UK to Join the CPTPP, the Trans-Pacific Trade Deal

Following the country’s exit from the single market of the EU, the UK government has applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Including the UK, this trade deal would represent 13% of global GDP (2019) and approximately 500 million people. Now in place among countries on both sides of the Pacific, the agreement is a newer version of its Obama-era predecessor, TPP, which the US withdrew from under Trump. While the CPTPP lowers tariffs and makes some trade and investment easier, some of its other provisions further entrench and broaden potentially damaging policies.

UK’s aspiration to join the agreement has been announced recently by the government and marketed by PM Boris Johnson and International Trade Secretary Liz Truss as a major step forward in economic relations between the UK and the rest of the non-EU world, as it tries to take advantage of its newly-gained trade independence by orienting itself outwards. The CPTPP represents one of the world’s biggest trading blocs, with the combined GDP of its current members of around £9 trillion.

Pointing out some of its most popular selling points to the public, Liz Truss explained that joining the CPTPP “will mean lower tariffs for car manufacturers and whisky producers, and better access for our brilliant service providers”. This is further elaborated upon by examples featured on the Government website, which states that tariffs on whisky exported to Malaysia would plummet from 165% to 0%, while exported cars would face no tariffs on arrival in Canada two years earlier under the CPTPP than under the UK-Canada bilateral deal currently in place. 

Truss added:

“CPTPP is an exclusive club of fast-growing countries who trade together, and our accession would secure increased trade and investment opportunities for all members and put the UK at the centre of a dynamic, free-trade area.”

The government emphasises that membership in the agreement is not equivalent to being part of the EU. “Unlike EU membership, joining does not require the UK to cede control over our laws, borders, or money.” While for two of those, borders and money, this statement is reasonably accurate, any trade deal has an effect on laws the member country then aims to pass. In the name of economic opportunities and international cooperation, said government restricts itself in certain respects. If it breaches those commitments, it might be prevented by others from enjoying some or all of the advantages offered by the trade deal.

Despite these claims by the government, similar trade deals in the past faced criticism along these lines. Commenting on the Trans-Pacific Partnership (TPP) several years ago, the ‘father’ of Brexit, Nigel Farage, said that the trade deal “was modelled and based on the European Union’s single market.” He further claimed that “the idea was the European Union was going to be a prototype for a bigger form of world governance.” The TPP had indeed followed the lead of the EU in its outline of a regional ‘regime’ of common trade and regulatory area. However, unlike the EU, it did not attempt to create political structures or to strive for an ‘ever closer union’, with the ultimate goal of regional federalism.

The CPTPP has evolved from the aforementioned TPP, which was being negotiated by Pacific-bordering states during the Obama administration. TPP never entered into force because, following the change of leadership, the US had announced his withdrawal from the agreement on his third day in office, primarily citing concerns over manufacturing jobs in the US. After the US withdrawal, other countries decided to continue the trade deal negotiations, which resulted in the new agreement. Two-thirds of CPTPP’s chapters are identical to its predecessor, and the main selling point - lowering of tariffs - remains as the cornerstone of the deal. Matthew Goodman, of the Center for Strategic & International Studies, says: “The CPTPP removes 99% of tariffs on goods and services, just like the original TPP did.” On the flip side, however, it also establishes quotas, making it a not-exactly-free-trade deal.

There are significant changes in the CPTPP as compared to its predecessor. For example, companies investing abroad are more limited in the legal defence available to them against governments enacting new legislation with adverse effects on the business. This change will make it riskier to invest in certain countries which do not themselves guarantee a high level of legal protection against government action. 

Another prominent change is in the area of intellectual property law. Compared to TPP, in the CPTPP, the common standards agreed to include shortened patent privileges and more limited copyright protection. Goodman adds:

“Even with these provisions suspended, however, the IP chapter offers the most advanced and detailed standards on intellectual property in a trade agreement to date.”

Many of the changes made have been in areas where the US had insisted on specific policies conforming to its own domestic standards. In the example of copyright longevity, the existing US-led standard is 70 years after the death of the author. Because, often, most of the other parties were in agreement about these policies against the US, these provisions could be removed after the US had left the negotiation table.

An important part of the CPTPP that has not been changed since the original TPP relates to the mutual sharing of information about state-owned enterprises. Such a provision can be crucial in making direct state involvement in economies more transparent, where there otherwise might be a blurry line between a competitively-based private sector and the monopoly-privileged state sector with significant ramifications for the international economy.

The labour issue is also among the more consequential ones covered by the agreement. On the one hand, the CPTPP further incentivizes states to eliminate forced labour or even modern slavery. On the other, it imposes labour market restrictions with potentially deleterious consequences, especially in lesser-developed countries. The issue was important for Vietnam, for example, who raised it during the deal negotiations. “CPTPP Parties are required to have laws governing acceptable conditions of work relating to minimum wages, hours of work and occupational health and safety.”

Perhaps one of the most notable sections of the CPTPP addresses ‘good regulatory practices’ to be implemented by members of the agreement. It encourages parties to “conduct regulatory impact assessments when developing proposed covered regulatory measures” that are projected to have a significant impact on the economy or society.

Such impact assessments have become increasingly popular over recent years. As many states struggle with runaway legislative glut which threatens the overall coherence of their domestic rule of law, this method has been used to slow down the pace of legislation in exchange for increased quality. Specifically, states are called upon to begin assessing “the need for [any specific] regulatory proposal”, which should include “a description of the nature and significance of the problem” which is being addressed by the regulation, examining “feasible alternatives” and comparing their costs and benefits. They should also contain an explanation of why the chosen option was selected over those alternatives. Further, it requires that new regulations be “plainly written”, and “clear, concise, well organised and easy to understand”. For the purposes of these goals, the CPTPP establishes a Committee on Regulatory Coherence which oversees the implementation of ‘good regulatory practices’ across member states.