October 4, 2015 the Ministers of twelve countries concluded their negotiations for the landmark Asia-Pacific trade agreement known as the Trans-Pacific Partnership (TPP). Those twelve countries include Australia, Canada, Japan, Malaysia, Mexico, Peru, Vietnam, Chile, Brunei, Singapore, New Zealand, and the United States. While all the potential effects of the Trans-Pacific Partnership Agreement on your business are not yet known, at least one aspect of the agreement incentivizes international expansion.
The TPP provides “comprehensive market access,” which “eliminates or reduces tariff and non-tariff barriers across substantially all trade in goods and services.” The significance of this may be substantial for business owners who either are from or are doing business in one of the twelve member countries, including the United States.
One positive effect of the TPP is that businesses are expanding. Before the TPP, some business owners could not afford to expand their companies because the cost of exporting was too steep. With these new limits on tariff and non-tariff barriers now in place, many businesses may now find themselves able to afford to expand into foreign markets.
One potentially negative effect of the TPP is that many businesses are now availing themselves to an array of international laws and regulations. While the all-time low cost of exporting may present a great opportunity to increase profits and grow your business, it also may present a new set of legal implications for you to consider. Many international contracts are governed by international laws and regulations that may not work exactly how you think they do. For example, suppose a seller from New Zealand enters a contract with a buyer from the United States. Depending on how the contract is drafted, whether it is a contract for goods or services, and the circumstances surrounding the deal, a future contract dispute for breach may either be sent to arbitration or to trial. Further, the tribunal or court that hears the case may be located in New Zealand, the United States, or a location wholly distinct from either country. Finally, the tribunal or court may apply the laws of New Zealand, the laws of the United States, or even a set of laws wholly distinct from either country.
To protect yourself from a potentially expensive dispute resolution and to prevent yourself from unintentionally breaching a contract yourself, you need to be certain what exactly you’re agreeing to under the contract. What exactly are your obligations? In the event of a breach, how will a dispute be resolved? What country’s laws will apply? Where will the hearing be located? You may be able to control these factors simply by making sure your negotiations are overseen and your contracts are carefully drafted by an experienced international business attorney.
For more information about the Trans-Pacific Partnership and the effects it may have on your international business, visit the Office of the United States Trade Representative’s TPP webpage at https://ustr.gov/tpp/.