The delivery of a formal letter of intent from the UK to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) has launched a renewed flurry of interest in this trade deal.
But what does it take to join?
This agreement has already expanded (and even contracted) multiple times. The CPTPP started life with three members: Chile, New Zealand and Singapore created the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP). By the time this free trade agreement was signed in 2005, the arrangement had expanded to include Brunei and was informally renamed the “P4.”
The agreement morphed again in early 2010 when talks began on the Trans-Pacific Partnership (TPP) with the addition of Australia, Peru, the United States and Vietnam. It continued to add new members along the way: Malaysia (2010), Canada and Mexico (2012) and Japan (2013).
The TPP had 12 members at the time of signature in 2015. It lost one, the United States, in January 2017.
The deal was renamed again and slightly adjusted. The CPTPP came into force for seven members in December 2018: Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam.[1] The remaining four countries (Brunei, Chile, Malaysia, and Peru) are still not actively participating members.
The deal is now poised for expansion again with the addition of the UK. Other potential CPTPP applicants may also be part of the accession process (especially if they hurry).
While the procedures for expansion have changed a bit over all these years, the basics have remained largely intact. The original TPP had a clear tie to APEC but the revised CPTPP has no geographic or regional membership requirement. The rules and procedures of accession can be found here.
As the text and schedules for all existing members are already available, it is possible to see where likely obstacles or challenges may be found and to identify gaps between existing practices, laws and regulations of a potential member and the requirements of the CPTPP.
An incoming member is meant to canvas the current membership on a bilateral basis and ensure that any potential obstacles are highlighted, discussed between the two sides in detail and, potentially, removed. While many trade “irritants” can and should probably be tackled through group negotiations, sometimes a potential member has a specific issue of concern to only one member. In this circumstance, it can be addressed prior to entry to negotiations.
Note that only the seven currently active members are required to be included in bilateral consultations. Members that signed the CPTPP but have not yet ratified the document lost the ability to participate formally in accession decisions at the end of 2019.
Assuming the current members have no objection, the applicant country can proceed to file a formal request to join. This letter, as the UK has demonstrated, gets sent to New Zealand, as Wellington serves as the official repository location for the CPTPP.
In the absence of a Secretariat, the CPTPP is managed through a rotating appointment of Commission Chairs. Japan is currently holding the post. (Mexico held it last year and Singapore is up for 2022. Both are serving as vice chairs of the Commission for 2021 to support Japan. The rotation is dictated by the order in which members joined the agreement.)
A CPTPP Secretariat would make accession talks significantly easier. It would come with a built-in group of officials well versed in CPTPP rules and regulations, familiar with the existing membership and important sensitivities, as well as the current individuals for each member that are actively involved in various chapter activities. Secretariat staff could serve as neutral parties, shepherding new members through accession.
Without a Secretariat, CPTPP accession will be started by the current chair. The chair will help members decide on the composition of a “working group” to manage the process. It may be that all aspiring members are grouped together into one working group or that members opt to hold separate working groups for each potential member. The chair of the working group(s) will be decided by members and the group(s) will include representatives from all active members.
Accession to the CPTPP is not like launching FTA negotiations. The process is closer to that of joining the World Trade Organization (WTO). It will likely take some time to organize, as there is no sitting working group for members.
New members are not negotiating over changes to existing rules. The nearly 600 pages of text need not be adjusted in accession.
Instead, work will get underway on crafting new member’s specific schedules which include:
· tariff cuts (order and timing of cuts to reach tariff elimination in a timely fashion);
· services, including financial services, and investment restrictions which will remain in place after joining the CPTPP (all other services and investments will be opened for market access for all parties);
· government procurement entities that will not be bound by CPTPP rules to open federal level procurement above the specified thresholds;
· state-owned enterprises that will not be bound by CPTPP rules; and
· temporary entry of business persons commitments (such as how many intercorporate transferees are to be allowed or whether spouses have access, etc).
Of course, the start of accession provides a potential opportunity for CPTPP members to adjust the agreement, if all agree. The CPTPP was always been designed as a “living agreement” which meant it was pitched as open for adjustment from the very beginning.
An agreement that effectively closed in 2015 is likely to benefit from a careful review in 2021 and beyond. CPTPP members have been enthusiastic participants in a range of FTAs, including the work on the Regional Comprehensive Economic Partnership (RCEP) which closed late last year and a growing set of digital economy agreements.
Some of these later agreements have innovations that might be brought into the CPTPP—such as the creation of a Secretariat or the inclusion of MOUs to cover topics of collaboration that are still evolving and not yet ready for binding into the CPTPP texts.
Members could potentially take advantage of an opportunity to adjust their own commitments, bringing forward some tariff liberalization or removing or adjusting services and investment restrictions of their own. Some of the more innovative areas of the CPTPP, like the scheduling of SOEs or government procurement, might look unnecessarily cautious on hindsight.
Such adjustments to texts and existing schedules are not part of the accession process, per se, but members might find it useful to review such elements as negotiating teams are gathering together for the first expansion of the CPTPP.
In short, the receipt of the UK’s letter of interest moves the ball forward for the CPTPP. The start of new negotiations on accession should be a trigger for additional possible members to come forward. If this window of opportunity is missed, it may be some time before the CPTPP is prepared to expand further.
***This Talking Trade was written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore. If you need help understanding the CPTPP or why it remains the best trade deal for companies, contact us today at info@asiantradecentre.org or visit our website (http://asiantradecentre.org/ ) to review our extensive list of publications and Talking Trade posts on the CPTPP and other trade issues.***
[1] Technically, Vietnam’s entry took place in January 2019.