Talking Trade blog
The CPTPP expands
Published 03 June 2021
The members of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade agreement have formally accepted the United Kingdom into an accession process.
While this is the first time the agreement has expanded since it entered into force, this trade deal has experience with adding new members over its negotiating history. It started as an agreement with four members in 2006 (Brunei, Chile, New Zealand and Singapore). By the time of conclusion, the Trans-Pacific Partnership (TPP) had twelve members: the original four plus Australia, Canada, Japan, Malaysia, Mexico, Peru, United States, and Vietnam.
It then famously shrunk when the United States withdrew in early 2017 and was converted into the CPTPP before entering into force, at long last, for seven members nearly two years later.
The CPTPP has been up and running for several years and delivering benefits to companies across Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam.
With the UK poised to join the deal, what happens next?
The CPTPP member countries will get together what will be called “working parties.” These are groups of trade officials in each member country to help facilitate or guide the process.
When a new member joins the agreement, it is not a full-blown negotiation. The new member will not be reopening or discussing the existing texts or rules. The current members will not be adjusting their own specific commitments as shown in their schedules. Instead, the UK and other potential new members will be working on creating their own market access schedules for goods (the pace and timing for tariff cuts and elimination for every tariff line), services and investment reservations (where the member reserves the right to remain out of alignment with specific commitments in the agreement), business mobility (where members outline what types of individuals may receive access to travel for temporary periods to deliver services into the new market), state-owned enterprise commitments (which specific firms will not be subject to CPTPP disciplines), and government procurement (to clarify what types of government contracts are available for CPTPP member firms).
Current members, while not preparing to adjust their own existing commitments, will need to recall what they have promised to deliver and review the texts and rules in order to more effectively work with the acceding members. The final commitments for the UK have to be approved by CPTPP members. The working party will manage the processes.
It’s unclear how long accession might take. A somewhat similar parallel process can be found in joining the World Trade Organization (WTO). There, accession can be swift, particularly as aspiring members have had time to read and absorb the existing agreement, texts and schedules and figure out their own preferred scheduled responses for each area. Or the process might be lengthy. Some WTO accessions have dragged on for years or even decades.
For the UK, however, the process of acceding to the CPTPP is likely to be fast. Joining the deal has political engagement at the highest levels in London, discussions have been underway for some time, and many of the most challenging topics have already been flagged.
The CPTPP members had hoped to have additional countries joining the UK at the same time. After all, it is costly to get teams together to manage the process and doing it for one aspiring member is not significantly different from handling two or more new members.
So, as is often asked, who else might quickly join the line?
The “missing four” should be at the top of the list. These are the four members of the CPTPP that have not yet completed their domestic ratification procedures to bring the deal into force for their markets. Most of the four (Brunei, Chile, Malaysia, and Peru) have undergone significant political changes during the past few years that has made it difficult to put CPTPP entry on the table. With the agreement expanding, the time is ripe for trying again.
After these four, likely new candidates include South Korea (perennially mentioned but unable to get consensus domestically) and Thailand (missing key supply chain opportunities to neighboring Vietnam). Taiwan is ready and prepared, although the political issues surrounding entry remain challenging.
There are two other possible members that are always mentioned: the United States and China.
The US could, certainly, rejoin the CPTPP. There were 22 provisions suspended or adjusted in the wake of American withdrawal from the original TPP agreement. These might or might not be reactivated if the US were to come back.
There are two bigger challenges however. First, the Executive Branch in the US is about to lose the authority to negotiate trade deal granted by Congress on July 1. Trade Promotion Authority (TPA) expires, and with it, instructions from the legislature about what must be included to help ensure a smooth passage of the agreement at the end. Getting TPA is not on the priority list for the Biden Administration at this time and probably will not be part of the agenda for a while to come.
Second, if the US were to return to the CPTPP, it is highly unlikely that the 22 items would be the only changes the United States would demand as conditions for entry. They would insist on making rule adjustments in other areas. After holding the line on exactly such changes for other parties, it could be difficult for the current members to agree. Even if they wanted to do so, the specific types of requests the US might make could be challenging for existing members.
Hence, while it is certainly possible for the US to join or rejoin the CPTPP, the timing is not auspicious and the price may be seen as too high for some current members.
A second country with potential aspirations of joining is China. Chinese interest in joining the CPTPP ought not be dismissed. While not asking for entry at this moment, the Chinese government has been increasingly active and involved in determining what sort of adjustments would be need domestically to come into compliance with the agreement and what sort of schedules could be offered to members.
Chinese entry would, of course, be complicated. Among other challenges, the timing is critical. Many current members want the United States back in the deal. But the US is likely to do so in the near term and may never come back. If China were in ahead of the US, of course, it would likely be impossible for the US to rejoin. However, keeping China out may also be problematic, particularly as many of the CPTPP rules would be encouraging exactly the sort of behavior that many want.
In the meantime, current and potential future members will be watching the accession process for the UK with significant interest. This is a trade deal that delivers results. Getting new members in only increases its attractiveness.
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