreement is leading to the anticipated gains in regional competitiveness; and if not, to analyze why this is, consider recommendations on addressing the problem, and to ensure stakeholder input into reviews. Its specific features include:

Committee on Competitiveness and Business Facilitation The chapter establishes a Committee on Competitiveness and Business Facilitation, made up of TPP countries with input from TPP stakeholders, to meet regularly to review the agreement’s impact on regional and national competitiveness, and on regional economic integration. The Committee will be able consider advice and recommendations from stakeholders on ways the agreement can further enhance competitiveness, including recommendations on enhancing the participation of small and medium-sized enterprises in regional supply chains.

Supply Chain Development The chapter identifies development and strengthening of regional supply chains as an objective of the TPP agreement. It establishes a basic framework for the Committee to assess supply chain performance under TPP, including submission of reports to the TPP Parties with findings and recommendations; consideration of ways to promote TPP Small and Medium-sized Enterprise (SME) participation in supply chains; review of stakeholder and expert input; and regularly scheduled meetings.

85 New Features Drawing from experience in Asia-Pacific Economic Cooperation (APEC) forum initiatives related to regional competitiveness and supply chain development, TPP is the first U.S. Free Trade Agreement (FTA) to include new stand-alone commitments promoting the development and strengthening of supply chains among its members. The Competitiveness and Business Facilitation chapter complements previous work on these issues in an innovative way by enabling TPP members to see not only the implementation of specific obligations, but their effectiveness in working as a whole to improve competitiveness and supply chain efficiency as the agreement goes into effect, and to consider improvements in the future.

Impact Asia-Pacific trade has evolved over the past decades away from a classic production process in which exports are fully manufactured in one country and exchanged for imports fully manufactured in another, toward a newer model of highly-specialized production, in which products like smart phones and pacemakers mesh the production strengths of different countries. American workers and businesses now use Asia-Pacific supply chains for a wide variety of purposes — for example, to ensure just-in-time access to intermediate goods and raw materials for final production of complex high-value goods such as aircraft or medical equipment in the United States — while U.S.-based services providers support all participants with express delivery services, Internet and telecommunications services, financing, and other services.

Ability to reach these supply chains is already a large factor in American exporting success. For example, in 2009 our 11 TPP partners’ exports included $118 billion in U.S.-made inputs — an amount nearly equal to that year’s U.S. goods exports to China and Japan combined. And the enhanced access of innovative U.S. products to Asia-Pacific supply chains will be a powerful driver of future U.S. exports.

One of TPP’s goals is to deepen and broaden these networks spanning four continents around the Pacific. The many separate commitments developed throughout all the chapters of the agreement — for example, telecommunications commitments, market access for goods, customs and trade facilitation, technical barriers to trade — have their own purposes, but are also designed to work together organically to improve the competitive strength of the United States, each of the other TPP Parties, and the region as a whole.

86 Achieving the deeper levels of integration that the TPP governments and stakeholders envision depends on a successful effort to ensure that these commitments support and complement one another as the TPP Parties intend. The Competitiveness and Business Facilitation chapter will help achieve this through ongoing work to:

 Assess the overall effects of a wide range of complex commitments spread across many different chapters of an agreement and implemented by a wide variety of agencies.

 Ensure regular provision of advice and analysis from a broad range of stakeholders, including businesses in all phases of the supply chain, academics, consumers, and civil society.

Chapter 23 – Development The TPP joins countries at widely varying levels of development. Recognizing this, the Development chapter creates a permanent Committee to help ensure that the Agreement’s developing-country Parties can take full advantage of the opportunities TPP creates for development and poverty reduction, and to focus attention on major development goals including inclusion of women, micro- enterprise, poverty reduction, and education, science, and technology.

Overview The Development chapter, in tandem with the Cooperation and Capacity Building chapter, addresses the above challenges not through an assistance program, but through an initiative to leverage public and private sector resources to maximize the TPP Agreement’s development benefits.

Development Role The Development chapter explicitly affirms the goal of Parties to improve economic opportunities in support of development, inclusive growth, and regional economic integration, and further, that these goals can be enhanced by cooperation among Parties, recognizing the different levels of development of the TPP countries.

