CPTPP Partners Gear Up for Signing Ceremony, Ratification Process

22 February 2018

Countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are preparing to gather in Santiago, Chile, in two weeks to sign the updated trade accord, whose text was released publicly on Wednesday 21 February. 

The CPTPP is the successor to the Trans-Pacific Partnership (TPP), a 12-country deal that was signed in February 2016. After the US withdrew last year, the remaining 11 countries decided to suspend a series of provisions in the original deal, along with ink some new side agreements, in order to move forward with the sweeping trade pact. (See Bridges Weekly, 11 February 2016 and 16 November 2017) 

Proponents of the CPTPP say that once the accord is signed and ratified, it could have a transformative effect on both its members and the wider global trading system, with comprehensive chapters on subjects such as the environment, labour rights, and e-commerce, among others. For some participating countries, the wider deal also marks the first time they will have had formal free trade agreements in place with some of the other countries involved – and therefore open up major market access opportunities for agricultural and manufactured goods, among others. 

“The trade agreement will create new opportunities for international trade, including preferential access for the first time to Japan, Canada, Mexico, and Peru,” said New Zealand Trade Minister David Parker upon the release of the CPTPP text, outlining some of the specific benefits for his country. “CPTPP has become more important because of the growing threats to the effective operation of the World Trade Organization rules.” 

The combined economic heft of the group is also significant, with the 11 current participants having a total GDP of US$10 trillion, or 13.5 percent of global GDP. While this is lower than the original 40 percent of GDP covered when the US was a member, the remaining participants have stressed that the TPP still has a vast potential for creating new opportunities for trade liberalisation in the region, as well as promoting sustainable development objectives and shoring up the multilateral trading system. 

The CPTPP preamble, for example, includes a reaffirmation by the 11 members of “the importance of promoting corporate social responsibility, cultural identity and diversity, environmental protection and conservation, gender equality, indigenous rights, labour rights, inclusive trade, sustainable development, and traditional knowledge, as well as the importance of preserving their right to regulate in the public interest.” 

Final CPTPP text

The final version of the CPTPP text was released by the New Zealand government, which is the depositary of the accord. The release from Wellington coincided with the publication of a “national interest analysis” of what the trade deal would mean for the Oceanic nation’s domestic economy. 

The latter document found that while taking part in the deal could boost GDP by 0.3 to 1.0 percent, or between NZ$1.2 and 4 billion, staying out of the deal could hurt GDP to the tune of NZ$183 million. 

The CPTPP text itself is nine pages, and outlines which parts of the original TPP have been suspended, along with including some new articles relating mainly to ratification, withdrawal, and accession. 

Most of these suspended provisions, as confirmed in November, are in the chapters of investment and intellectual property, along with a handful of provisions on financial services, telecommunications, government procurement, and cross-border trade in services involving express delivery services. (See Bridges Weekly, 16 November 2017

Aside from what is listed in the CPTPP document and any new side agreements, the rest of the original TPP remains intact, minus the US schedules of commitments given that Washington has left the deal.  

The new CPTPP text clarifies how entry into force will work, given that the original provisions in TPP Chapter 30 meant that US participation was necessary to move forward. Under the original terms, the 11 remaining members would have been unable to meet the threshold of covering 85 percent of the original 12 signatories’ GDP without the US. 

The CPTPP now says that “at least six or at least 50 percent” of the accord’s signatories must ratify for the deal to entry into force, and says that the threshold which applies will be “whichever is smaller.” Once that threshold is met, the agreement will take effect for this group 60 days after they have all notified New Zealand, the accord’s depositary. 

Any signatory which ratifies afterward will have to wait 60 days from when they notify their ratification for it to take effect for them. The text also outlines how withdrawal and accession will work. Regarding accession, the CPTPP clarifies that new members can join after the deal is in effect, so long as existing parties agree. New entrants can include any state or separate customs territory, according to the text. 

The text also includes a provision on reviewing the trade deal. It says that “if the entry into force of the TPP is imminent or if the TPP is unlikely to enter into force, the parties shall, on request of the party, review the operation of this agreement so as to consider any amendment to this agreement and any related matters.” 

It also confirms the planned date for the CPTPP’s signature, which will be 8 March 2018 in Santiago, Chile. 

Trade dynamism in the region

The planned trade deal is one of a plethora of accords springing up in the region, ranging from bilateral deals such as the recently signed Australia-Peru agreement to multi-country initiatives such as the Pacific Alliance talks to form a bloc with four “associate members.” (See Bridges Weekly, 8 February 2018)

Separately, negotiations continue among 16 countries for a Regional Comprehensive Economic Partnership (RCEP), with the goal of clinching an agreement this year. The RCEP group, which involves the 10 members of the Association of Southeast Asian Nations (ASEAN) and their six FTA partners, has significant overlaps in membership with the CPTPP grouping, with some exceptions.

The RCEP participants have had 22 negotiating rounds, with the latest held in Indonesia earlier this month. The subject-area scope of RCEP is not as extensive as the TPP and experts say it takes a different approach to some overlapping topics. The group has a mix of countries with different economic weights and structures, from large developed or emerging economies like Australia, China, India, Japan, South Korea, and New Zealand, to the widely varied membership of ASEAN.

Prospects for new entrants?

With the CPTPP now ready to move into the next stages, other countries outside the coalition have continued to express interest in signing on when possible. Officials from the UK government have previously indicated that they would like to join the CPTPP, once they have exited the EU and are able to do so. Australian Foreign Minister Julie Bishop suggested this week that the addition of the UK could potentially be welcome.

“The TPP11 is open to all nations who are prepared to accede to the terms of the TPP11 – the guidelines, the standards, the benchmarks, being negotiated between those 11 nations,” said Bishop during a press conference in London on 19 February, using the acronym for the TPP’s 11 remaining signatories.

“Obviously Britain is a significant global economy and if Britain were to join the TPP11, it would enhance the standing of the TPP11 and the opportunities and the benefits for the members,” she added.

Japan’s top TPP negotiator, Kazuyoshi Umemoto, has similarly said that the UK could be a welcome addition if it shares the group’s interests, according to comments reported by the Financial Times this week

Australian Prime Minister Malcolm Turnbull is visiting the US this week, with trade and the potential for the US to re-join the CPTPP someday expected to be on the agenda.

The Australian premier has mentioned this possibility in the past, and dozens of Republican lawmakers have been lobbying US President Donald Trump to “prioritise engagement” with the deal’s eleven members. These lawmakers noted Trump’s own recent expressions of possible interest in the pact and highlighted the potential for the TPP to build deeper ties with Asia-Pacific allies.

Trump has qualified those statements of potential interest by saying that the deal would require additional renegotiating to bring Washington back on board. 

ICTSD reporting; “Malcolm Turnbull will try to woo Donald Trump back to TPP,” THE AUSTRALIAN, 20 February 2018; “Japan’s TPP negotiator welcomes UK membership of trading bloc,” FINANCIAL TIMES, 20 February 2018.

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