CPTPP

The Final ATC Talking Trade

The Final ATC Talking Trade

It was an exciting time to be in the region.  Governments were enthusiastically signing up to a wide variety of trade agreements.  For example, Laos completed accession procedures to become the 158th member of the World Trade Organization (WTO).  We were in Bhutan for two workshops to support a renewed consideration of joining the WTO.  We also had several training activities in Timor Leste with members of Parliament and across the government to support accession to the WTO in conjunction with plans to become part of ASEAN.  Mongolia, the last WTO member to not have a free trade agreement (FTA), asked for training to complete an FTA with Japan. ASEAN itself was rapidly pursuing greater internal integration, with plans for the ASEAN Economic Community (AEC) pushed forward from 2020 to 2015.  It was also working on a range of agreements called ASEAN+1s with major powers in the region including Australia, China, India, Japan, New Zealand, and South Korea.  There was also a lot of activity to integrate Asia more closely to the rest of the world.  The first meeting in what would become the Trans-Pacific Partnership (TPP) took place in Singapore on the sidelines of APEC.  The TPP, as regular Talking Trade readers will recall, rapidly expanded and finally concluded in 2014.  The European Union was actively involved in working with members of ASEAN to create an eventual bloc-to-bloc agreement, starting with a bilateral FTA with Singapore.

CPTPP: Moving to Entry Into Force for the UK

CPTPP: Moving to Entry Into Force for the UK

While the UK signature on the concluded accession protocol is to be welcomed, it does not mean that firms should expect to receive benefits from CPTPP expansion just yet.  First, the agreement has pass domestic UK approval procedures, which includes Parliamentary votes.  The protocol will also need to be approved by existing CPTPP members, using whatever domestic procedures are in place for managing this process.  In some members, domestic approvals might also require Parliamentary approval. The UK accession protocol will only enter into force (EIF) once the UK and at least 6 existing members have completed their internal processes and 60 days pass.  Members appear to be targeting approval within 15 months. Of course, these procedures could be shorter or longer than anticipated.  When the original CPTPP was moving towards ratification and approval, members were targeting a start date of January 1, 2019.  However, timing can be difficult to get quite right.  Several members wanted to be among the first 6 members to ratify the deal.  The Vietnamese were working hard to hit the January 1 deadline.  Several existing members moved slightly faster than anticipated and the 6th instrument of ratification was deposited in time to launch entry into force on December 30, 2018, instead of January 1.  This meant that the whole agreement came into force sooner than expected, with the first round of tariff cuts taking place on December 30 and the second “year” of tariff cuts starting just three days later on January 1.[1] The Vietnamese had an unexpected delay, which meant CPTPP did not come into force for Vietnam until January 14, 2019, when it joined Australia, Canada, Japan, Mexico, New Zealand, and Singapore.  Peru was not a full member until September 19, 2021, Malaysia on November 29, 2022, Chile on February 20, 2023, and Brunei finally joined just last week, on July 12, 2023.[2] [Photo courtesy Photo: RNZ / Giles Dexter]

Enforcement in Free Trade Agreements

Enforcement in Free Trade Agreements

Which makes the use of the dispute system in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) all the more surprising.  Last year, New Zealand challenged Canada over the proper implementation and allocation of tariff rate quotas for dairy products.  CPTPP members established the first-ever panel to review the case in March 2023.  The public hearing for the case is taking place this week in Ottawa, with a decision expected in a matter of weeks afterward.  The case is expected to be publicly released in September.  This will give observers a first glimpse into how well or poorly the dispute system embedded in the CPTPP works.  It could also provide an important impetus to future use of the dispute mechanism as a tool to prod members towards improved enforcement of various provisions. Frankly, none of the current CPTPP members is likely to have fully implemented all their commitments.  As a simple example, the agreement requires all members to update their government procurement thresholds at least every two years.  This is necessary because the limits were written as Special Drawing Rights (SDRs) which are not typically top of mind for firms looking to compete for construction contracts.  The SDR conversion rates and the adjustments to procurement are supposed to be published regularly but (as far as I know) not a single government has done so.  These sorts of implementation gaps appear across the agreement.  Some may be relevant to businesses and others may be less so.  But the basic point here is that, by relying on a dispute settlement mechanism built into an FTA to manage effective implementation, it requires such a mechanism to actually be used by participants.  Otherwise, enforcement and compliance will always be weak. The use of the dispute settlement provisions for the first time in the CPTPP, then, represents a potentially significant boost to the overall implementation incentives for this agreement.  For companies that may be waiting for improved delivery of various CPTPP promises, stepped up attention to implementation cannot come soon enough. 

Asia’s Response to the Collapsing Consensus on Trade

Asia’s Response to the Collapsing Consensus on Trade

Recent events have not been kind to fans of global trade.  Growing discontent with the status quo, particularly by major powers in the system like the United States, has led to a range of policy actions that would have been unthinkable just a decade ago.  The disruptions caused by the Covid-19 pandemic further shattered consensus over what constitutes acceptable actions by governments.  National security concerns are increasingly dominating economic decisions. In this rapidly evolving landscape, the global trade system is facing at least three major challenges.  First, global leadership has been in short supply with significantly less enthusiasm for supporting past trade practices and solutions.  Second, the proliferation of new trade arrangements comes with a growing risk of further trade splintering.  Finally, if past practices are increasingly seen as inadequate, there is limited agreement on what sort of alternative arrangements might be better fit for purpose. Asia plays a pivotal role in designing outcomes for the future.  This highly trade-dependent region has relied on the bedrock created by the World Trade Organization (WTO) to ensure trade lanes remain open and the use of broadly consistent rules to help govern trade.  Connecting to others via trade does not solve all problems, but it remains a critical tool for driving growth and economic development.  Now the WTO is stuck, with the consensus-based organization largely unable to move ahead on most of its agenda.  Other than an agreement on trade facilitation, the WTO has not managed to get any new trade rules or market liberalization in place since 1995.  Even the so-called “crown jewel” of the WTO, the dispute settlement system, has now been broken for several years. Restoring the multilateral system is an urgent priority, however, there is limited agreement on how to make it happen. 

CPTPP: Back to a Dozen Members!

CPTPP: Back to a Dozen Members!

The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) agreement is gaining its first new member with the announcement this morning of substantial conclusion of accession talks for the United Kingdom. While the Ministerial statement containing the good news amounted to just four paragraphs, regular Talking Trade readers will know that getting this far in accession talks is an important milestone.  The process has taken nearly two years, driven partly by Covid-19 pandemic travel disruptions which meant early talks were held online.  This was not the only challenge.  During the Working Party discussions, the CPTPP’s own active membership increased by three, with the ratification of Peru, Chile, and Malaysia.   (Just Brunei remains an original signatory, but not yet an active member of the group.)  Covid was not the only disruption during the past two years either.  The UK itself went through substantial domestic upheavals.  The country was also wrapped up in complex talks to help sort out its own trade strategy and engagements across the globe.  As trade experts are keenly aware, there can be a lag between the announcement of “substantial conclusion” and the actual closure of a trade deal.  Often this gap is described as allowing sufficient time for “legal scrubbing” to take place.  However, international trade lawyers will argue that a good legal eagle should be able to review any final changes that arise from a last marathon sprint in negotiations very quickly and, certainly, good lawyers should not need weeks or months to get their jobs done.