Development Priorities

87 The chapter includes three specific areas to be considered for collaborative work once TPP enters into force, including:

 Broad-Based Economic Growth Promoting broad-based economic growth through policies that take advantage of trade and investment opportunities created by the TPP Agreement can contribute, among other goals, to sustainable development, poverty reduction, and the promotion of micro, small- and medium-sized businesses.

 Women and Economic Growth Enhancing opportunities for women to participate in the domestic and global economy through TPP contributes to economic development, including through activities aimed at helping women build capacity and skill; enhancing their access to markets, technology and financing; developing women leadership networks; and identifying best practices in workplace flexibility.

 Education, Science and Technology, Research and Innovation Policies related to education, science and technology, research and innovation can help Parties maximize the benefits of the TPP agreement, including through activities aimed at developing expertise and managerial skills, and enhancing enterprises’ ability to transform innovations into competitive products and start-up businesses. TPP Development Committee to Promote Joint Development Activities The chapter establishes a TPP Development Committee that will meet regularly to promote voluntary cooperative work to identify and potentially support ways for TPP’s developing economies to tap new opportunities created by TPP for their development priorities. We anticipate that the Committee will work with governmental bodies as well as civil society groups, private companies, academic institutions, and non-governmental organizations, and promote joint activities to promote and align development activity, expand joint engagements in science, technology, and research; and facilitate public-private partnerships to enable private enterprises, small and medium-sized enterprises to bring their expertise to bear to support development goals

88 New Features TPP is the first U.S. agreement to include a development chapter, incorporating commitments to promote sustainable development and broad-based economic growth. It has the potential to support new cooperative activities aimed at enhancing the ability of women to fully access and benefit from TPP, as well as activities designed to promote education, science, technology and innovation, including through science and technology agreements, public-private partnerships, and other joint development activities.

Impact The Asia-Pacific region has been the center of one of the most rapid reductions of poverty in history. The World Bank estimates that from 2002 to 2011, despite the financial crisis, the number of Asians living in absolute poverty fell from 518 million to 161 million people, or by 70 percent. In the same period, Latin America has also seen a nearly 50-percent cut in absolute poverty. World Bank projections suggest the possibility of near-elimination of deep poverty in the Asia-Pacific over the next 15 years.

To further this progress, the TPP partners will need to further promote trade and investment by strengthening regional integration, spurring innovation, and ensuring inclusive and sustainable growth. The United States has many decades of experience in trade and development policy, dating to the Kennedy era Alliance for Progress, the creation of the Generalized System of Preferences in the 1970s, and the African Growth and Opportunity Act in 2000. In TPP, we have an opportunity to draw on this experience and the ideas of our partners and civil society groups, in pursuit of equity, inclusion, and the alleviation of poverty in the world’s most populous region.

Complementing the agreement’s provisions on market access, e-commerce, customs, and other issues, the Development chapter’s institutional focus on development-related issues will help to ensure that TPP will be a model of high- standard trade and economic integration, that TPP’s developing-country members can obtain the complete benefits of the agreement, and that they are fully able to implement their commitments. This will help sustain growth rates, alleviate poverty, promote food security, and boost living standards broadly for citizens in all TPP countries; and at the same time, enable TPP’s developing-country members to emerge as more prosperous societies and stronger markets for America’s goods and services.

89 Chapter 24 – Small and Medium-sized Businesses Since the launch of the TPP talks, one of the United States’ core goals has been to promote and support American small and medium-sized enterprises entering global trade, and to address barriers that pose disproportionate challenges to small business exports. These include issues such as inaccessible or overly complex trade paperwork, opaque regulatory processes and corruption, inefficiency of customs administration, restrictions on Internet data flows, weak logistics services that raise costs, and slow delivery of small shipments. The Small and Medium-Sized Enterprises (SME) chapter bolsters substantive commitments on these issues in chapters like those on Customs and Trade Facilitation, E-Commerce, and others by providing readily accessible information to small and medium-sized enterprises on the opportunities TPP will offer, and giving them an ongoing means to engage with TPP governments on ways to enhance the functioning of the agreement so as to benefit small- and medium-sized enterprises.

