The CPTPP – the TPP back from the (near) dead and coming your way

22 February 2018

This article was first published on the 20 February 2018 in Air Cargo Asia-Pacific Magazine. and has been updated on 22 February 2018 to reflect the release of the CPTPP text.

The Trans-Pacific Partnership (TPP) was an ambitious 12 nation free trade agreement (FTA) which was entered into some time ago but had never been formally implemented even though its entry into force had been approved by New Zealand and Australia.

The TPP has subsequently evolved into a new 11 nation version now known as ‘TPP11’ or, more formally, as the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) which appeared to have been approved by the 11 member nations at a meeting in Japan late in January 2018.

Recent history – clinching victory from the jaws of defeat

The evolution of the TPP into the CPTPP had not been without controversy and survived two near-death experiences. First, when the US withdrew from the TPP following the Trump administration taking office. Second, when Canada stalled on agreement to the deal at the APEC Ministers meeting in November 2017 even when the deal seemed to have been completed. On both occasions there were a number of reports of the death of the TPP but subsequent events seem to have proved that such reports were exaggerated and that the CPTPP would proceed with the remaining 11 nations with signing reported to take place on 8 March and (hopefully) implementation later this year or early in 2019.

So, more accurately the CPTPP is not ‘back from the dead’ but instead it represents an example of flexibility in negotiations and willingness to preserve the benefits of a deal in the face of adversity.

Transparency on the terms of the CPTPP

There has been some criticism around alleged secrecy on the terms of the CPTPP. While the text of the CPTPP was only released yesterday (21 February 2018) its details could have previously been constructed based around the original TPP (in the public domain), the removal of the US and details of 22 ‘suspensions’ to the TPP agreed at the APEC meeting.

Ultimately the CPTPP is only 9 pages long – and can now be found on the Department of Foreign Affairs and Trade website.

Highlights for industry

Some of the highlights for those in industry moving goods appear to be as follows:

  • It will improve our existing FTAs with countries who are also parties to the CPTPP
  • It will constitute new trade deals for Australia with Canada and Mexico
  • It will eliminate more than 98% of tariffs in the trade zone
  • Tariffs will be eliminated on trade in sheep, meat, cotton, wool, seafood, horticulture, wine and industrial products
  • New quotas for wheat, rice and sugar to Japan, Canada and Mexico will be granted
  • New reductions in Japan’s tariffs on beef (Australian exports worth AUD2 billion in 2016-17)
  • New access for dairy products into Japan, Canada and Mexico, including the elimination of a range of cheese tariffs into Japan covering over AUD100 million of trade
  • Tariff reductions and new access for our cereals and grains exporters into Japan, including, for the first time in 20 years, new access for rice products into Japan
  • Providers of transport and logistics services will benefit from simpler customs procedures and freight providers in Malaysia and Vietnam will gain more effective trade and investment protections for the first time, guaranteeing any future market reforms also flow through to Australian providers
  • The provisions for claims of origin are reasonably consistent of previous practice with the benefit that there is no mandatory use of certificates of origin issued by ‘approved authorities’. Hopefully this will allow for less complexity compared to ChAFTA

There are also other significant gains in the areas of services and investment as well as the benefits which arise from agreement on trade rules between nations (even when such gains may not be able to be readily quantified).

Measuring the benefits – possible and practical?

Further doubts have been expressed as to the quantum of the benefits to be delivered by the CPTPP and there have been calls for the deal to be reviewed by the Productivity Commission before coming into force. However those calls do not seem to take into account the following:

  • The TPP was previously reviewed and endorsed by the Parliaments Joint Standing Committee on Treaties (JSCOT) before which I appeared to support the TPP
  • The respected Peterson Institute had already modelled the benefits of the CPTPP in a study which confirmed substantial benefits even without the US
  • Business welcomed the deal – even with its limitations
  • The ECA issued a media release which identified some restrictions on reviews by the Productivity Commission which do not take into account a number of broader issues which cannot be reduced to figures at this stage
  • The current scope of the CPTPP is only the beginning. There are other countries such as Korea which have expressed an interest in joining the CPTPP – there is even commentary that the US is re-considering its position. Further membership can only increase the benefits and the deal sets the basis for further gains
  • The terms of the CPTPP will be subject to review by JSCOT, as was the TPP which allows a lot of parties the opportunity to make commentary on the CPTPP and its process

A broader pivot to the ‘other’ Americas?

Even with the US dropping out of the CPTPP there still remains a discernible move in focus to the Americas. Not only does the CPTPP effectively include a new FTA with Mexico but we have recently concluded a deal with Peru, one of the fastest growing economies in South America. In conjunction with New Zealand we are also progressing negotiations with the ‘Pacific Alliance‘ countries which includes Mexico and Peru as well as Colombia and Chile (with whom we already have an FTA). Given our FTAs with three of these countries the prospects look good.

All of these developments improve access into relatively new markets and represent an interesting comparison to regional delays with the Regional Comprehensive Economic Partnership, in our deals with India and Indonesia and the recent imposition of increased import duties by India. Our deals with North Asia have delivered good results and given my knowledge of some of the negotiators of the CPTPP I remain confident that it has been completed with national best interests in mind.

The CPTPP – part of needed positive outcomes

I remain positive around the CPTPP as I was for the TPP. We should accept that in a ‘second best’ world no one deal is perfect. At the same time that there are negatives in the global trade agenda, the CPTPP and other developments such as described above represent a useful counterbalance to increasing protectionism and demonstrate that the world can still move forward without the US or other major trading partners who appear either to be taking shelter in protectionism or be limited by political uncertainty.

Stay tuned for developments including more detail on adoption and implementation of the CPTPP – and, of course if pain persists contact your friendly customs and trade lawyer.

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