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Release of CPTPP’s Full Text Brings Asia-Pacific Trade Pact a Step Closer to Reality

Posted March 05, 2018


The rebooted Trans-Pacific Partnership took another step to becoming a reality with the recent publication of the trade pact’s final text ahead of an official signing ceremony in Santiago, Chile scheduled for later this week.

Now re-branded as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – also referred to as “TPP-11” – the free trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam has been widely touted as an antidote to growing U.S. protectionism under President Trump.

The Trudeau government in a statement  said the deal will give Canada “preferential access to half a billion consumers in the world’s most dynamic and fast-growing market, a move that will strengthen Canadian businesses, grow the economy, and create more well-paying jobs for middle class Canadians.”

Although considerably diminished without participation of the United States, the CPTPP remains hugely significant as it creates a new Asia-Pacific trading bloc of half a billion people with a combined gross domestic product of CAD $13.5 trillion – a full 13.5% of global GDP and a little over half the U.S. share of 24.5%.

Government impact analysis published last month concluded that the agreement would generate long-term economic gains for Canada of $4.2 billion, up from the $3.4 billion that was expected under the old TPP. The increase is due to improved market access to member nations for farm exports in the absence of U.S. competition.

However, the same study warned that the CPTPP could also lead to a decrease in U.S. exports to Canada by $3.3 billion, sparking concerns that the deal could potentially undermine Ottawa’s bargaining position in the NAFTA talks.

What’s New in the CPTPP?

Much like the 2015 agreement that was a signature foreign policy initiative of the Obama administration, the CPTPP is a so-called next generation trade deal that expands free trade rules beyond traditional goods and services, by embracing the digital economy and calling for broader requirements in areas such as labour issues, the environment and government procurement.

Where the TPP-11 primarily differs from the original agreement results from the suspension of a score of controversial provisions that had been included at the demand of U.S. negotiators, such as rules ramping up intellectual property protection of pharmaceuticals, which some governments and activists worried would raise the costs of medicine.

Suspended provisions will not have an effect under the agreement signed this week, but remain in the text and could be reintroduced at a later date, if all the parties agree.

Even with the numerous suspensions, it should be noted that the CPTPP still contains more detailed IP rights provisions than Canada’s other major trade agreements like the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union.

Side Letters

Certain areas that Canada wanted covered in the CPTPP are not dealt with in the final multilateral agreement.  However, the federal government is actively pursuing a series of bilateral “side-letter” agreements with individual countries to obtain additional protections for its cultural and automobile sectors.

Because the name can be easily misconstrued “by those who wish to undermine their actual heft and meaning,” government officials are quick to point out that these side-letters are actually a legally binding, treaty-level, agreement between countries.

On culture, Canada is expected to complete side-letters with each of the counterpart countries to provide protection for federal and provincial government activities in sensitive cultural areas, especially for the French language.

In the auto sector, Canada has already reached side-letter agreements with Japan and Malaysia, and is pursuing an agreement with Australia as well. The agreements with Japan and Malaysia address rules of origin (including to potentially allow Canada to benefit from concessions in future agreements with other non-party countries, such as the U.S.) and dispute resolution.

Next Steps

Following the signing ceremony later this week in Chile, each country will undertake its own domestic ratification procedures, which Canada’s case will include further stakeholder engagement, the tabling of the CPTPP in Parliament and the introduction of implementing legislation.

Once 6 of 11 countries (that together account for at least 85% of the group’s collective GDP) ratify the agreement domestically – a threshold analysts believe should be easily met – the trade pact will then come into force 60 days afterwards among those ratifying parties; most likely in late 2018 or early 2019. The majority of the tariff reductions on goods will take immediate effect when the CPTPP comes into force, as will all provisions related to services liberalization and investment.