Overview Dedicated On-Line Website with SME Information To ensure that small and medium-sized enterprises have ready access to tailored information that will enable them to fully participate in and benefit from TPP, the Small and Medium-Sized Enterprise chapter includes commitments by each TPP Party to create a website targeted at small and medium-sized enterprise users to provide easily accessible information on the agreement and how they can take advantage of it. These websites will distill all the relevant information spread out over hundreds of pages of the TPP Agreement, plus additional country-specific information, into single user-friendly sites tailored to the needs of small and medium-sized enterprises. This will include a description of the provisions of TPP relevant to small and medium-sized enterprises, contact information for relevant agencies in each TPP country; information on standards and regulations in each TPP country; procedures concerning intellectual property rights; foreign investment regulations; business registration procedures; employment regulations; and taxation procedures.

Establishment of a TPP Small and Medium-Sized Enterprise Committee To ensure ongoing engagement by TPP Parties on issues related to small and medium-sized enterprises, the chapter establishes a Small and Medium-Sized Enterprises Committee that would meet regularly to review how well small and medium-sized enterprises appear to be availing themselves of the benefits of TPP.

90 This Committee will also consider recommendations on ways to further enhance the benefits of TPP for small and medium-sized enterprises. We expect its activities also to include cooperation or capacity building activities to support small and medium-sized enterprises, in areas such as export counseling, trade assistance, and training programs for small and medium-sized enterprises; information sharing; and other activities.

New Features TPP is the first U.S. Free Trade Agreement (FTA) to include a separate chapter focusing on issues specific to SMEs. It will ensure easy on-line access to relevant information and provide a means to address issues of particular interest and concern to small and medium-sized enterprises in an ongoing manner. In doing so, we expect the TPP to make it easier for U.S. SMEs — from small specialized manufacturers and small food exporters to independent craftsmen and artisans and small tech start-ups — to take advantage of the opportunities the agreement will create.

Impact The evolution of information technology and logistics makes it easier and cheaper than ever before for small businesses to find customers and sell their products and services all over the world. Small, specialized manufacturers, artists, apps entrepreneurs, immigrant-owned businesses and many others now regularly use websites, email, online auctions, and other new tools to reach foreign customers at low cost, and express delivery services to get their products to buyers all over the world with speed and precision. As a result, their share of American exports is growing. Where in 2006 small and midsize exporters accounted for 29.1 percent of U.S. goods exports, in 2014 they accounted for fully one third.

The enhanced ability of small and medium-sized enterprises to trade internationally promises large future rewards for entrepreneurs and workers alike. Businesses that export tend to hire more and pay more than businesses that do not export. A 2012 study, for example, showed that African-American owned businesses which export employed an average of 33 workers with compensation averaging $44,016 per worker — four times the eight workers employed on average by non-exporters, at compensation levels nearly 80 percent higher than the $24,750 per worker for African-American owned businesses that do not export. Hispanic- owned exporting businesses likewise employed an average of 19 people with compensation averaging $43,880 per worker; non-exporting Hispanic-owned

91 businesses employed an average of eight workers, with compensation averaging $27,060 per worker.

Nonetheless, the number of small businesses participating in international trade remains relatively small. Less than 5 percent of U.S. small businesses export, and over half of these do so to only one country (in many cases to Canada or Mexico.) This low rate in part reflects the fact that, because of a series of policy challenges, exporting remains more difficult for small- and medium-sized businesses than it is for large firms and multinationals. Some of these challenges are the same for small firms as for large ones, but the small firms are affected disproportionately because they have fewer resources available to overcome these obstacles. The lack of transparent or easily accessible information on foreign laws, regulations and processes blocks many small businesses from participating in international trade from the start. Small businesses able to overcome this obstacle then face greater relative costs than larger firms in managing foreign regulations, paperwork, and fees and charges. They also may face burdensome customs regulations; lack of efficient express delivery services, on-line auction sites, and/or secure online payment options; intellectual property theft, and differing regulatory regimes in foreign markets — all further discouraging them from exporting.

