UK trade

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.

Brexit Means a Free Trade Agreement

But from our perspective, one key outcome of her speech is the announcement that the UK will seek to replace its current situation with an FTA and not with some sort of association or associate membership status.  Many are likely to cheer this news—not least because it brings some clarity after months of uncertainty over objectives.  But, frankly, from the perspective of companies operating in or out of the UK, it should be viewed with some alarm.  Why?  Because it means the UK will have to negotiate the most amazing FTA that has ever been negotiated with a very green, untested team up against one of the very best, most seasoned team of officials with the deepest bench of staff members on the planet. 

Special Edition: Why Trade Negotiations Are So Hard—The Details of Orange Juice

The Brexit debate has given rise to many bewildered discussions about the apparent difficulties of negotiating trade agreements.  After all, as at least one commentator said, if we can put a man on the moon, surely the UK can negotiate a few trade agreements?  Of course.  Compared to putting a person on the moon, many things seem easy.  But the complexity of negotiating trade is not to be underestimated either.  To illustrate why this is so challenging, just consider the following example of orange juice. 

Should Singapore (Or Anyone Else) Sign a Bilateral Trade Deal with the UK?

To launch negotiations on a free trade agreement with Singapore (or any other country) would mean starting to build a house without a clear foundation.  No sensible partner would want to do such a thing.  Instead, potential trade partners will want to wait until the specific terms and conditions of Brexit are sorted.  Then, and only then, will it be possible for the UK to figure out what sort of obligations can it take up with the EU, at the WTO, and with potential trade partners.