The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) is finally springing to life at the end of the month. Despite doubts from many quarters, companies and consumers will start receiving benefits within days. In their rush to become one of the first signatories, in fact, CPTPP members have actually delivered an unexpected, early New Year’s gift. Not only does the entire agreement begin on the first day, but most firms will get double tariff cuts by January 1, 2019. What does this mean? Start with the basics: on December 30, 2018, the full legal text of the CPTPP will come into force for Australia, Canada, Japan, Mexico, New Zealand, and Singapore. Vietnam joins on January 14, 2019. Every single provision in the 583 pages will become active on the very first day.
The much anticipated G20 meeting between US President Trump and Chinese President Xi finished without a total disaster. Both sides finished dinner, in fact, with a rudimentary agreement in place and managed to emerge with smiles all around. But does the “deal” signify anything of substance? In short, the signs are not great. Bets could easily be taken now on whether or not we will return to the exact same spot at the end of February. The early signs are not good. While people leaving the table in Argentina managed to argue that they achieved win-win outcomes, immediately afterwards both sides seem to have different interpretations of what, exactly, was agreed. The Americans have stressed a 90-day timeline for resolution of significant issues in the relationship. In that timeframe, the US will refrain from increasing tariffs on $200 billion in goods from 10% to 25% on January 1 as promised earlier. In exchange, the Chinese will make substantial purchases of agriculture, energy and other industrial goods. The Chinese, by contrast, have made no mention at all of the timelines for discussion. The tariff discussion inside China suggests that all tariffs will be eliminated during dialogue. And no commitments have been made for what, exactly, is to be bought or in what quantities or how quickly.
But slow stagnation does not automatically mean crisis. The current state of calamity in trade comes from the new approaches taken by the largest players in the system. This is not a post to discuss the diagnosis of the problem. It is, instead, to discuss the difficulties in treating the patient. What has been especially striking over the past few weeks has been the inability of many trade policy experts to conceptualize treatment options that go beyond simple remedies. If, indeed, the patient is on life-support or headed for the ICU, it may be necessary to think of unusual options. Yet different forums that ought to be perfectly positioned to do so seem to be caught. Perhaps they do not want to acknowledge the severity of the illness, do not want to admit that the diagnosis goes beyond conventional treatments, do not want to handle the intervention of others in handling the patient treatment, or do not want to think about more depressing trade news.
This was supposed to be the year that the Regional Comprehensive Economic Partnership (RCEP) trade negotiations finally wrapped up. Once again, it will not happen. The 16 parties involved (Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam) have been talking since early 2013. After 24 formal rounds, at least 9 ministerials, multiple informal meetings, and annual leader’s meetings, RCEP remains a work in progress. Why is it taking so long to get an agreement? The short answer is two-fold—a lack of sufficient political will and serious technical challenges in bridging the gaps between widely different member states. The lack of political will seems surprising to many outsiders. After all, at a time of rising global trade tensions, surely this is the best time to lock down an agreement in Asia to keep trade lanes open for mostly export-dependent trading states?
After a long and arduous path, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade agreement is ready to enter into force on December 30, 2018! Six member states have completed ratification procedures to allow the entire agreement to begin before the end of this year: Australia, Canada, Japan, Mexico, New Zealand and Singapore. This means that for these six members, every provision in the CPTPP will enter into force on December 30. Every tariff line will be reduced or eliminated, every service and investment sector that was pledged will be opened for CPTPP companies, all new rules on intellectual property rights start, all new customs procedures begin, new provisions for competition and state-owned enterprises kick in, labor and environment rules come into force, and so forth.