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The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is back in the spotlight. In July 2023 the group welcomed its 12th and first new member, the United Kingdom, since the partnership's creation 2018. It is a win-win achievement for the United Kingdom to join the prominent Asia-Pacific trade pact and for the CPTPP to bring in the second largest economy among the members, going beyond its geographic limitation. Moreover, six aspirant countries are in queue for possible accession: China, Taiwan, Ecuador, Costa Rica, Uruguay, and Ukraine.
These positive developments follow five turbulent years of existence, which culminated in the preemptive US withdrawal in 2017 from the pact's precursor (the Trans-Pacific Partnership). Now the CPTPP is at a crossroads.
Building on its recent momentum, will the CPTPP evolve into a truly open, comprehensive, and inclusive trade platform with significant market liberalization for new members? Or will its evolution be hampered by geopolitical tussles, compromising the agreement's relevance in the rapidly changing Indo-Pacific? The partnership's future depends on how it copes with the imminent and outsized task of accession for six countries, and for China and Taiwan in particular, and how it positions itself for enduring preeminence as a guardian of free and open trade in the region.
Big tasks ahead for the CPTPP
The CPTPP faces three challenges.
First, the CPTPP should show how, during its nearly five years of existence, its new rules and standards have been implemented. Do the innovative "cumulative rules of origin" accelerate the formation of intraregional supply chains and save money and time for small and medium-sized enterprises as intended? What are the effects of the implementation of the pact's first-of-their-kind rules, for example, on state-owned enterprises (SOEs), in light of recent industrial policies, fishery subsidies, and much strengthened sanitary and phytosanitary measures? The CPTPP got off to a slow start—ratification of the original 11 members was completed only in May 2023—but such evidence-based assessment would help to address recent concerns and backlash on free trade and mega free trade agreements.
Second, the CPTPP rulebook, which was conceived in an era of globalization a decade ago, is becoming out of date as the global trade environment is shifting fundamentally. The critical issues of today include supply chain resilience, decarbonization, emerging technologies, and AI, and traditional trade agreements such as the CPTPP and the Regional Comprehensive Economic Partnership (RCEP) were not designed to tackle these emerging challenges. To be effective and relevant in the new global environment, it is imperative that the CPTPP update and upgrade its rulebook, although some members may prefer to wait until the United States rejoins.
Third, in terms of its membership, the CPTPP is not yet broad enough to formulate more complete supply chains among members compared with the RCEP. There is a missing link in the CPTPP with some major economies in the region absent: South Korea, Indonesia, Thailand, and the Philippines, to name a few. The CPTPP needs to strike a right balance between maintaining high standards versus expanding qualified membership. As additional qualified members join, the benefits will be greater.
Managing the CPTPP accession process
Managing accession in a prudent, efficient, and strategic manner is of critical importance for the future of the CPTPP. In the complicated cases of China and Taiwan, structuring of the process of accession and its discussion could be as important as the substantive issues involved. There are several items to consider.
First, there needs to be clarity on how some of the agreement's chapters/provisions based on market capitalism principles could be applied to an economy based on state capitalism. For example, the SOE chapter—the first of its kind in any international trade agreement—is based on the premise that SOEs and their exception from the market principle should be limited to achieve competitive neutrality. Vietnam is unique among the current members in that it was allowed to carve out dozens of SOEs in the annex for exemption from the SOE disciplines. But what about a country with thousands of SOEs that are major players in its economy? What does this imply for the CPTPP's SOE principles? This fundamental question needs to be analyzed and clarified by members, scholars, and lawyers.
Second, the CPTPP members should carefully organize the next steps for accession considering their limited resources and the Herculean efforts needed to negotiate six pending cases. The members should avoid getting stuck in years of negotiations with unprepared aspirant economies. This is where informal consultations prior to the launch of a formal negotiation process could be valuable. Informal consultations could be an effective way to screen out the aspirants that are prepared—and have enough political capital—to get through the grueling accession process. But the process should not be used or perceived as a way of imposing an extensive—or expensive—entrance fee on the aspirants.
To take an example from the Korea-US Free Trade Agreement (which was considered a template for the CPTPP), the two sides officially announced their intent to launch the free trade agreement negotiation in February 2006. Prior to the official launch the two sides engaged in almost a year of intensive bilateral talks to address pending trade disputes such as market access in agricultural products. Strong commitments to resolve such issues were necessary for both sides to secure the domestic political support needed for the tough decisions involved in the final trade negotiation. Similarly, as Korea prepared for accession to the CPTPP over the last several years, it conducted countless informal and formal consultations with every member country at every level of the government hierarchy. This engagement certainly helped both sides to prepare.1.
In fact, the unwritten norm or practice among early TPP/CPTPP aspirant countries was that they should have informal consultations with each member and then, only after every member agrees, submit a formal application.2 It is not clear whether and how each of the six aspirant countries has conducted and completed such informal consultations before official submission of their applications. If such consultations were not sufficient, CPTPP members could consider establishing an exploratory task force for information gathering, analysis, and bilateral/plurilateral consultations necessary before officially deciding whether to commence the accession process and set up an accession working group. Aspirant economies' "demonstrated pattern of complying with their trade commitments"3 could be investigated and discussed in this way.
Last, the CPTPP should make it clear that the order of accession will be based on who is the most prepared politically and substantively (not on the principle of "first come, first served"). This should incentivize aspirant economies to be fully prepared before they enter into the process. Conducting accession negotiations with multiple aspirants simultaneously in batches would be practical as well.
The CPTPP is a valuable plurilateral trade platform in the world's fastest-growing region, especially at a time when trade liberalization is becoming a thing of the past. From the humble beginnings of the Trans-Pacific Strategic Economic Partnership (P4)—the visionary countries of Brunei, Chile, Singapore, and New Zealand—the CPTPP has grown and contributed to incubating new ideas and initiatives that have advanced the global trading system. If the CPTPP can manage to expand effectively and upgrade its rules and standards to cope with new global challenges, it will be positioned to lead by example the future of free and open trade the world desperately needs.
Notes
1. Korea has not submitted its official CPTPP application, pending completion of its domestic procedure requirements.
2. According to Article 1.1, Annex to CPTPP/COM/2019/D002, "Aspirant economies are encouraged to engage informally with all CPTPP Signatories regarding their interest in joining the CPTPP prior to submitting a formal request." The member countries have used informal consultations as an essential part of the process for an aspirant economy, informing and leading to consensus among members before the candidate submits a formal application.
3. Stated in the recent CPTPP Joint Ministerial Statement on the Occasion of the Seventh Commission Meeting in New Zealand.
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