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.

The “North Star” of US Trade Policy Leads Where?

The “North Star” of US Trade Policy Leads Where?

Tai has made very few public appearances. Her confirmation hearings provided limited details into her thinking about how US trade policies might adjust to fit in this Administration. Vague answers make sense when trying for a smooth passage with Congress which makes it imperative to say nothing that might offend anyone. While resetting policy directions does take time, after several months on the job, at least broad outlines ought to be clearer, along with a sense of what is currently considered acceptable or intolerable about past practices. However, Tai is a master of speaking without revealing any worthwhile information at all. She deftly dodged every question posed to her during her conversations last week in the Financial Times’ Global Boardroom. Instead, she deflected pointed questions and responded mostly with “motherhood and apple pie” sorts of statements. The net result is it still remains unclear what a worker centered trade policy actually looks like. Beyond repeatedly stating that the Administration’s “North Star” remains creating a trade policy that delivers value to workers, there were no details on what that means in practice. She said that the whole of government would be laser focused on following this objective. It’s awfully difficult to have the government machinery start focusing on a particular “Star” without any guidance on what might be meant by the term, what might be problematic from past efforts, and what outcomes should be encouraged going forward. Unless Tai is much more voluble in conversations with the whole of government engaged—to one extent or another—in designing and executing US trade policy, it is highly likely that most officials are uncertain or confused about the path forward.

Making Payments Easier in Asia

Making Payments Easier in Asia

Digital payments are at the centre of digital trade expansion and serve as a key enabling factor for digital commerce. Firms will not provide goods or services if they cannot be paid. Payment services, therefore, are a critical component of the online services ecosystem that allows consumers to conveniently make purchases for goods and services from merchants globally and for firms to sell around the world far more easily and cheaply than ever before. Cross-border digital payments, in particular, are instrumental for the development of the regional economy and the growth and resilience of micro, small and medium sized enterprises (MSMEs) looking to thrive in a post-Covid pandemic environment. New innovations within the e-payments space, like e-wallets and blockchain, and initiatives by governments aimed at fostering increased use of digital payments, will likely improve access and lower the costs of cross-border transactions, especially for MSMEs. However, most of this innovation has taken place in the domestic space, where payments are experiencing improvements in terms of speed and convenience. Conversely, cross-border e-payments remain slow, costly and opaque, and difficult to manage. A lack of access as well as regulatory and payment network interoperability means that payments remain one of the most challenging issues for MSMEs hoping to engage in cross-border e-commerce in the region. As governments in the region continue to promote initiatives that improve access and use of digital payments, the challenges of managing cross-border transactions are often under-appreciated by policymakers. MSME merchants and financial service providers continue to struggle to develop and sell their products and services across borders.

Facilitating Trade: Vaccine Passports?

Facilitating Trade: Vaccine Passports?

International tourism is key to many economies around the world, accounting for over 10 percent of world GDP in 2019. But international travel is not just about beach vacations in Aruba. Business travel is essential to restarting the world economy. Facilitating travel for work is a clear reason to embrace the vaccine passport. Take, for example, the opening of a manufacturing plant. Such an endeavor requires highly skilled experts who may not necessarily live in-country. The type of engineering expertise needed to construct and kick off the operations of a high-tech factory is not always needed day-to-day – meaning in the pre-COVID world, the firm or industry relied on hassle-free international and inter-regional travel, allowing experts to work on-site for short periods. Now, a similar trip might require the traveler undergo two two-week hotel room quarantines on either end of the trip, making business travel much more expensive and inconvenient. In a 2020 paper, Harvard researchers set out to determine how much business travel benefits the global economy. Using their model, the researchers determined that the effects of reduced business travel are severe. If business travelers were forbidden from leaving South Korea alone, world GDP would fall by an estimated 0.95 percent – equivalent to nearly US$770 billion a year. In 2020, business travel fell by an estimated 54 percent, and expected to fall even further through 2021. To put it simply – the consequences of reduced business travel are huge. With governments nowhere near lifting entry restrictions and airlines not particularly keen on letting contagious passengers fly, the vaccine passport is an obvious solution to ease restrictions on international travel.