TURKISH CENTER  for ASIA PACIFIC STUDIES

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CPTPP:  Will it be useful for Global World?


The Turkish Center for Asia Pacific Studies -  October 1, 2022

Professor Badar Alam Iqbal
APAC Non-resident Distinguished Fellow, e-mail: 
badar.iqbal@fulbrightmail.org 

The General Agreement on Tariffs and Trade [GATT] was created in 1947 to regulate world trade. The GATT was transformed into World Trade Organization [WTO] in 1995 with the purpose of promoting a Multilateral Trading System. Nevertheless, with the passage of time, the global economy started experiencing “Old and New Regionalism”. Accordingly, trade blocks had emerged and the entire globe has seen different mega deals. The notable was the creation of the Trans-Pacific Partnership [TPP] with 11 countries, as back as 2009; then the Comprehensive and Progressive Agreement for Trans-Pacific Partnership [CPTPP] in March 2018, and then Regional Comprehensive Economic Partnership [RCEP] with 15 countries came up in November 2020. The RCEP become operational in January 2022. This is how the above three global mega deals have defeated the concept of promoting a “Multilateral Trading System” for which the WTO was established.

The CPTPP is a free trade agreement (FTA) comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam, since it was signed by the 11 countries on 8 March 2018 in Santiago. The CPTPP entered into force on 30 December 2018, while the ratification process of Brunei, Chile and Malaysia have been still pending.

The noteworthy feature of CPTPP has been that it is a more diversified block in nature and contents in the Asia Pacific region. This mega Agreement is a separate treaty that incorporates, by reference, the provisions of the TPP Agreement (signed but not yet in force), with the exception of a limited set of suspended provisions. The 11 participant countries have a shared vision of the CPTPP as a platform that is open to others to join if they are able to meet its high standards.

Significantly for Australia, the CPTPP ensures that the substantial market access package secured in the original TPP is maintained (i.e., covering goods and services market openings and commitments on regulations on foreign investment). This market access package will be implemented among the CPTPP Parties, delivering major new opportunities for Australian exporters, investors, and firms engaged in international business. The CPTPP maintains the ambitious scope and high-quality standards and rules of the original TPP.

In 2021, other economies namely- China, Taiwan, Ecuador, and the United Kingdom have submitted their respective application for becoming part of CPTPP. Other countries such as South Korea and Thailand are on the way to joining the CPTPP. These two important issues make out the CPTPP more comprehensive as compared to the RCEP which has become operative from January 2022.

Why CPTPP may be better than RCEP?

First, the requirements for phasing out tariffs on member countries are more comprehensive in regard to the CPTPP. Second; trade liberalization is incremental and tariffs on sensitive imports are left intact. Unlike the CPTPP, the RCEP does not include disciplines on support for state-owned enterprises (SOEs) or provisions on labor issues and environmental protections.

With 30 chapters in total, the CPTPP covers almost all aspects of trade between Canada and the 10 other CPTPP members. The Agreement features ambitious market-access commitments in trade in goods, services, investment, labor mobility, and government procurement. The Agreement also establishes clear rules that help create a consistent, transparent, and fair environment to do business in CPTPP markets, with dedicated chapters covering key issues like technical barriers to trade, sanitary and phytosanitary measures, customs administration, transparency, and state-owned enterprises. Additionally, the CPTPP features chapters on the protection of the environment and labor rights, which are enforceable by dispute settlement, to ensure that CPTPP members do not derogate from their commitments in these areas to increase trade or investment. The Agreement also includes a variety of chapters aimed at trade-related technical cooperation among CPTPP members, including with respect to small and medium-sized enterprises, regulatory coherence, and economic development.

Possible Pros of the CPTPP Members:

It is believed once the agreement is fully implemented, the CPTPP will establish a free trade area that spans the Asia-Pacific region, with its 11 member countries accounting for 13.5 percent of global GDP and 500 million consumers. The trade economists have opined that CPTPP ‘s member countries may have the following pros: 

  • There will be new opportunities for a broader range of member economies in terms of industries and sectors;
  • There could be preferential access among seven markets in the Asia-Pacific region such as Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam;
  • There could be increasing access to present FTA partners namely- Chile, Mexico, and Peru;
  • There will be a level playing field for Canadian exporters in regard to competitors from other countries in the region that already enjoy enhanced access to key markets such as Japan, Malaysia, and Vietnam;
  • There will be better and effective management in terms of enhanced rules and obligations to keep transparency, predictability, and consistency for member countries;
  • The CPTPP may provide a comprehensive commitment that addresses challenges and issues faced by member nations;
  • The CPTPP may ensure strong and sound provisions that may help in protecting the interests of member nations with regard to the protection of the environment, labor rights, and preservation of the right to regulate in the public interest while enhancing trade and investment among CPTPP markets.
  • There could be an ambitious outcome that puts a new standard for rules on trade and investment in the Asia-Pacific region and further promote and reinforce the commitment to the rules-based international system and global free trade.


Added to these, the CPTPP includes an accession process that provides for the further expansion of its membership now. Any economy that is able to meet the high-standard rules and ambitious market access commitments of the CPTPP can seek to join the Agreement, subject to negotiations on terms and conditions with the current members. As a result, the CPTPP may provide member countries with preferential access to additional markets in the Asia-Pacific region in the future.

It is believed that with the passage of time the CPTPP may bring more benefits to the global world in general and member countries in particular. There will be a higher degree of economic integration among the member nations resulting in more cohesiveness at the global level.


References:

Carey, S. (2020). An examination of the RCEP agreement. Guardian (Sydney), (1945), 4.

Chang, S. M., Huang, Y. Y., Shang, K. C., & Chiang, W. T. (2020). Impacts of regional integration and maritime transport on trade: with special reference to RCEP. Maritime Business Review.

Petri, P. A., & Plummer, M. (2020). RCEP: A new trade agreement that will shape global economics and politics, Brookings: Southeast Asia Insights. Retrieved from RCEP: A new trade agreement that will shape global economics and politics (brookings.edu)

Wu, C. H. (2020). ASEAN at the Crossroads: Trap and Track between CPTPP and RCEP. Journal of International Economic Law, 23(1), 97-117.

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