UK applying to join Asia-Pacific free trade pact CPTPP
https://www.bbc.co.uk/news/business-55871373
https://www.instituteforgovernment.org.uk/explainers/trade-cptpp
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
What is the CPTPP?
The CPTPP is a free-trade agreement (FTA) between 11 countries around the Pacific Rim: Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and Japan.
When was the CPTPP negotiated?
Negotiations for what was then simply the Trans-Pacific Partnership (TPP) began in March 2010 and concluded on 5 October 2015.
The US was party to those talks, but the election of President Trump in 2016 led to its withdrawal from the agreement before ratification. The remaining 11 participants scrambled to amend the text of the agreement, and the newly renamed
Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed in March 2018. It came into force in December the same year.
What does the CPTPP do?
The rights and obligations under the CPTPP fall into two categories:
- Rules: for example, on how countries should make new food safety regulations or whether they can ban the transfer of data to other CPTPP members. These are the same for all CPTPP parties (including any new members that may join).
- Market access: how far each CPTPP member will cut its tariffs, open up its services markets, liberalise visa conditions for business travellers, and so on. Each member has its own schedules of commitments. In some cases the commitments are offered to all other members, while in others they are restricted to specific negotiating partners.
The CPTPP provides for almost complete liberalisation of tariffs among the participants. Tariffs are retained in only a few highly sensitive areas – for example, Japan keeps tariffs on rice, while Canada’s dairy industry is also protected. It provides a single set of
rules of origin, and allows content from all CPTPP countries to be ‘cumulated’. If a good has to have at least 70% ‘CPTPP content’ to qualify for preferential tariffs, for instance, that 70% can come from any combination of CPTPP countries.
Why is the CPTPP important?
The original TPP (including the US) would have been one of the world’s largest economic blocs, accounting for over 30% of world GDP. For this reason, it was thought that it would have been able to exercise of high degree of influence over the rules governing the world economy. In particular, the Obama administration hoped that it could become a vehicle to constrain the rise of China, setting rules for such a large group of countries that China would be compelled to follow them.
The smaller (if more ambitiously named) CPTPP is less significant, but still accounts for a substantial share (about 13%) of world GDP. This could rise, and help the CPTPP become even more important, were the US to come back on board – which Joe Biden, the presumptive Democratic nominee for November’s US election, has hinted support for.
Can the UK join the CPTPP?
Yes – provided all the existing members agree. Article 30.4 of the agreement makes clear that the CPTPP is open to accession by any state “as the Parties may agree”. It is not necessary for a state to be in the Pacific region to participate.
What would the UK have to do in order to join the CPTPP?
A state that wants to join has to inform the New Zealand government (the depositary of the agreement), which will then inform the other members. The CPTPP Commission then decides whether or not to start an accession process. If it decides to start the process, a working group would be formed. The UK would have to explain to the working group how it was going to comply with the CPTPP rules.
Within 30 days of the first meeting of the working group, the UK would have to submit its market access offers: tariff cuts, lists of service sectors from which it proposed to exclude CPTPP members, and parts of government procurement that would not be open to bids from other CPTPP members. There would then be a process of negotiation. Once all the existing members are satisfied, the Commission would formally invite the UK to become a member.
Is the CPTPP Commission like the European Commission?
Not really. Unlike in the EU, there will be no new ‘CPTPP regulations’ developed over time. The CPTPP Commission is simply a gathering of representatives of CPTPP member states. It meets for short sessions about twice a year to discuss issues arising from the agreement, and to set procedures for the accession of new states and rules of conduct for dispute settlement.
There is no ‘CPTPP Court’ equivalent to the European Court of Justice (ECJ) either: if a dispute arises between the parties, an ad-hoc arbitration panel is convened. If the panel finds that a member state has breached its obligations under the agreement, there are no fines payable (as in the ECJ). Such a state has a choice of four options:
- Comply with the CPTPP rules as interpreted by the panel.
- Compensate the offended party through a tariff concession.
- Compensate the offended party with a cash payment.
- Accept increased tariffs on its own exports to the offended party.
What would the UK get out of CPTPP membership?
The government has still not conducted an assessment of the economic impact of joining CPTPP. Its
most recent policy paper on the subject just gives figures for how much trade the UK does in the region already and what percentage of tariffs would be eliminated under the agreement – which says little about what benefits would actually accrue to the UK.
The benefits of joining the CPTPP are also likely to depend on how successful the UK is at replacing, or ‘rolling over’, the existing FTAs it enjoys as an EU member state. The EU has signed FTAs with all of the CPTPP countries except Malaysia, Brunei, Australia and New Zealand, which the UK is therefore party to until the transition period ends. If the UK is able to roll over these existing EU–CPTPP agreements – admittedly far from guaranteed given the cool responses to the suggestion from Canada, Japan, Mexico, Singapore and Vietnam – the benefits of CPTPP membership could become quite limited.
The UK government has also stated that it sees geopolitical advantages in CPTPP membership, since it would put “the UK at the centre of a network of countries committed to free trade and to the global rules underpinning international commerce”.
Could the UK both join the CPTPP and have a trade deal with the EU?
Many CPTPP members also have trade agreements with the EU, so there is nothing in principle to stop it. Some of the provisions of the CPTPP, however, clash with the UK's obligations under the Withdrawal Agreement and with the EU’s demands in the future relationship negotiations.
For example, Article 58(2) of the Withdrawal Agreement requires the UK to protect “traditional terms” for wine. These are terms such as “château”, “clos” or “tawny” which, in the EU’s view, are associated with specific winemaking regions and should be reserved for them. The US disagrees vehemently and so secured a provision prohibiting the parties from restricting the use of such terms. The UK would need to secure an exemption from this rule to comply with its obligations under the Withdrawal Agreement. This can be done – Canada secured such an exemption in the original TPP talks – but it highlights the complexity, and risk, of attempting to negotiate two wide-ranging and at times contradictory FTAs at once.