Negotiations started in March 2010. The original deal was finished in January 2016 with 12 parties. When the United States withdrew a year later, many people expected the agreement to die a quiet death. However, officials persevered and fought hard to maintain the high quality of the trading arrangements. For many, this meant accepting tough provisions originally negotiated as part of a comprehensive package with 12 members. The consequences of the final agreement are important for companies. Our brand-new booklet on 10 Benefits of the CPTPP can be downloaded here. The final agreement signed in Chile pared back the commitments by suspending 19 elements, amending one provision, and clarifying the terms for two others. (For more specific details, see our revised Policy Brief 17-11a.)
November 2017: This is an updated version of an earlier post on Talking Trade, modified to reflect the TPP11 changes and the expansion of the agenda in RCEP. However, because RCEP, especially, remains under negotiation, the assessment should be viewed with some caution. For further discussion on how you can use or influence these agreements, please see us soon at the Asian Trade Centre.
The primary difference between the original 12 party Trans-Pacific Partnership (TPP) and the new 11 party version is a set of “suspended” provisions. This is a list of 20 items that officials from the member countries have agreed to remove temporarily from the free trade agreement texts. These suspended provisions (found in Annex 2 of the CPTPP) are meant to be reinstated at some future date. In other words, these elements of the TPP may come back into the agreement as originally negotiated. Between now and then, member governments are not required to implement these rules at the domestic level. Many commentators with an unclear understanding of the TPP have assumed that these suspended provisions are a significant proportion of the document. The removal of both the United States and the 20 elements, therefore, has been said to make the TPP11 less relevant. Neither is the case. The TPP11 (or the CPTPP) is extremely important for companies and continues to set the benchmark for future trade agreements globally.
In other words, all of the existing annexes from the TPP agreement remain unchanged. All tariff cuts will take place on schedule as planned. All services open as intended. All investment is opened as indicated for TPP11 firms. All procurement access that was originally scheduled will continue. Furthermore, there are zero changes to the legal texts at all (beyond removing references to the United States) in the original chapters for 1-4 (definitions, market access for goods, rules of origin, textiles), 6-8 (trade remedies, sanitary and phytosanitary, technical barriers to trade), 12 (temporary movement of business persons), 14 (electronic commerce), 16-17 (competition, state owned enterprises), 19 (labor), 21-25 (cooperation and capacity building, competitiveness and business facilitation, development, SMEs, regulatory coherence), 28 (dispute settlement).
Broken down, the new elements are the inclusion of the suspended bits (discussed more below), the revised entry into force (necessary after the US pulled out), a new section on withdrawal (the necessity of which was made crystal clear after the US pulled out), a new section on accession (since the old one was too vague anyway), a potentially interesting article 6 that seems to review the whole agreement in the future, and article 7 that copies across all of the original commitments and texts from TPP12. What this means in practice is that the CPTPP or TPP11 has identical schedules and commitments for members to TPP12. Everyone should start pulling out their TPP12 materials and reviewing documents to refresh memories now. Firms need to prepare for entry into force which is coming up fast.
Proving once again that good ideas cannot be killed, the Trans-Pacific Partnership (TPP) is ready to move into force as soon as next year. Companies had largely given up on the TPP after the withdrawal of the United States. Now firms will need to scramble to figure out how the agreement matters to their business and what steps they should take to maximize the opportunities and minimize the risks arising from the most important trade agreement in decades. What makes the TPP so relevant is the deep, interlocking nature of the commitments. Unlike other free trade agreements (FTAs), the TPP doesn’t simply open up trade in some goods or partially address services or investment. It manages to better reflect the way that firms actually structure business operations today. It will allow companies to more seamlessly move goods, services, and investments between and across TPP member markets. This benefits not just the biggest firms that have always had advantages of scale, but smaller firms that often struggle to sort out complex rules in trade deals.