Comprehensive and Progressive Trans-Pacific Partnership

The CPTPP Expansion Challenge for America

The CPTPP Expansion Challenge for America

This now puts the US in a particularly awkward position with Chinese entry to the CPTPP on the table. The easiest solution would be for the US to quickly come back to the revised deal. All the schedules have been maintained and could be reactivated. The 20 provisions that were “frozen” in the transition from TPP to CPTPP could be addressed. However, politically in the US, this is viewed as a “non-starter.” If the US were to return at this point, there would need to be additional adjustments made and, even then, it is not clear whether there might be sufficient votes in Congress to approve entry. The US, under the Biden Administration, continues to work on its trade policy dimensions. There is a review of policy with China, specifically, that has been underway for months. Until these are both clarified and supported by Congress, it’s not clear what sort of forward-looking offensive trade items might be possible. It could be something on digital or perhaps on climate. Since the US is neither likely to return to the CPTPP in the near term or have a comprehensive trade strategy in place, the US is in a pickle.

Time to Upgrade the CPTPP

Time to Upgrade the CPTPP

Since all CPTPP member countries will gather together various working groups to discuss UK accession, it makes sense for these working parties to also reflect on what aspects of the agreement may need a bit of a refresh. There are lots of new ideas that have been built into other agreements that might be usefully imported in the CPTPP. One area, in particular, that is due for an upgrade is the e-commerce chapter. For example, it currently carves out in the opening chapter paragraphs, via the definitions of “covered persons,” the cross-border transfer of financial services data. This exception has not been replicated in other trade arrangements by the current CPTPP members. The existence of this definition is problematic because it seems to conflict with pledges elsewhere in the agreement, including the financial services chapter, to provide such services. It could be time to remove this exception or, at a minimum, relook at the language to determine whether it needs to remain exactly as it was originally written. The rest of the chapter was pathbreaking for its time. But the digital economy, in particular, does not stand still and many innovations in technology, the extent to which digital increasingly underpins nearly every other aspect of the economy, and changes in rules outside the CPTPP suggest that it is due for a closer look and review. Many members will balk or hesitate at the idea of adjusting the agreement now, and especially as part of an accession process. Thus far, every new member joining the deal has had to commit to taking the rule book “as it stands.” Bringing changes or a review into the accession proceedings sets a new precedent to allow future members to expect similar treatment. While a legitimate and valid concern, it raises the issue of when such reviews might take place. If not now, then when? Preparing teams to handle the CPTPP is not simple. Absent a Secretariat with full-time officials that have made CPTPP a daily priority, every government manages the CPTPP on the side or as part of their overall job addressing a range of trade commitments and new negotiations elsewhere. Staffing up at the level of detail and knowledge necessary to carefully review provisions is likely to be a major undertaking. It won’t happen again easily.

The CPTPP Expands

The CPTPP Expands

For the UK, however, the process of acceding to the CPTPP is likely to be fast. Joining the deal has political engagement at the highest levels in London, discussions have been underway for some time, and many of the most challenging topics have already been flagged. The CPTPP members had hoped to have additional countries joining the UK at the same time. After all, it is costly to get teams together to manage the process and doing it for one aspiring member is not significantly different from handling two or more new members. So, as is often asked, who else might quickly join the line? The “missing four” should be at the top of the list. These are the four members of the CPTPP that have not yet completed their domestic ratification procedures to bring the deal into force for their markets. Most of the four (Brunei, Chile, Malaysia, and Peru) have undergone significant political changes during the past few years that has made it difficult to put CPTPP entry on the table. With the agreement expanding, the time is ripe for trying again. After these four, likely new candidates include South Korea (perennially mentioned but unable to get consensus domestically) and Thailand (missing key supply chain opportunities to neighboring Vietnam). Taiwan is ready and prepared, although the political issues surrounding entry remain challenging. There are two other possible members that are always mentioned: the United States and China.

How to Join the CPTPP

How to Join the CPTPP

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:

Bright Spots for Trade in Asia

Bright Spots for Trade in Asia

Two other important groupings have important milestones in August. The members of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) are meeting on August 5. The CPTPP, which still has no Secretariat to manage this sprawling and complex trade agreement, is instead driven by a series of meetings across the year by government officials working on various aspects of the deal. The primary mechanism for oversight is the CPTPP Commission, which will be held virtually under Mexico’s chairmanship this year. The Commission meeting should be notable for a few reasons. First, it is an opportunity to celebrate the achievements of the agreement after more than 18 months in operation. While trade flows remain depressed under the pandemic, governments like Vietnam have taken advantage of the opportunity to expand knowledge. Vietnam held 577 seminars and workshops in 2019 alone to encourage the proper utilization of the CPTPP by firms of all sizes across the country. Second, the Commission will review any issues that have emerged in implementation. An agreement that runs to nearly 600 pages with thousands of country-specific commitments is bound to have a few issues. As a simple example, a typo in one of the letters mentioned yams instead of yarn.