Pacific Nations Clinch Comprehensive Trade Accord

25 January 2018

The 11 remaining Trans-Pacific Partnership (TPP) countries are set to sign their final agreement this March in Chile, after chief negotiators from the participating economies resolved the last sticking points during meetings in Tokyo this week.

The negotiating meetings, held on Monday and Tuesday in the Japanese capital, saw countries agree on the final list of suspended provisions and side letters, given that four items had been left pending when they last met in late 2017. They also agreed on the date for the signing ceremony for the accord, which is now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

In an address to the World Economic Forum Annual Meeting in Davos, Switzerland, on Tuesday 23 January, Canadian Prime Minister Justin Trudeau confirmed the news and praised the final accord as “the right deal” that will “strengthen the middle class,” both now and in the long term. He also called Tuesday a “great day for progressive trade,” in light of the CPTPP news.

Trade officials from across the other CPTPP signatories similarly welcomed the accord as a turning point in Asia-Pacific economic relations, while noting the complexities of bringing the talks across the finish line over the past several months.

Moving forward

Countries had already agreed on most elements for advancing the TPP deal last November, when the group met on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Da Nang, Vietnam. (See Bridges Weekly, 16 November 2017)

The negotiations on how to proceed with the original TPP began some months after US President Donald Trump withdrew his country from the deal in early 2017, as the remaining signatories considered whether to suspend some of the accord’s provisions, and which ones.

Twelve countries initially signed TPP in February 2016, with some members starting their ratification processes in the months that followed. The US withdrawal complicated that effort, given that the country was the largest economy of the group, and without it the remaining members would be unable to meet the GDP threshold for bringing the accord into force.

Trump had been a vocal opponent of the TPP on the campaign trail, and cited concerns over potential US job losses and his preference for bilateral trade deals when announcing the withdrawal in the first weeks of his term. (See Bridges Weekly, 16 February 2016 and 26 January 2017)

In the US’ absence, Japan is now the largest economy in the group. Along with Japan, the other 10 countries involved are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam – mix of developed and developing economies that border the Pacific Ocean. Their combined population numbers approximately 500 million people and their economies add up to over US$10 trillion, or over 13 percent of global GDP, according to statistics cited by the Canadian government.

At the Da Nang summit, the 11 countries had circulated a list of 20 suspended provisions, many of which dealt with intellectual property, that would be put on hold when ratifying the accord. They also noted that four provisions were still under discussion due to concerns raised by specific members.

Canada had expressed interest in ensuring strong protection for its continued support to its cultural industries, such as films. A spokesperson for Canadian Trade Minister François-Philippe Champagne told Reuters this week that this was due to the country’s “unique cultural sensitivities.”

“For Canada, the main issue that they have raised is in relation to a cultural exception, they would like to be able to carve out elements of their broadcast policy, for example, to allow for French speaking language,” said Australian Trade Minister Steven Ciobo to ABC Insiders late last year.

Negotiators reportedly agreed in Tokyo that they would address Canada’s cultural concerns via side letters rather than by revisions to the full TPP text, according to Japan’s Economic Revitalization Minister Toshimitsu Motegi, though further details were not publicly available at press time.

Separately, Canada had also sought better terms on automobile trade, such as on the rules-of-origin threshold for cars and their component parts. In a written statement on Tuesday, Champagne announced that his country’s negotiators had clinched “an improved arrangement on autos with Japan,” without specifying further.

In addition to Canada’s requests, a few more issues had been pending after the November meeting. Vietnam was concerned about TPP’s “non-implementation” sanctions in the context of labour rights, which Motegi told Kyodo News will now be resolved via side letters.

For its part, Brunei had concerns over a provision in a particular TPP annex that had to do with foreign participation in its coal sector, specifically involving “non-conforming measures” related to investment and services. Malaysia, for its part, had raised concerns over an annex on liberalising its state-owned enterprises. Those provisions will now be suspended, along with the original 20 suspended provisions from November.

Getting others on board

Speaking last week before the Tokyo negotiators’ meetings, Australian Prime Minister Malcolm Turnbull stressed the possibility for other countries, including the US, to join. Turnbull had met with his Japanese counterpart, Prime Minister Shinzo Abe, to discuss the next steps for the CPTPP process.

“Crucially, one of the design features of the TPP is its flexibility as an open platform. I believe its logic – the logic of cooperation – is so compelling, that others will want to be a part of it once it’s up and running. Indeed, that’s what we are seeing already,” said Turnbull in an address to business leaders in Tokyo.

“We are consciously setting it up to enable and encourage the United States to dock in should it choose to do so in the future,” he added.

The United Kingdom has already floated its interest in joining the CPTPP once the country has exited the European Union, according to officials interviewed by the Financial Times. Speaking to the Financial Times earlier this month, Greg Hands, UK Minister of State in the Department of International Trade, suggested that joining could work even though the United Kingdom is not a Pacific Rim country.

“With these kind of plurilateral relationships, there doesn’t have to be any geographical restriction,” he said. Whether the UK can join and on what terms will depend on negotiations with and approval of existing CPTPP members, and how much support the move would have domestically is not yet clear.

ICTSD reporting; “11 TPP countries to sign pact without U.S. in March in Chile,” KYODO NEWS, 23 January 2018; “Pacific Nations Agree to Save TPP Trade Pact After Trump Quit,” BLOOMBERG, 23 January 2018; “El TPP-11 se firmara en Chile la primera semana de marzo,” MILENEO, 23 January 2018; “Trade officials pursue TPP in Tokyo as Canada wavers,” REUTERS, 22 January 2018; “11 countries ‘to seal’ Pacific free trade pact: Japan,” FINANCIAL TIMES, 23 January 2018; “UK looks to join Pacific trade group after Brexit,” FINANCIAL TIMES, 2 January 2018; “TPP 11 signatories gather in Tokyo to hammer out remaining issues,” NIKKEI, 22 January 2018.

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