Talking Trade blog
CPTPP: Moving to entry into force for the UK
Published 18 July 2023
This past weekend, the United Kingdom and 11 current members signed accession documents for the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). This is the first time since the agreement came into force in late 2018 that it has accepted a new member.
The schedules of the UK were just released, with the key details shown in the annexes. The legal CPTPP text document does not change with the addition of any new member, nor do any existing commitments like tariffs or services schedules for existing members, although there are 65 new side letters which have been concluded between the UK and other members on a bilateral basis. (It appears that some letters are identical, or nearly identical, and signed with multiple members.)
Side letters were used by existing members to clarify the relationship between CPTPP commitments and existing trade arrangements, to grant time-bound extensions to some provisions (especially for developing country members), or to exempt the application of some provisions for some members as agreed in the letter.
The total number of existing letters is unclear, as there is no single location for accessing them. The New Zealand website, as the official repository country for CPTPP, provides links to 25 documents. However, these are dominated by arrangements that include New Zealand and do not include letters signed by other members that can be found in various other member CPTPP websites. (If I may complain once more—if we had a CPTPP Secretariat looking after this agreement full-time, this problem would surely be resolved.)
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 while others have less formal procedures.
The UK accession protocol will only enter into force (EIF) 60 days after the UK and at least 6 existing members have completed their internal processes. 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.
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.
CPTPP members had anticipated potential difficulties in getting the agreement to enter into force, however. They included provisions to ensure that any member that experienced delays in approvals would not gain an unfair advantage. Instead, regardless of when a member joined, it would “start” its own schedules and commitments at the same point as existing members. In other words, although it took some time for all existing members to submit their domestic ratification, all are currently at the same “year” for tariff concessions.
To better understand the issue, it might be helpful to look at a concrete example. Mexico’s base rate on onions (HS070310) was 10%. Tariff reductions were scheduled in 15 even installments to become duty or tariff free. Thus, the original six members had a tariff cut to 9.3% on December 30, 2018, followed by another reduction to 8.6% on January 1, 2019. By 2023, the tariff rate is 6% (in “year 6”).
Hence, some of the CPTPP members with late entry into force, like Chile and Brunei which have only just started, would have been at a disadvantage compared to other CPTPP members. The catch-up clause ensures that all members—regardless of ratification date of entry—receive tariff cuts on Mexican onions to 6% this year.
The reverse is also true. Late approvals also mean that members like Chile and Brunei never started their schedules at year 1, but jumped straight to year 6. The same conditions will apparently apply to the UK.
Onion tariffs for Brunei were already 0 and Chile’s 6% tariff rate also dropped to zero on entry into force, so the difference between starting on year 1 or year 6 for onions is minimal. However, for some other products or for other members, these differences could be more significant.
This issue of which “year” applies is most acute for tariff schedules and tariff rate quotas. Most of the agreement enters into force in full on the opening day.
Although the main focus of the CPTPP Commission meeting was the agreement with the UK, members also reviewed existing work in the agreement, including the creation of a new group on customs. While many were hoping for a decision on the line of other applicant countries, the Commission ducked the issue and simply pledged to continue working with applicants. Members will meet again on the sidelines of the Summit season in November.
 Although it should be noted that Japan scheduled its own “year” of tariff cuts to start annually on April 1, rather than January 1.
 The timing of ratification also determined the rotation schedule for the Chair of the CPTPP Commission. This year, the Chair is New Zealand, to be followed by Canada in 2024.
 Of course, many CPTPP members had free trade agreement arrangements with Mexico that might have included tariff reductions on onions prior to CPTPP entry into force, which may have given members lower tariff rates at the outset than 10%. The promiscuous nature of CPTPP members, with many overlapping FTAs, makes tariff comparisons a more challenging exercise, as rates need to be set against any other possible FTA benefits as well as the CPTPP commitments.
 Hopefully a (future?) Secretariat will adjust all the existing tariff schedule documents to make it much easier to understand which “year” applies on a calendar so companies can unravel some of the details on their own. If you want your head to spin, try unraveling the details in Annex 2-D, Section A which is supposed to be providing clarity on tariff scheduling.
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