Formal talks on the UK’s accession to the 11-nation Comprehensive Progressive Trans-Pacific Partnership (CPTPP) began this week after several months of preliminary negotiations. The fast-growing Asia-Pacific region served by the CPTPP promises to eclipse the economic activity of the rest of Europe, if not the world, well into the 21st Century. More than that, the CPTPP may be poised to establish itself as a near-global regime for trade governance in conjunction, or perhaps in competition with the 164 nation World Trade Organization (WTO). Covering matters such as tariff and non-tariff barriers on goods, market access for services, intellectual property and subsidies like the WTO, the CPTPP also has rules on digital trade and investment which the 26-year-old WTO, with all of the problems associated with needing global consensus, does not. Whereas momentum in multilateral trade liberalisation has stalled in recent years with little to no progress on the key issues of agricultural subsidies, fisheries or dispute settlement, interest in the CPTPP is picking up speed.
It may be that China’s move to join the CPTPP, announced only a day after the AUKUS security pact, was designed primarily to work mischief in global affairs. China’s statement, which merely re-iterates comments made by President Xi last November, may have already ruffled feathers in Taiwan, which expressed an interest in acceding to the CPTPP last year and has now declared its intention to press forward in membership talks. China is further eager to demonstrate its acceptance of regulatory reforms needed to meet some of the CPTPP’s requirements with a view to attracting foreign investment. Its willingness to actually implement them (for example in relation to the protection of IP) is uncertain. On the other hand, many of the alleged regulatory obstacles to China’s accession to the CPTPP, for example in relation to its support of State-Owned Enterprises (SOEs), would actually fit well into the CPTPP’s flexible rules. Members are able to negotiate tailored reservations to the agreement’s various commitments. Unlike the WTO, the CPTPP already allows exemptions for SOEs in Viet Nam and Mexico.
It is unlikely that China’s purported interest in the CPTPP will trigger the US to reconsider its membership in the Pacific pact. The world’s largest economy withdrew from the CPTPP’s predecessor (the TPP) in 2016 and President Biden shows even less interest in trade agreements than his predecessor. The CPTPP’s less strict Rules of Origin (ROO) which allow preferential treatment for a larger component of goods made in non-member countries, will likely remain unattractive to US negotiators. The US typically prefers tighter ROO in its free trade agreements, as seen in the United States Mexico Canada Agreement (USMCA), in order to protect manufacturing. Were the US to remain outside the CPTPP, as is most likely, it could invoke the USMCA’s controversial ‘China clause’ which requires the US to grant permission to Canada or Mexico should either form a preferential trade relationship with China, in order to block China’s accession to the CPTPP. There is the related problem that any CPTPP member which actively supports China’s accession might be perceived as ‘soft on China’ which could be politically damaging domestically. This could explain Canada’s recent statement that it will not publicly support China’s application to join.
Preferential free trade agreements, even with large partners like China or the US, account for only a small percentage gain in GDP. Much trade can and does proceed without them. Moreover, as with many preferential trade agreements and WTO disciplines themselves, the CPTPP has more coverage for goods than services, where the UK’s real strengths lie. Still, the UK’s CPTPP accession, which should unfold in the next year or so, will bring real gains in areas of economic activity currently underserved by the WTO in some of the world’s fastest growing regions.