The Trans-Pacific Partnership (TPP) is a massive trade agreement that impacts over 40% of the world’s economy. It aims to boost trade between a dozen nations around the world, all of which are committed to economic growth through free, open trade.
According to the Small Business Administration, TPP “unlocks opportunities for small and medium-sized businesses…by addressing trade barriers that are particularly difficult for small businesses to navigate.”
No matter what your business’s size or which industry you’re in, this agreement could have huge ramifications for your growth in the coming years.
- TPP is a trade agreement between 12 different countries, including the United States, Canada, Mexico, Chile, Peru, Australia, New Zealand, Japan, Malaysia, Vietnam, Singapore, and Brunei.
- The deal was signed into agreement in 2015 and 2016, and is currently being ratified in each of the individual countries. The ratification process is expected to take another two years.
- The purpose of the agreement is to foster free trade or liberal trade between all of the member nations. Some 18,000 different tariffs will be slashed or eliminated altogether, encouraging economic growth between and within each country.
So what does that have to do with your business?
Well, if you’re based in the United States and interested in selling your products or services to customers around the world, or if you sell B2B services to an organization with interests abroad, it’s possible that the TPP could make it easier than ever – and more profitable than ever – to do just that.
5 Important Facts About TPP
#1: It’s a pretty big deal
As a small business owner, hearing about an international trade agreement may not peak your interest, at least at first. But in this case, it’s possible that it should.
- Over 800 million people call a TPP country home.
- TPP countries will include almost twice as many people as the European Union.
- TPP trade will generate some 40% of all the world’s trade.
Think of TPP as the Facebook of trade agreements – member nations come together to form a huge source of prospective customers and new markets for your business, as well as potential talent pools for new employees. Suddenly, you could have access to business opportunities you never could have afforded to pursue in the past.
#2: Not all industries are impacted equally
While the goal of TPP is to benefit each of its member nations, not all industries within those nations are impacted by the agreement in the same way.
- The auto industry will see a huge boost when big manufacturing countries like Japan can export cars to the U.S. more inexpensively. At the same time, the U.S. will be able to export their cars to countries like Vietnam, which currently enforces tariffs of up to 70% on foreign imports.
- Tech giants and startups will get a break thanks to some of the treaty’s provisions. Until now, companies like Google have faced heavy restrictions in markets outside the United States. These restrictions often involved setting up physical locations and real estate in the country they wanted to do business in. This agreement lifts that restriction, freeing the companies to operate 100% digitally and expand into the virtual markets of the other 12 countries.
- U.S. food manufacturers and farmers should see up to 98% of all tariffs eliminated on food exports like rice, beef, soybeans, and seafood. Farmers will now be able to export their goods to countries like Canada and Japan, which have had high tariffs on meat.
As you can see, the number of tariffs eliminated is industry-dependent.
So what if you’re not in agriculture, automobiles, or tech? TPP may still benefit your small business by making it easier to break into international markets, partner with international vendors, and access international customers.
#3: TPP may increase labor competition
This prospect may be alarming for employees who fear their jobs being outsourced, but labor competition is a win for any business owner. With the strong economic relationships developed through TPP, business owners from member countries may enjoy access to a growing talent pool that must compete for the best jobs and wages.
As a business owner, you’ll have more options than ever when choosing where to open your next location, where to scout and hire talent, where to build your next factory, or how to staff your marketing team.
#4: TPP is committed to digital commerce
Google, Uber, and other tech giants aren’t the only ones who stand to benefit from TPP. Small business owners, entrepreneurs, and anyone who does business online stands to gain from this agreement.
Under TPP, infoproducts such as eBooks, music downloads, software, and videos can now be sold to member countries without tariffs. You no longer have to worry about complicated foreign tax laws or tariffs that change depending on your customer’s country. Instead, you can sell directly to the customer in the form of a digital download, without having to own real estate in their home country.
As a small business owner who sells products to other countries, the TTP could have a huge impact on your bottom line. Tweet This
#5: TPP promises faster customs processes
Have you ever ordered a product from another country and had it shipped to your home country? If so, you know just how long it can take. The reason for the delay is often customs, where the product you ordered undergoes scrutiny and checks by border officials.
As a small business owner who sells products to other countries, this could have a huge impact on your bottom line. Customers will be able to get their products much more quickly than before, which can significantly improve the buyer experience, build brand loyalty, and boost your bottom line.
In the very near future, the Trans-Pacific Partnership will open a new era of trade between some of the most prosperous and emerging nations in the world. As a small business owner, you stand to benefit from this agreement by taking advantage of lowered taxes on exported goods and services to these countries.
If you currently do business abroad, the implementation of TPP should save you money. If you’ve been thinking of doing business abroad, now might be the time to get started. By focusing your operational and marketing strategies on member nations of TPP, you can position your business to take advantage of the many lucrative opportunities this agreement has to offer.
Interested in taking advantage of lowered tariffs for your industry? Find out more about the TPP.
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