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What the Trans-Pacific Partnership Means for Small Business

by Andrew Storrier

3 min read

The Trans-Pacific Partnership (TPP) deal was reached on 5 October and has divided the opinions of business owners and consumers alike. For some it’s a global trade game changer, while to others it’s a deal benefiting only the US and its corporations. But what does it mean for Australian small businesses? Here, we weigh up the pros and cons and let you decide whether your business will prosper under this new initiative.

When It Works, It Works

E-commerce stands to win big over brick-and-mortar retailers as the TPP prohibits customs duties on electronic transmissions and prevents countries from favouring national producers or suppliers.

The TPP also bans “forced localisation”, meaning companies such as Uber and Google no longer need to establish local infrastructure before launching services in, say, Australia. Under the TPP, companies can launch in international markets for much less, which could mean cheaper prices on your storage service. It could also mean you can provide your e-service to Americans from Australia.

Financial services will benefit from more streamlined regulations for firms operating in the TPP region. Australian companies will be able to target overseas growth markets and transfer staff to offshore branches “for extended periods”. This means if you open a branch in Malaysia, you can bring staff over from Australia without much hassle, so you aren’t spending countless hours trying to find the right candidate in a foreign market.

The agreement also reduces the regulatory burden on firms wanting to export their services, and allows them to import and export information in and out of countries for data processing.

It isn’t a free-trade agreement, as such – rather it’s an international economic constitution. The Asia-Pacific region is a complex, intermixed supply chain – think about how you can offshore administration, for example – and the TPP aims to make outsourcing and “supply chain trade” much easier. So you can have all your admin and research done offshore on the cheap while you take care of business development. Another nice caveat is companies in developing economies might hire you for your expertise.

The Downsides

Australia doesn’t really benefit at the moment, except for maybe in the financial services sector where we are competitive with our American counterparts. Essentially, the TPP is pro-America, with most benefits flowing into the US economy. Developing economies, such as Vietnam, are obviously excited because they can bring their textiles industry into the massive US economy. However, Australia isn’t a developing economy.

Local data centre providers, such as NextDC, are likely to suffer under the TPP, with international providers basically given free rein to offer their services in the Australian market. Low-cost provider Amazon could also smother Australian companies with its aggressive pricing strategies.

Agriculture stands to make some gains, however the TPP heavily favours the US market. One of the most controversial issues was whether sugar farmers would get better access to the US market, which the US has resisted thus far.

Overall, the professional and financial services seem to be the big winners of the TPP, which should allow small businesses to take more robust steps into Asia, while innovative tech companies will have their work cut out for them to compete with the US big dogs from Silicon Valley.

The above article is intended to provide generalised financial information designed to educate a broad segment of the public; it does not give personalised tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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