An agreement that is genuinely effective for smaller businesses accordingly must address many issues that larger firms can view simply as costs of doing business. It also needs to take special care to elicit advice on policy and on implementation from smaller firms, which rarely have offices overseas or government affairs offices to collect and analyze information about trade and regulatory issues. TPP deals with many of these challenges through specific obligations contained in its other chapters, such as Trade in Goods, Customs, E-Commerce, Financial Services, Intellectual Property, Technical Barriers to Trade, Transparency and Anti-Corruption, and others. The Small- and Medium-Sized Enterprise chapter is designed to address the overall challenges smaller businesses face in learning about the opportunities these substantive obligations create for them, and ensuring that they are able to raise concerns about implementation or alert governments to ways small and medium-sized businesses can take advantage of new opportunities as the agreement is implemented.

Chapter 25 – Regulatory Coherence Through the Regulatory Coherence chapter, the United States is seeking to foster an open, fair, and predictable regulatory environment for U.S. businesses operating

92 in Asia-Pacific markets, including through principles that are central features of the U.S. regulatory process, such as transparency, 140 impartiality, and due process as well as coordination across the government to ensure a coherent regulatory approach. The chapter does not affect the rights of the United States or other TPP Parties to regulate for public health, safety, worker and environmental protections, security, financial stability, and other public interest reasons, nor will anything in it require changes to U.S. regulations or U.S. regulatory procedures.

Overview Importance of Regulatory Coherence The Regulatory Coherence chapter includes provisions promoting the use by TPP governments of good regulatory practices in developing and implementing regulatory measures. It also recognizes the important role such policies can play in enhancing the benefits of the TPP Agreement and promoting regional trade and investment, as well as that each Party has the right to identify its regulatory priorities and establish and implement measures to address these priorities at levels it considers appropriate. For the United States, these features apply only to federal regulatory measures. Establishment of Coordination and Review Processes or Mechanisms

The chapter aims to facilitate regulatory coherence in each TPP country by promoting mechanisms for effective interagency consultation and coordination for agencies and issues Parties agree to cover.

Implementation of Core Good Regulatory Practices The chapter also encourages widely-accepted good regulatory practices. These include impact assessments of proposed regulatory measures in order to assess the need and range of feasible alternatives, and communication of the grounds for the selection of the chosen regulatory alternative and the nature of the regulation being introduced. They also include ensuring that regulations are clearly and concisely written; that the public has access to information on new regulatory measures, if possible online; and that existing regulatory measures are periodically reviewed to determine if they remain the most effective means of achieving the desired objective. In addition, it encourages TPP governments to provide public notice

93 annually of all regulatory measures it expects to take the following year. All these practices are standard in the United States.

Framework for TPP Cooperation The chapter promotes ongoing work on regulatory coherence through a committee that will give TPP countries, businesses, and civil society continuing opportunities to report on implementation, share experiences on best practices, and consider potential areas for cooperatio

New Features TPP is the first U.S. Free Trade Agreement (FTA) to include a chapter on regulatory coherence, reflecting a growing appreciation of the relevance of this issue to international trade and investment. As in the United States, we expect these commitments to promote “good regulatory practice” principles in the regulatory development process, including coordination among regulators, opportunities for stakeholder input, and fact-based regulatory decisions that will serve to eliminate the prospect of overlapping and inconsistent regulatory requirements or regulations being developed unfairly and without a sound basis, including so as to benefit a particular stakeholder. Nothing in the chapter will affect the U.S. or other TPP Parties’ right to regulate in the public interest, nor will anything in it require changes to U.S. regulations or U.S. regulatory procedures.

Impact Governments are responsible for regulating to foster fair competition, consumer safety, environmental quality, workplace safety and many other policy goals. In the United States, the rulemaking process is well developed so as to ensure transparency, impartiality, and due process. The U.S. also has a well-established system for coordination among agencies across the government to safeguard against “stove-piped” internal decisions that could lead to conflicting regulatory approaches by different agencies responsible for related issues or to agencies being inappropriately influenced by the stakeholders — often domestic — that they are responsible for regulating.

