CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership)

The United Kingdom has joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which is a trading bloc of 11 countries. The Countries in the CPTPP agree to reduce or remove tariffs on the vast majority of goods and cooperate on regulations and standards. Read here to learn more about the partnership.

The UK is the first non-founding member to join the CPTPP and the second biggest economy in the bloc after Japan.

The step has been taken a year after Britain’s exit from the European Union. It is also the first European country to join the trade bloc.

The CPTPP members account for about 8% of UK export, thus this membership will provide UK businesses with newer opportunities through myriad sectors. Key UK exports to these countries include services, dairy, whisky, and cars.

What is the CPTPP?

The CPTPP is a free trade agreement between Japan, Malaysia, Vietnam, Australia, Singapore, Brunei, New Zealand, Canada, Mexico, Peru, and Chile.

• These 11 countries are also members of the Asia-Pacific economic cooperation (APEC).
• CPTPP rules require all 11 signatories to agree to the admission of additional members.

It is one of the biggest trading blocs in the world, worth 15% of global GDP as the UK joins. The number of countries in the bloc has officially raised to 12.

The CPTPP started as the Trans-Pacific Partnership (TPP), with the US negotiating to join under President Obama. This would have made the club the world’s largest free trade deal.

But in 2017, President Trump withdrew from the deal on his first day in office. The remaining countries continued talks, eventually signing the CPTPP in March 2018.

The CPTPP gives signatory countries greater access to one another’s markets and reduced tariffs on trade on the vast majority of items.

• Tariffs remain on some particularly sensitive areas to some countries – for example, Japan’s rice industry.
• In return, countries cooperate on regulations and standards.

CPTPP removes 99% of tariffs on goods and services, just like the original TPP did, all the member countries have agreed to cut down on wildlife trafficking. That helps elephants, rhinoceroses, and marine species the most.

It prevents environmental abuses, such as unsustainable logging and fishing. Countries that don’t comply will face trade penalties.

CPTPP vs TPP

The CPTPP keeps all the core content of the TPP and stands open for the US to rejoin. However, as many as 20 articles of the TPP document have been postponed or revised.

• The CPTPP will delay requirements for member countries to change their laws and practices.
• The CPTPP also suspends the time term of copyright in case of unreasonable delays in licensing.
• Members of the agreement will not have to extend protection terms from 50 to 70 years.

The agreement’s impact has shifted.

• The TPP states that it will go into force if the member nations’ combined GDP in 2013 equals 85% of the combined GDP of the 12 signatory countries.
• The eleven remaining nations had to alter this when the US withdrew because it represented 60% of the TPP’s overall GDP.
• Consequently, the CPTPP may easily become effective 60 days after signing if at least six countries accept it.
• The updated agreement also includes additional rules for the CPTPP’s future participation, withdrawal, and flexible review procedures.

Importance of CPTPP

The prospects for economic growth in the current market are pretty miserable. Two-thirds of respondents to the World Economic Forum’s Chief Economist’s Outlook 2023 predicted a global recession in 2023.

The UK joined the grouping intending to strengthen its trading links around the world post-Brexit.

If more countries were to join the CPTPP, this could be beneficial.

• Costa Rica and Ecuador have also applied to join their Pacific Rim counterparts, while Uruguay, Thailand, the Philippines, and South Korea have also expressed an interest.
• China launched a bid to join in 2021, but it does not currently appear interested as the US is reconsidering its stance.
• Taiwan has also sent its request to join the trade bloc.

The CPTPP recognizes the challenges facing Small and Medium-sized enterprises (SMEs) in establishing export markets and includes outcomes to help make this task easier in the CPTPP region.

The new trade bloc will integrate the efforts of the existing partnerships in the Asia Pacific region like APEC, RCEP, ASEAN, etc.

Challenges

The signatories’ sovereignty is severely constrained by the pact.

• Signatories’ state-owned companies are limited in what they may do and are subject to international courts.

The deal might provide benefits to high-income workers more than the small and medium-scale workers.

• Free trade agreements contribute to income inequality in high-wage countries. They promote cheaper goods from low-wage countries.

Competition has been increasing among the member countries of the CPTPP in terms of investment and export which challenges domestic companies, particularly SMEs and state-owned companies.

• According to CPTPP, all state-owned companies have to meet transparency in the operation and information provision.

In the framework of CPTPP, competition with foreign companies puts pressure on state-owned enterprises to receive and enjoy preferences from the state on which they are grounded.

• Such state-owned enterprises have to handle pressure to be innovative in the way of operation, management, and evaluation of their business.

India’s Stand on CPTPP

India has recognized that the sweeping economic concessions required to join CPTPP have too far-reaching consequences, similar to RCEP.

• India opted out of the bloc because it wants to impose stricter labor and environmental regulations on its other partners.
• Additionally, the CPTPP draft contains incredibly specific requirements for investment protection, safeguards for the host state’s regulatory authority, and the imposition of extensive transparency standards.

As with the US, India also may be left on the outside looking in as crucial issues such as data localization and environmental standards are debated and decided.

Previous year question

Q. With reference to the ‘Trans-Pacific Partnership’, consider the following statements: (2016)

1. It is an agreement among all the Pacific Rim countries except China and Russia.
2. It is a strategic alliance for maritime security only.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Probable UPSC question

Q. With reference to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), consider the following statements:

1. No European member is a signatory to the agreement.
2. The CPTPP incorporates all of the Trans-Pacific Partnership (TPP) provisions.

Which of the statements given above is/are correct?

a) 1 only

b) Neither 1 nor 2

c) 2 only

d) Both 1 and 2

-Article written by Swathi Satish