Countries Sign Pacific Rim Trade Deal, Call for “Expeditious” Ratification Process
The 11 countries forming the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are now beginning their domestic processes to ratify the accord, with the hopes of bringing it into force “expeditiously,” possibly even this year or in early 2019.
The CPTPP was signed by ministers in the Chilean capital city of Santiago last week. Its signatories include 11 of the 12 original Trans-Pacific Partnership (TPP) countries, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, which together make up 13.5 percent of global GDP. The United States withdrew from the TPP over a year ago.
These 11 countries will now need to pass the CPTPP through their respective ratification processes, which will start immediately for most signatories, including New Zealand and Mexico, according to remarks from ministers at the joint press conference following the signing ceremony.
“The signing of the Agreement enables us to move to the next phase. Ministers expressed their determination to complete their domestic processes to bring the Agreement into force expeditiously,” said a joint ministerial statement issued at the event.
New Zealand Minister for Trade and Export Growth David Parker estimated that his country could ratify the deal by year’s end. To enter into force, the agreement will require at least six or at least 50 percent of the number of signatories, whichever is smaller, to ratify the accord and notify the depositary accordingly.
Other nations expressed similar aspirations for the deal’s entry into force. “In the name of Peru we are very happy with this agreement. I think it’s the most modern, comprehensive agreement, actually, in the world,” said Peruvian trade minister Eduardo Ferreyros.
“I hope and believe that this agreement will enter into force this year,” Ferreyros added, after outlining the ratification process in his country.
The Malaysian government must amend several of its domestic laws before it can ratify the agreement, according to Dato’ Sri Mustapa Mohamed, the country’s minister for trade and industry. This will determine the timeframe for CPTPP ratification, though the minister expressed the hope that this could occur by early 2019.
Vietnam also suggested that it would work to push the process forward this year, if possible, while both Brunei and Singapore said they would move to approve the deal “expeditiously.”
Side letters now released
The CPTPP document signed on 8 March includes the final list of suspensions, along with updates to the provisions for bringing the deal into force. It also features a preamble affirming the signatory countries’ commitment to cooperate on various sustainability issues. The text was already made public in late February by the New Zealand government, in its capacity as the treaty’s depositary. (See Bridges 22 February 2018)
With the agreement now signed, CPTPP members have released the additional side letters that they had negotiated to finalise the deal. This included, for example, Canada’s side letters with each of its CPTPP members on culture, allowing Ottawa to “adopt or maintain discriminatory requirements on service suppliers or investors to make financial contributions for Canadian content development and may adopt or maintain measures that restrict access to online foreign audio-visual content.”
Other side letters endorsed by all CPTPP countries cover topics such as the application of the labour chapter on Vietnam, including dispute settlement and the timeframe for requesting suspension of benefits in that context.
CPTPP members have also released the texts of their side deals with individual signatories. For instance, one side letter confirms that investor-state dispute settlement (ISDS) will not be available for Australian investors in New Zealand, and vice versa. Other side letters touch on topics ranging from beef and agricultural chemical test data to cybersecurity.
South Korea to request accession?
The CPTPP text highlights the ability for others to join the agreement, stating that the parties “welcome the accession of other states or separate customs territories.” Several economies have hinted that they might be interested in joining, including Taiwan, the United Kingdom, and South Korea.
Earlier this month, Japan’s chief TPP negotiator Kazuyoshi Umemoto told the Financial Times that discussions on accession can begin when the deal enters into force. “TPP is aimed at an open, rule-based, multilateral, liberal trade system so, if any country is interested and willing to abide by the rules, then we can talk about accession.”
US officials have also floated the possibility of rejoining the deal, pending more favourable terms. While officials from Japan and Australia have suggested that they would be interested in exploring the possibility, participants have stressed that the US’ re-entry would be contingent on current CPTPP members agreeing.
South Korea is also considering asking to join the CPTPP, though officials say that they are continuing to examine the potential benefits for Seoul should it seek accession.
"Within the first half of the year, (the government) will decide whether to join, after discussion among government agencies, and will take steps for domestic procedures, if necessary," South Korean Finance Minister Kim Dong Yeon said earlier this week.
Regional economic integration
The signing of this large Pacific regional agreement comes at a time of increased fears over inward-focused policy approaches by some countries. That trend has, in turn, fuelled a concerted response from many countries across world regions, who have repeatedly pledged to keep trade open and defend the rules-based international trading system.
Proponents of the CPTPP have cited the treaty as a success story that will serve both of those ends, creating a potential template for trade rules that are fit-for-purpose in the 21st century global economy.
Speaking at the signing ceremony last week, Chilean Foreign Affairs Minister Heraldo Muñoz said that it “is a milestone on the common path of further deepening regional economic integration,” while noting that signatories will need to continue their efforts to ensure that “the benefits are shared with all our citizens.”
Other trade officials expressed similar sentiments this past week.
“The signing of the CPTPP is a concrete demonstration of the signatories’ commitment to the collective goals of greater trade liberalisation, regional economic integration, and better opportunities for our people,” said Lim Hng Kiang, Singapore’s Minister of Trade and Industry.
The CPTPP is one amid a series of regional initiatives aimed at reshaping trade rules in the Asia-Pacific, including the separate effort by Pacific Alliance countries to clinch a trade deal with associate members.
Negotiators from Pacific Alliance states and candidates for associated state status wrapped up a third round of trade talks in Santiago, Chile, on 9 March, covering topics such as market access and small and medium-sized enterprises (SMEs).
Candidate countries for associate member status include four CPTPP signatories: Australia, Canada, New Zealand, and Singapore. Negotiations with associate members will continue in Ottawa, Canada in May.
Proponents of bringing on associate members note that this could boost regional trade, along with allowing participants to develop deeper trade rules than what is currently included under the Pacific Alliance framework. Reports suggest other countries are also exploring the possibility of asking to negotiate associate member status, such as South Korea.
The round’s close came just days after heads of state from the Pacific Alliance bloc – Chile, Colombia, Mexico, and Peru – met virtually on 6 March to discuss topics such as their “strategic vision” from now through 2030, including in relation to the Sustainable Development Goals (SDGs). They also reviewed their approach to the trade talks with prospective associate members, according to an Alliance press release. Another presidential summit is set for 24-25 July in Mexico.
“The July meeting would be a key opportunity to consolidate and lock-in integration trends and shield them from political changes taking place in the region, and also to set off Pacific Alliance – Mercosur integration dynamics” said Ricardo Meléndez-Ortiz, Chief Executive of the International Centre for Trade and Sustainable Development (ICTSD) at sessions with trade ministers at the regional gathering of the World Economic Forum in São Paulo this week. (Editor’s note: ICTSD is the publisher of Bridges)
The Pacific Alliance is a deep integration initiative focused on regulatory cooperation, financial integration and slashing trade barriers and moving towards free movement of goods, services, and people. It was formed in 2011, and has since expanded to include Canada, Australia, New Zealand, and Singapore as prospective associate members and several dozen nations as observers.
ICTSD reporting; “South Korea considers joining revamped Pacific trade deal CPTPP,” 13 March 2018, THE STRAIT TIMES; “Protests in Chile as 11 countries set to sign new TPP trade agreement,” 8 March 2018, THE SANTIAGO TIMES; “Finaliza tercera ronda de negociaciones entre la Alianza del Pacifico y paises del Asia-Pacífico,” 12 March 2018, PORTAFOLIO; “Finaliza tercera ronda de negociaciones de la Alianza del Pacífico,” 13 March 2018, AGENCIA ANADOLU; “Pacific countries seek new members for regional trade deal,” FINANCIAL TIMES, 7 March 2018.