The legal and regulatory environment in countries across the Asia-Pacific is diverse. The region’s governments and publics may have differing priorities and reach different conclusions on specific regulatory issues. They share a common interest, however, in developing regulations based on reliable and objective data;

94 avoiding conflicting requirements in their own markets; allowing requirements to be met in the most effective way possible to achieve the policy objectives; and ensuring that public input helps inform decision-making so as to lead to the optimal outcomes. They also share an interest in cooperating and exchanging information on appropriate regulatory approaches to respond to new challenges. This is particularly important as TPP economies become more integrated, businesses manage production and supply chains across borders, and workers increasingly depend on the jobs these production and supply chains support.

Coherent regulatory processes — coordinated across government agencies, designed and implemented based on good regulatory practices, and with opportunities for stakeholder input — are critical to creating open, fair and predictable environments for U.S. businesses operating in Asia-Pacific markets. The Regulatory Coherence chapter does not address specific regulatory issues related to trade and investment, but rather the overall process or system through which TPP members develop regulations. It will also help leverage regulatory best practices, while reaffirming the right of each TPP Party to identify its regulatory priorities and establish and implement measures to address these priorities as it considers appropriate.

Chapter 26 – Transparency and Anti-Corruption TPP’s Transparency and Anti-Corruption chapter promotes good governance and addresses the corrosive effects of bribery and corruption on trade, investment, and government policies related to trade and investment. Toward this end, the chapter ensures that U.S. exporters, service suppliers, investors, and other interested stakeholders in TPP have ready access to information about the laws, regulations, and other rules affecting trade or investment in TPP markets; guarantees due process rights; commits TPP Parties to have and enforce anti-bribery laws; and promotes rules against conflicts of interest in government. The chapter guarantees the full rights of governments to regulate for public health, environmental quality, and other public-policy goals.

Overview Publication The Transparency and Anti-Corruption chapter requires TPP Parties to ensure that, to the extent possible, their laws, regulations, and administrative rulings related to

95 any matters covered by the TPP Agreement are publicly available and that regulations are subject to notice and comment.

Due Process Procedures TPP Parties agree to ensure certain due process rights for TPP stakeholders in connection with administrative proceedings, including prompt review of any administrative action through independent and impartial judicial or administrative tribunals or procedures.

Measures to combat corruption Each TPP Party commits to adopt or maintain laws that criminalize the offering of an undue advantage to a public official (or the solicitation of such an advantage by a public official), as well as other acts of corruption in matters affecting international trade or investment. Parties also commit to effectively enforce their anticorruption laws and regulations.

Promotion of integrity among government officials TPP Parties agree to work to adopt or maintain a code of conduct for their public officials, as well as measures to decrease conflicts of interest. They also commit to increase training of public officials, take steps to discourage gifts, facilitate reporting of possible corruption, and provide for discipline of public officials engaging in acts of corruption.

Annex on Transparency and Procedural Fairness for Pharmaceuticals and Medical Devices The Annex to the Transparency and Anti-Corruption chapter recognizes the importance of key principles intended to facilitate high-quality healthcare and continued improvements in public health for TPP partners’ patients and the public. This annex will help ensure transparency and due process with respect to listing and reimbursement procedures in relevant national healthcare programs operated by national healthcare authorities. These transparency and due process requirements are best practices that are fully reflected in U.S. law and practice, including in the Medicare National Coverage Determination process. They require no changes to any U.S. healthcare program nor will they affect the U.S. government’s ability to pursue the best healthcare policy for its citizens, including future reforms or decisions on healthcare expenditures or cost containment. The commitments in this Annex are not subject to investor-state dispute settlement.

96 New Features Corruption and governance issues are significant problems in many countries, which often harm U.S. exporters. TPP contains the strongest disciplines on transparency and anticorruption of any U.S. trade agreement. We expect that these will set a new high standard for action against corruption, including commitments to adopt, maintain, and enforce criminal laws to prevent corruption by public officials, to maintain codes of conduct to promote integrity among public officials, to adopt laws criminalizing corruption in accounting practice and to effectively enforce their anticorruption laws. At the same time, we expect TPP to set a new standard for transparency, including the maintenance of robust systems for allowing public input prior to the adoption of new laws and regulations and, once new measures are adopted, for easy access to information on how they operate.

Impact The U.S. has been a leader in combatting international bribery and corruption since the passage of the Foreign Corrupt Practices Act in 1977. Succeeding decades have brought considerable achievements in this battle, notably with the creation and wide adoption of the OECD’s Anti-Bribery Convention in 1997 and its broadening at the United Nations in 2005.

