Santiago, Chile: Japan, Canada, Australia, New Zealand, Brunei, Chile, Malaysia, Mexico, Peru, Singapore and Vietnam signed the revised Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreement in Chile Thursday (March 8), without the USA – it’s former leader – which Trump withdrew on his first day in office on January 23, 2017.
Now led by Japan, the 11 nations said CPTPP sent a strong signal against protectionism after signing revamped trade deal without USA.
At the signing of the revised Trans-Pacific Partnership ministers from the newly-formed trade bloc vowed to bring the agreement into force as soon as possible.
“The signing of the Agreement enables us to move to the next phase. Ministers expressed their determination to complete their domestic processes to bring the Agreement into force expeditiously,” said the ministers in a joint statement.
“The agreement demonstrates our collective commitment to an effective, rules-based and transparent trading system which is open to all economies willing to accept these principles,” the statement added.
They also welcomed the interest shown by a number of other economies wishing to join the trade bloc, which accounts for 13.5 per cent of the world’s gross domestic product.
Countries will now have to ratify the agreement, a process which involves amending their laws.
The signing comes as US President Donald Trump signed an order to impose tariffs on steel and aluminium imports, a move that other nations and the International Monetary Fund said could start a global trade war.
The CPTPP will strengthen trade among countries in the Asia-Pacific region and among pacific rim nations, by significantly eliminating tariffs and non-tariffs barriers for goods.
It will also allow service suppliers greater access to business opportunities in a wide range of sectors, and increase their access to government procurement contracts in other countries.
In addition, it will boost trade and investment flows by facilitating investments and putting in place rules that address emerging trade challenges.
The CPTPP will reduce tariffs in countries that together amount to more than 13 per cent of the global economy – a total of US$10 trillion (S$13 trillion) in gross domestic product. With the United States, it would have represented 40 per cent..
Even without the United States, the deal will span a market of nearly 500 million people, making it one of the world’s largest trade agreements, according to Chilean and Canadian trade statistics.
The deal’s completion comes a year after Mr Trump pulled the United States out of the original agreement on his first day in office.
Led by Japan, the remaining members spent a year reworking the deal and ended up suspending 22 out of the over 1,000 provisions.
The CPTPP will do away with virtually all tariffs and other barriers to trading goods, and help shipments clear Customs more easily.
CPTPP countries accounted for US$214 billion – a fifth – of Singapore’s total goods trade last year.
Under the deal, service providers will be able to compete for some government contracts in other member states for the first time, including in Singapore. E-commerce rules can also ensure that data moves freely across borders.
The signing is expected to speed up ongoing negotiations on the Regional Comprehensive Economic Partnership (RCEP), an Asean-led pact involving seven CPTPP members, which Singapore is pushing hard to conclude. Singapore’s hope is that the CPTPP and RCEP can be stepping stones to its “end-goal” of a wider free trade area of the Asia-Pacific, Mr Lim said last week.
The CPTPP agreement leaves the door open for the US to rejoin the club, a step Mr Trump in January hinted he would be open to if the US could get a “substantially better deal”.
Here’s a look at what the latest deal, renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) after Washington’s withdrawal, is about.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
In November 2017, ministers of the remaining 11 Trans-Pacific Partnership (TPP) countries agreed on the way forward to implement the TPP agreement after the US withdrew, and also renamed it as the CPTPP.
The CPTPP incorporates the original TPP agreement, with suspension of a limited number of provisions, while still seeking to maintain the high standard of the agreement.
Tariffs schedules are kept as negotiated with custom duties on 95 per cent of trade in goods to be removed in the long run.
Commitments to liberalise in key areas such as textiles, technical barriers to trade and sanitary and phytosanitary measures, competition, state-owned enterprises and small- and medium-sized enterprises, labour, and dispute settlement, are still intact.
But the ministers also endorsed the List of Suspended Provisions. These provisions were part of the original TPP text. They suspended 20 provisions from chapters on trade facilitation, investment, services, public procurement, intellectual property rights (IPR), environment and transparency.
These rules – included earlier in the TPP at the US’ insistence – have now been put on hold, but could be reinstated in the future.
From 40 per cent of global GDP, the latest trade deal – without the US – now covers about 14 per cent, and involves the livelihoods of 500 million people. It is estimated that the net benefit of CPTPP to all its members from liberalisation of trade in goods and services is roughly 0.3 per cent of their combined GDP or US$37.3 billion (S$49.2 billion), in the medium term.
So, the 11 members will still be better off with the CPTPP than without it.
The Original Trans-Pacific Partnership (TPP)
In 2005, the Trans-Pacific Strategic Economic Partnership comprising four countries – Brunei, Chile, New Zealand and Singapore – was signed.
That pact was then expanded and became US-led during the Obama administration.
Dubbed the TPP12, it was initialled in February 2016, and member countries are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
The TPP would have covered 40 per cent of the global economy, as the members represent a market of 800 million people with a combined GDP of US$27.5 trillion (S$36.3 trillion).
The 12 countries signed the deal – which set a new standard for global trade – on Feb 4, 2016.
But on Jan 23, 2017, US President Donald Trump signed a Presidential Memorandum to withdraw the US from the TPP. The TPP could not enter into force without the US, as it accounts for 60 per cent of the combined GDP of the 12 TPP members.
Japan then led a scramble to keep the deal alive, with the hope of enticing the US to return at a later date.