CPTPP accession

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]

Latin America and the CPTPP: A Short Window of Opportunity

Latin America and the CPTPP: A Short Window of Opportunity

Last week Costa Rica officially submitted its petition to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), arguably the broadest and most ambitious regional trade agreement in the Asia-Pacific. Costa Rica’s application highlights the growing interest of Latin American governments to use the CPTPP as a mechanism to strengthen their linkages with the Asia-Pacific—a strategy that would reduce their reliance on a single trading partner and diversify/grow their exports and sources of investment. The CPTPP is the first major trans-Pacific agreement where most of its members to the east of the Pacific are Latin American—Chile, Mexico and Peru. Over the past year alone, Costa Rica and Ecuador have formally applied to become members and Uruguay has stated its intentions to join the agreement. Despite renewed enthusiasm in Latin America towards the CPTPP, the region’s engagement with the agreement could be short-lived. Volatile election cycles and growing political unrest and dissatisfaction across the region are likely to shift the region’s commitment towards, and ability to negotiate and ratify, an agreement like the CPTPP.

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.

Where Are We in Global Trade?

This has been an interesting, mixed, two weeks in trade.  On the one hand, the system continues to receive new shocks, particularly from US President Donald Trump.  On the other hand, trade integration is also moving forward.  The net result continues to highlight the increasingly unsettled global environment.  Firms need to focus on how to mitigate the risks facing their business operations.
Let’s start with the bad news. Two separate hearings have wrapped up in Washington.  The first focused on product categories for an additional $16 billion in 25% tariff rate hikes against goods coming from China. Regular readers may recall that the Americans first produced a list of items totaling $50 billion for new tariff increases.  The list was revised on the basis of hearings.  The first $34 billion in tariffs have already gone into force (and were met with retaliation by China on a similar amount).  But $16 billion in products were contested, resulting in a new list from the USTR. Now that hearings on the revised list of products has been completed, tariffs can be imposed at any time.  Expect them to be announced on Friday (since this seems to be the preferred approach of the Trump administration).  These new Section 301 tariffs will likely be met with $16 billion in matched retaliatory tariffs by China.