The challenge of bribery and corruption remains large, however, and its price for the public and American businesses and workers remains high. American firms and their workers — given the U.S.’ strong anti-bribery laws and enforcement — likely lose opportunities for exports, jobs, and growth. The impact on governments and politics abroad is even more profound.

TPP’s Transparency and Anti-Corruption chapter provides an opportunity to make progress in the long campaign against corruption in global trade and investment, and to promote good governance. The challenges in this area include:

 Variable and sometimes irregularly enforced national laws against bribery and corruption;

 Opaque rulemaking, encouraging favoritism and deterring merit-based success in trade, investment, and procurement; and

 Lack of public input into laws and regulations before they are passed and promulgated.

97 In addition, we are seeking to address specific issues that may arise related to transparency and due process in the health sector. Our goal is to ensure transparency and procedural fairness in applicable systems, not to modify a TPP country’s system of healthcare or rights to determine healthcare expenditures and reimbursement rates.

Chapter 27 – Administrative and Institutional Provisions As the TPP goes into effect, participating governments will need to assess and guide implementation, and address any concerns that may emerge from business, civil society, and government agencies themselves. This chapter sets out the institutional framework enabling them to do so, by establishing the Trans-Pacific Partnership Commission, composed by Ministerial or senior level officials, to oversee the implementation of the Agreement; and by defining the tasks the Commission will fulfill, the rules for its decision-making, and other general rules regarding the operation of the Agreement.

Overview Trans-Pacific Partnership Commission The Administrative and Institutional Provisions chapter establishes the Trans- Pacific Partnership Commission to ensure that the Agreement is properly implemented.

Review of the Agreement The Commission will review the operation of the Agreement on a periodic basis to ensure that it remains relevant to the challenges confronting the Parties. As in other agreements, the TPP can be modified or amended in the future, but any such modification or amendment would only apply following applicable domestic legal procedures, including Congressional consultation and approval.

Contact Points The chapter identifies contact points to facilitate communications between the Parties.

Reporting on Progress Related to Transitional Measures The chapter creates a mechanism through which a Party that has negotiated a specific transition period for an obligation must report on its progress to implement

98 the obligation. This will provide greater transparency with respect to implementation of obligations after the Agreement enters into force, and provide early warning if a Party is not taking the steps necessary to implement its obligations on schedule.

New Features For the first time in a trade agreement, the TPP requires Parties to report on their plan and progress in implementing those measures for which they have negotiated implementation transition periods. These transition periods support the development objectives of the TPP by providing lower-income TPP countries additional time to build capacity in specific agreed areas. Through the reporting requirements, Parties can monitor progress, address problems, and offer capacity building assistance if needed, ahead of the date for final implementation.

Chapter 28 – Dispute Settlement The United States seeks rigorous implementation of agreements we sign and strong mechanisms to enforce U.S. rights when there are failures of implementation. TPP’s Dispute Settlement chapter provides both. It ensures that the dispute settlement system — using tariff retaliation when necessary — applies to the full range of issues covered by the agreement, from market access to labor, environment, services trade, intellectual property rights, and others. And it ensures that the dispute settlement system has strong rules against bias and conflict of interest; is transparent and open to the public; and encourages resolution of complaints when possible through cooperation and consultation. The Dispute Settlement chapter governs disputes between governments. It is unrelated to the Investor-State dispute settlement (ISDS) mechanism, which applies exclusively to commitments in the investment chapter and relates to disputes between private parties and governments.

Overview Overall Application The dispute settlement mechanism generally applies across the TPP Agreement, including to obligations under the Labor and Environment chapters, as well as newer disciplines related to cross-border data flows and state-owned enterprises.

Transparency

99 The Dispute Settlement chapter guarantees the right of the public in each TPP country to follow proceedings, by ensuring that submissions made in a dispute will be made publicly available, hearings will be open to the public, and final decisions by panels will be made publicly available. Further, non-governmental entities will have the right to request making written submissions to panels during disputes.

