The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) will come into force at the end of December 2018 following Australia’s ratification of the agreement, which means that the minimum six nations have now formally ratified the deal. Consequently, the first round of tariff cuts will commence on 30 Dec 18, with a second to follow on 1 Jan 19. A week later, Vietnam also ratified the CPTPP, making it seven countries.
Assessment: Trade liberalisation given a fillip
When it comes into full effect, the CPTPP will do away with virtually all tariffs and other barriers to trading goods. However, the trade pact’s significance goes beyond the immediate benefits of trade liberalisation accruing to its 11 members.
- First, the likelihood of the CPTPP successfully coming into force has already galvanized several non-members to seek to join the CPTPP. Earlier on, in June 2018, Colombia had already formally requested to join the CPTPP. Thailand had followed in July when Thai Deputy Prime Minister Somkit Jatusripitak requested Japan’s support for Thailand to join the CPTPP. Now, South Korea is reportedly considering joining the CPTPP, with its Finance Minister expressing interest to join the trade pact to “actively deal with growing trade protectionism”. Japanese PM Shinzo Abe’s invitation to Britain to join the CPTPP reportedly appealed to pro-Brexit factions as demonstrating the potential for a ‘Global Britain’ trade policy after its exit from the EU.
- Second, as the CPTPP gains traction, impetus could be given to the 16-nation Regional Comprehensive Economic Partnership (RCEP) trade pact between ASEAN and six of its key trading partners: Australia, India, China, New Zealand, Japan and South Korea.
- Third, the CPTPP’s coming into force may augur a change in trade negotiations between Japan and the US. While the US has forced Japan into a bilateral discussion on trade, PM Abe may be able to use the trade pact as a lever in negotiations to entice the US to re-join the trade agreement in the future which will be a boon for member countries given the centrality of the US to global trade.
- Fourth, the CPTPP will act as a bulwark against the anti-trade rhetoric stemming from the Trump Administration, such as the recent ruminations about designating imported cars and car parts as a threat to the national security of the US which could foment upheaval across supply chains in Europe and Asia.