One of the largest and most comprehensive trade agreements in the world may soon get even bigger. We’re talking about the Comprehensive Progressive Trans-Pacific Partnership (CPTPP), an 11-country pact that the United Kingdom has officially expressed interest in joining.
Below is a primer on the CPTPP, why it’s important and what we should expect in the days and months ahead.
What is the CPTPP?
- A free trade agreement between 11 countries in the Asia-Pacific region: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
- While originally an American-led negotiation, Donald Trump pulled the U.S. out of the original TPP as one of his first acts as president. The remaining members renegotiated in a few areas and the agreement entered into force in December 2018. Full implementation of the pact is still in progress.
- Once fully in force, the CPTPP will be a free trade agreement that spans the Asia-Pacific region, representing 13.5% of global GDP and 500 million consumers.
Why is it important?
As a U.S.-led initiative, one of the prime objectives for the pact was to set the rules for global trade in the large and lucrative Asia-Pacific region in order to counter a rising China.
Specifically, the pact binds its members to ambitious intellectual property rules and sets the terms for the role state-owned enterprises play in the region. It also enforces strict environmental and labour standards. Despite the American retreat from the pact, it remains an important geopolitical as well as trade and investment tool.
Furthermore, as trade linkages around the world continue to grow, comprehensive trade pacts are important especially as the WTO remains unable to advance free and open trade in a meaningful way. The CPTPP is one of the most ambitious of the large, 21st century pacts and features robust commitments to lower and eliminate tariffs, advance trade in services, facilitate investment and expand access to each country’s government procurement markets.
For the existing 11 members, implementation continues. Many of the tariff reduction and elimination schedules and related provisions will take years to take come in to effect. For example, Japan will slowly reduce tariffs over the next several years while tariffs from other countries and for other goods will fall to zero immediately. This critical work of bringing the agreement fully online will be important to track, especially since implementation and enforcement are increasingly just as important as the negotiations themselves when it comes to large, multi-party agreements.
And as mentioned above, the CPTPP is open to expansion for other countries that want to join. In addition to the UK, South Korea has also expressed interest in joining the pact. Many are even hopeful the U.S. will rejoin, however that is unlikely to happen anytime soon. Given the strategic importance of this region, not to mention the lucrative business opportunities, we’ll continue to watch these movements closely.