Cooperation and Alternative Mechanisms The chapter commits the TPP Parties to make every attempt to resolve disputes through cooperation and consultation, and encourages the use of alternative dispute resolution mechanisms where the Parties believe that it would be helpful to resolve a dispute.

Formal Consultations and Panel Review within Specified Timeframes Under the Dispute Settlement chapter, the first formal step is to hold consultations between the relevant Parties, with a view to early resolution of the issue. In the event that these consultations fail, the dispute can proceed with a Party requesting the establishment a dispute settlement panel tasked with determining whether a Party has failed to comply with its obligations under the Agreement. Specified timeframes are set to ensure an efficient system — a panel may be requested within 60 days after the date of receipt of a request for consultations or 30 days after the date of receipt of a request for perishable goods.

Composition of Panels Panels will be composed of three objective international trade and subject matter experts. Timeframes for selection of arbitrators will be established, including procedures to ensure that the panel can be composed even if a Party fails to appoint an arbitrator within a set period of time.

Functioning and Integrity of Panels Clear rules of procedure will guide the functioning of panels and, in particular, ensure the transparency aspects noted above. In addition, panelists will be subject to a code of conduct to be agreed by TPP Parties to ensure the integrity of the dispute settlement mechanism.

Panel Report

100 Panels must present an initial report to the disputing Parties within 150 days after the last panelist is appointed or 120 days in cases of urgency. That report will be confidential to allow the disputing Parties to review and submit any written comments to the panel. The panel will then issue its final report within 30 days of the presentation of the initial report. The disputing Parties will then be required to release the final report publicly within 15 days thereafter, subject to the protection of any confidential information.

Implementation of the Final Report In order to maximize compliance with the obligations agreed to, the Dispute Settlement chapter allows for the use of trade retaliation (suspension of benefits or payment of a monetary assessment) if a Party that has been found not to have abided by its obligations fails to fix the problem identified by the panel. Before that may happen, a Party that is found in violation can negotiate or arbitrate a reasonable period of time in which to fix the problem. While the Parties recognize the importance of prompt compliance with panel determinations, nothing in the Agreement can require the United States or other Parties to change a law or regulation.

Private rights No TPP Party can provide for a private right of action under its domestic law against any other TPP Party for failure to carry out the obligations in the TPP Agreement.

Alternative Dispute Resolution The chapter encourages use of arbitration and other alternative dispute resolution with respect to private commercial disputes.

New Features The TPP Agreement provides for more expeditious resolution of disputes, closes various potential loopholes in the existing template that could allow a TPP country to delay or prevent establishing a panel, while also — as in previous U.S. Free Trade Agreements (FTAs) — providing for the ability of non-governmental entities to provide written views to panels and ensuring that panel hearings are open to the public. It also requires that Parties to a dispute make their written submissions public — the first time that some TPP Parties will commit to this level of transparency in dispute settlement.

101 Impact When the United States negotiates a trade agreement, we expect our trading partners to abide by the rules and obligations agreed. All earlier U.S. trade agreements since the U.S.-Canada agreement of 1989, as well as the World Trade Organization (WTO) Agreement, have accordingly included a dispute settlement mechanism to adjudicate disputes over compliance.

This is particularly important for the TPP, which creates a wider set of obligations than we have been able to achieve in earlier agreements in areas such e-commerce, labor and environment, state-owned enterprises, and other areas. The TPP dispute settlement mechanism will give us the tools to be able to enforce the strong, high- standard obligations that have been negotiated.

Chapter 29 – Exceptions The General Exceptions chapter ensures that flexibilities are available to the United States and the other TPP Parties that guarantee the full right to regulate in the public interest, including for national security and other policy reasons.

Overview The Exceptions chapter ensures that exceptions to the TPP obligations are available for public interest regulation, national security, and other policies a Party considers necessary, paralleling the exceptions contained in our earlier trade agreements.

General Exceptions The Exceptions chapter incorporates the general exceptions provided for in Article XX of the General Agreement on Tariffs and Trade to the “goods trade” related provisions. This provides treatment parallel to what we are provided in the WTO, which specifies that “nothing in this agreement shall be construed to prevent the adoption or enforcement” of policies to, among other things, protect public morals, protect human, plant, or animal life and health, enforce intellectual property rules against counterfeiting, enforce laws relating to imports of products of prison labor, and conserve exhaustible resources. The chapter contains the similar general exceptions provided for in Article XIV of the General Agreement on Trade in Services with respect to the “services trade” related provisions.

