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ASIA TRADE: The challenges of expanding the CPTPP

Expansion has been baked into the DNA of the Comprehensive and Progressive Trans-Pacific Partnership. But the ongoing United Kingdom accession has revealed how challenging the process is in practice for the members as other countries have joined the queue.

From Four to Eleven

From the start of negotiations, officials working on what would become the CPTPP recognised the importance of including an accession clause to allow new members to join the deal.

Chile, New Zealand and Singapore demonstrated the importance of adding members when Brunei was included near the end of talks for what was then called the Trans-Pacific Strategic Economic Partnership or TPSEP in 2006.

TPSEP, colloquially known as the P4, concluded without agreement on two chapters—on financial services and investment.  In 2008, the United States asked to join negotiations for these two elements.

By the time participants gathered for the first round of talks in early 2010, additional members for a wholly new agreement included Australia, Malaysia, Peru, and Vietnam.  Canada, Japan and Mexico joined later.

The final text of the Trans-Pacific Partnership in 2016 contained a relatively short section on accession, its article 30.  Formally membership was open to APEC members and other states and separate customs territories and provided some information about the process of creating and concluding a working party process for accession.

When the United States withdrew from the TPP, the revised agreement got a new name, CPTPP, and two dozen adjusted provisions.

The CPTPP legal text, which is only nine pages in length and incorporates the TPP text by reference, has a new Article 5 on accession. It dropped the explicit reference to APEC, opening up accession to a wider set of possible members, but made no other adjustments to TPP’s article 30.4.

The CPTPP entered into force in December 2018.  Members has so far largely focused on getting as many of the original signatory countries to complete their domestic ratification procedures to become full members.  Malaysia will become the 9th participating member in December 2022.

Guidance

Members also recognised a lack of clarity regarding the processes and procedures for accession.  This was reflected in their almost immediate decision issued by the CPTPP Commission in January 2019 to provide an additional three pages of information for aspirant members.

The new guidance highlighted the importance for potential members to engage in informal consultations prior to submitting a formal request for membership.  Members pledged to provide a response to member requests within a “reasonable period of time” and to make the process publicly available.

The parties to the treaty committed to establishing a working group, once members agreed on the suitability of the aspirant candidate country, using the benchmarks outlined in the document.

Within 30 days, the rules say that aspirant countries shall submit market access offers and list their ‘non-conforming measures’ on goods, services, financial services, investment, temporary entry for business persons, government procurement and state-owned enterprises.

While the process has been described as a “negotiation,” it should be viewed as an accession.  The current members are not changing their own commitments in any way to accommodate new members.  The legal text of the agreement is not up for debate or revision.

Accession or negotiation?

The guidelines say in a benign sounding way that “the objective of comprehensive market access commitments agreed by CPTPP original signatories through the elimination of tariffs and other barriers to goods and services trade and investment should guide the level of commitments offered by aspirant countries.”

In practice, this means that members expect aspirants to eliminate 90% of all tariffs on entry into force and have the remaining 10% of tariff lines reach duty elimination in short order. This is undefined, but means as little as 3-5 years.

All services and investment sectors and subsectors should be fully opened to CPTPP firms with a modest number of reservations allowed.

One key normative commitment from the outset has been that every member agrees to follow all of the rules.  There are, of course, some flexibilities and exceptions built into the deal, but the overall practice assumes that the rulebook is the rulebook for all.

There are a very small handful of what members have called “side letters” that allow deviations from the rules.

In practice, most letters are modest, such as ensuring that a past bilateral provision can continue to stand.  A few are less so, such as some member carve-outs from the application of investment protection provisions or time extensions on some rules (particularly for developing country members).  The side letters apply only to signatories.

These are practices that current members have also followed.  A big part of the bilateral consultations at the outset are aimed at ensuring that aspirant members understand and are prepared to undertake these types of commitments.

United Kingdom test case

Accession to the CPTPP is therefore a mix of formal and informal rules and practices which have been developed by the current membership.

The process of applying existing rules and commitments to accession has been tested by the formation of the working group for the UK.  While the UK entry has not been finalised, the process has highlighted some significant challenges.

First, the management process has proven cumbersome.  The CPTPP does not have a secretariat and is led by one member acting as chair for the year based on their own order of entry into the agreement.

As a relatively new agreement, the CPTPP also has limited processes in place to operationalise the various committees that are meant to be included in the agreement.

Second, the current structure ends up being extremely “bespoke.”  With the UK process underway and formal applications pending from China, Ecuador, Taiwan and Costa Rica, it is hard to manage, particularly for smaller CPTPP members with limited staff and resources.

Third, knowledge of the CPTPP across current and applicant countries is inconsistent.  Some are very comfortable with the requirements and understand the likely gaps.  Others are less familiar with the agreement.  This has led to difficulties in making sure everyone is up to speed and able to follow talks effectively.

Fourth, while the current CPTPP members thought that they have been quite clear about expectations for aspiring members, including overall objectives, allowable timelines and the extremely limited exceptions allowed via side letters, the process so far has suggested that more clarity is needed.

More time needed

Members have therefore decided to give the accession process for the UK more time to evolve before expanding the agreement by allowing aspirant members to form new working parties.

Members recognise the serious challenges ahead in trying to manage new applications, especially from the current batch of aspirants, and are keen to put into place some new processes to better address the workload, expectations, and procedures.

It remains unclear exactly how long these changes might take, but pending applications probably cannot remain indefinitely on hold.  It is likely that next year’s chair, New Zealand, will find itself in the challenging position of announcing revisions to the accession processes as well as managing the formation of new working parties.

 

Deborah Elms is founder and executive director of the Asian Trade Centre in Singapore.

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