The CPTPP: An Un­cer­tain Prospect

Is the new trade deal as com­pre­hen­sive and pro­gres­sive as it de­clares? By Wen Qing

Beijing Review - - World -

Af­ter U. S. Pres­i­dent Don­ald Trump signed the or­der to with­draw from what he called the “po­ten­tial dis­as­ter” of the Trans-Pa­cific Part­ner­ship (TPP), ev­ery­one left it for dead. How­ever, the re­main­ing 11 TPP mem­ber coun­tries took a dif­fer­ent view and agreed to move for­ward. Fi­nally, Aus­tralia, Brunei, Canada, Chile, Japan, Malaysia, Mex­ico, New Zealand, Peru, Sin­ga­pore and Viet Nam signed the re­vised agree­ment in Chile on March 8, and the TPP was re­born as the Com­pre­hen­sive and Pro­gres­sive Agree­ment for Trans-Pa­cific Part­ner­ship (CPTPP). But with­out the par­tic­i­pa­tion of China and the United States, the two big­gest economies across the Pa­cific Ocean, is it re­ally as com­pre­hen­sive and pro­gres­sive as it de­clares?

A weak­ened TPP

“The TPP, as a strate­gic U.S. plan, was more like a closed sys­tem,” said Han Liqun, a re­searcher with the China In­sti­tutes of Con­tem­po­rary In­ter­na­tional Relations (CICIR), in an in­ter­view with Bei­jing Re­view. He noted that, among the 12 mem­bers that made up the TPP, Malaysia, Aus­tralia, New Zealand and Canada have rich raw ma­te­ri­als. The United States, Canada, Japan and South Korea are all strong man­u­fac­tur­ing pow­ers. Mean­while, the United States is also one of the big­gest con­sumer mar­kets in the world. There­fore, the TPP was a closed trade sys­tem which could have op­er­ated well with­out par­tic­i­pa­tion from other coun­tries.

Ac­cord­ing to Han, with the ab­sence of the United States as a huge con­sumer mar­ket, the CPTPP can­not run in this closed model. There­fore, the CPTPP is merely an­other av­er­age re­gional trade bloc, in con­trast to the strate­gic mean­ing of the TPP be­fore U.S. with­drawal.

The TPP was dif­fer­ent from past free trade agree­ments which fo­cused on the con­ve­nience of trade and in­vest­ment. It in­volved reg­u­la­tions on the free flow of per­son­nel and cap­i­tal, pro­tec­tion of in­tel­lec­tual prop­erty rights, pro­tec­tion of la­bor rights and the en­vi­ron­ment, as well as re­stric­tions on pref­er­en­tial poli­cies for sta­te­owned en­ter­prises.

“A de­sign mech­a­nism built on such high stan­dards re­flects the United States’ strate­gic plans to play the dom­i­nant role in re­shap­ing the rules of global trade,” said Han. How­ever, the CPTPP, although re­tain­ing most of the orig­i­nal TPP text, low­ered stan­dards by sus­pend­ing or al­ter­ing 22 pro­vi­sions about in­tel­lec­tual prop­erty pro­tec­tion and in­vest­ment. For ex­am­ple, the length of patent pro­tec­tion for in­no­va­tive medicine has been slashed, and the avail­abil­ity mech­a­nism for for­eign in­vestors to sue the host mem­ber state has also been nar­rowed, Han added.

More­over, “the in­flu­ence of the new or­ga­ni­za­tion is weak­ened when you con­sider its de­creased over­all eco­nomic power,” said Ni Jian­jun, Deputy Di­rec­tor of the In­sti­tute of World Eco­nomic Stud­ies at the CICIR. The 11 mem­ber coun­tries ac­count for 13.5 per­cent of the global GDP and 15.2 per­cent of total global trade turnover, much lower than the TPP’s 38.2 per­cent of global GDP and 26.5 per­cent of trade turnover. “Although it re­tained some high stan­dards from the TPP, con­sid­er­ing its over­all slashed eco­nomic power, the CPTPP is in no po­si­tion to play the role of rewrit­ing rules for global trade or lead­ing glob­al­iza­tion as it has de­clared,” Ni noted.

Prospects for the CPTPP

Ac­cord­ing to the rules of the CPTPP, it will take ef­fect 60 days af­ter be­ing ap­proved by at least six coun­tries, which is much eas­ier than that of the TPP.

“But its outlook re­mains un­clear,” Ni told Bei­jing Re­view. Ob­sta­cles still ex­ist for ap­proval. For in­stance, the pro­tec­tion­ist forces of these coun­tries will prob­a­bly try to im­pede its ap­proval as it may dam­age their vested in­ter­ests, Ni ex­plained.

Although im­mensely am­bi­tious due to its eco­nomic size within the bloc, Japan is not up to the task of lead­ing the CPTPP, Ni said. Af­ter the with­drawal of the United States, the CPTPP be­came less ap­peal­ing to the As­so­ci­a­tion of South­east Asian Na­tions (ASEAN) which had ini­tially been at­tracted to the TPP by the huge con­sumer mar­kets in the United States and the rich re­sources in Aus­tralia and Canada.

Jiang Yuechun, a se­nior re­searcher at the China In­sti­tute of In­ter­na­tional Stud­ies, echoed Ni’s com­ments, of­fer­ing as proof Japan’s adop­tion of agri­cul­ture pro­tec­tion­ism to avoid in­ter­na­tional com­pe­ti­tion by pro­tect­ing the so­called “sa­cred five” prod­ucts: rice, wheat, beef and pork, dairy prod­ucts and sweet­en­ers such as sug­ar­cane and beets.

“The tar­iff on for­eign rice is as high as 600 per­cent,” Jiang said. “Join­ing the CPTPP means Japan’s tar­iffs on im­port­ing agri­cul­tural prod­ucts would de­crease to zero, which means a big hit to lo­cal agri­cul­tural sec­tors. That’s why many pow­er­ful agri­cul­ture lob­bies crit­i­cized Japan’s role,” he ex­plained.

Nev­er­the­less, Jiang pointed out that con­sid­er­ing Japan’s over­all trade strat­egy, Ja­panese Prime Min­is­ter Shinzo Abe will vig­or­ously pro­mote the CPTPP’s ap­proval. By at­tempt­ing to play a lead­er­ship role in guid­ing the re­gion in re­shap­ing global trade rules, Japan aims to coun­ter­bal­ance and iso­late the grow­ing Chi­nese econ­omy.

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