102 Essential Security Exception The Exceptions chapter includes an exception, applicable to the entire Agreement, making clear that a Party may take any measure it considers necessary for the protection of its essential security interests.

Taxation Exception The chapter ensures that only specific provisions of the TPP Agreement apply to taxation measures.

Temporary Safeguard Measures The chapter defines circumstances and conditions under which a Party may impose temporary safeguard measures restricting transfers — such as contributions to capital, transfers of profits and dividends, payments of interest or royalties, and payments under a contract — related to covered investments. The exception is important to ensure that governments retain the flexibility to manage volatile capital flows, including permitting countries to impose temporary safeguard measures or capital controls restricting investment-related transfers in the context of a balance of payments crisis, or certain other economic crises, subject to certain conditions and disciplines.

Tobacco Control Measures Tobacco is a product that poses unique public health challenges, as is reflected in each Party’s tobacco control regulations. In order to ensure that each Party has the ability to regulate manufactured tobacco products and protect public health, TPP, for the first time in any trade agreement, builds on structures established in the agreement to give each Party the right to decide that its tobacco control measures for manufactured tobacco products cannot be challenged by private investors under Investor-State Dispute Settlement (ISDS). Other provisions of the agreement, including state-tostate dispute settlement procedures by governments, will continue to apply. This provision does not apply to tobacco leaf; under TPP, U.S. tobacco farmers will have enhanced opportunities to compete fairly in foreign markets by the elimination of foreign tariffs on tobacco leaf.

Disclosure of Information A basic rule clarifies that no Party is obligated to provide information under the Agreement if it would be contrary to its law or public interest, or would prejudice the legitimate commercial interests of particular enterprises.

103 Impact U.S. free trade agreements and World Trade Organization rules open markets to American goods and services, while also providing explicit assurance that governments remain free to regulate for the public interest in areas such as public health, environmental protection, national security, public morals, and others. This has been standard practice in all U.S. trade agreements dating to the first multilateral trade agreement in 1947, and is the case in TPP.

Chapter 30 – Final Provisions The Final Provisions chapter defines the way the Agreement will enter into force and the ways in which it can be amended; provides rules on the ways other economies can join the TPP Agreement in the future and how Parties can withdraw should they choose to do so; and specifies the official languages of publication.

Overview Amendments The Final Provisions chapter ensures that the TPP Agreement can be amended, after each Party follows its appropriate domestic procedures. No amendments will apply to the United States without U.S. agreement based on our domestic procedures, including Congressional consultation and approval.

Accessions The United States is interested in seeing TPP membership grow over time so that it can serve as a platform for economic integration across the Asia-Pacific region. Therefore, the Final Provisions chapter includes provisions specifying the Agreement is open to accession by members of the Asia Pacific Economic Forum (APEC) and other economies as agreed by the Parties. New entrants would need to be willing and able to meet TPP’s high standards, and the terms of accession for new entrants will have to be agreed by all pre-existing Parties. For the United States, applicable domestic procedures would be needed to add new members to the TPP. This would include Congressional notification before entering into negotiations with a potential new entrant, Congressional notification of intent to sign, consultation with Congress throughout the process, and final Congressional approval.

Entry into Force

104 The TPP will enter into force with each partner only when the United States is satisfied that the other Party has taken the steps necessary for the proper implementation of the TPP Agreement. Other Parties may similarly seek to confirm the proper implementation of the TPP Agreement by each Party.

Housekeeping Provisions The Final Provisions chapter specifies the procedures under which a Party can withdraw from the TPP Agreement, designates a depositary (responsible for receiving and disseminating documents), and sets out that the English, Spanish, and French versions of the Agreement are equally authentic.

New Features The TPP Agreement contains provisions that provide clearly defined accession procedures, with the support of all TPP Parties. However, new Parties will only be able to accede to the Agreement if they are willing and able to meet TPP’s high standards, and applicable domestic procedures — including approval by Congress in the case of the U.S. — are followed.

105

Load more

  105

Copy Link