It is not easy to reconcile the way in which some commentators praise the economic potential of the Comprehensive Progressive Trans Pacific Partnership (CPTPP), often citing President Trump’s withdrawal from it as one of the signature failures of his America-First trade policy, while simultaneously decrying the same agreement as one of the UK’s hopeless post-Brexit trade objectives. Similar hypocrisy can be seen whenever the EU concludes a new FTA, typically presented as evidence of its impressive global engagement strategy, whereas the UK’s FTA aspirations are derided as brash, Imperial hubris. In case you’re finding it hard to follow, the logic seems to work this way: EU = good, UK = bad. And of course also Trump = bad.
Accession to the CPTPP is indeed a worthwhile strategy for the UK as it seeks to establish a robust international trade strategy in the coming years. The 11-nation pact comprises roughly 13% of global GDP (16% with the UK) and contains among the most advanced provisions on matters such as digital trade and SMEs, as well as tariff reductions on 95% of goods.
Some of those who oppose the CPTPP have dug up the old chestnut of the threat it would pose to the NHS, a claim typically wheeled out whenever a Conservative government sets out plans for FTAs.
Critics contend that the UK would better off negotiating with the individual signatories of the CPTPP rather than joining the bloc in one go. Putting aside the fact that the UK is doing this already, with bilateral negotiations with Japan, Australia and New Zealand well underway, joining the CPTPP could achieve with one fell swoop what would need a series of lengthy bilateral discussions over years.
Others have suggested that the CPTPP is fundamentally flawed as an instrument of trade liberalization, at least for the UK, because it consists of a pre-existing text containing a suite of obligations which the UK had no hand in drafting. But there is no reason that acceding to a mega-regional like the CPTPP would pressure the UK into making concessions in a way that would not occur in a bilateral context. The fact that the CPTPP does have a core text arrived upon by negotiation among 11 countries does not mean that the extent of the UK’s obligations under the agreement cannot be tailored to suit its specific needs, notably the further liberalization of services. Each of the CPTPP’s signatories has its own schedule of individual commitments which sit alongside the core text, either as extensions or carve-outs. For example, Canada reserves the right to impose technology transfer obligations in relation to foreign takeovers. Moreover, signatories are allowed to extend preferences to some signatories and not others. For example, New Zealand acknowledges that Chile’s electronic payment regulations comply with its domestic regulations. These kind of side agreements could enable the UK to grant additional market access to certain parties in exchange for deeper services liberalization.
Some of those who oppose the CPTPP have dug up the old chestnut of the threat it would pose to the NHS, a claim typically wheeled out whenever a Conservative government sets out plans for FTAs. Critics argue that acceding to the CPTPP would result in the UK opening up the delivery of healthcare to foreign firms, leading to sweeping US-style privatization. Putting aside the notion that allowing healthcare to be delivered by international suppliers would most likely result in an improved service for the British public, the chances of the UK actually making these kinds of commitments in any FTA, let alone the CPTPP, are beyond remote. The Johnson government has repeatedly stated that it will not do so. We have no reason to doubt this promise now any more than in the run up to the 2019 general election.
It is true that there are features of the CPTPP which may appear out of step with some of the trends emerging in international economic law. Its retention of investor-state dispute settlement (ISDS) is perhaps the most conspicuous of these. A number of countries are moving away from, or never fully accepted, ISDS as a means of resolving disputes between investors and host states. But even here the CPTPP has pulled back from classic investment treaties, with some signatories restricting the scope of ISDS considerably – another manifestation of the agreement’s bespoke nature. ISDS is not marked departure from the EU’s investment court system anyway, now a normal feature its modern trade agreements. Surely if the EU still allows companies to sue governments for excessive regulatory interference then it must be okay? EU=good, after all.
The CPTPP’s Rules of Origin are high at about 70% for most goods. Importantly, though, this total can include inputs from non-parties to the CPTPP, as long as the goods have undergone a substantial transformation within one of the CPTPP countries. This requirement should help support larger scale manufacturing in the UK, allowing these companies to participate in global supply chains. Smaller firms will benefit from the CPTPP’s dedicated chapter on SMEs, designed to simply export procedures, which are most troubling for smaller firms and have often been left out of international trade rules.
While the various signatories of the CPTPP are themselves members of other trade alliances, including ASEAN, the USMCA and the RCEP, this does not mean that the agreement will morph in a direction which will be antithetical to the UK’s interests in the coming years. The CPTPP may well be renegotiated one day. It is already nearly five years old and there are signs that the digital trade agenda, for example, has begun to move on. But it is the nature of all international treaties to adapt to changing circumstances, including transformations in patterns of global commerce and technological innovation. The digital trade and e-commerce chapters of the CPTPP, while in many respects still world-leading, may require an update sooner than expected in light of the Covid-19 epidemic and its panic-stricken aftermath. Such issues could feature in UK schedules or side agreements to the CPTPP.
For those who fear that the CPTPP will be hi-jacked by the trade superpowers, it is unlikely that either the US or China will apply to join it in the near future. It is not clear that Joe Biden, were he to win the US presidency later this year, would be any less inimical to globalization than President Trump. Biden has so far failed to articulate a coherent trade policy and we have no reason to expect that he will risk upsetting voters who have been told for years that millions of jobs have been lost to free trade. Of course this view will suddenly make sense to many observers if he is elected because, since Trump = bad, then Biden = good. For its part, China appears to be in retreat from global engagement at a fundamental level. But if either country were to pursue CPTPP membership we shouldn’t expect that they would attempt to modify the agreement’s core commitments. Rather, they would, like the UK, commit the sectors they choose and opt-out of others, as is feasible through the variable commitments made across the CPTPP’s schedules and annexes. The CPTPP has exemptions for national security too, which should dispel growing fears linked to China.
While acceding to the CPTPP is an excellent plan for the UK, it is not the only way for the UK to demonstrate global leadership in strengthening the international legal framework for trade. The best forum for this is still the World Trade Organization (WTO). The UK has already taken positive steps to advance the agenda of this vital body, notably in relation to the inclusion of multilateral disciplines on digital trade and agricultural subsidies as well as badly-needed dispute settlement reform. The UK’s nomination of a skilled former trade minister to become the next Director General marks symbolically significant engagement with the WTO. If Liam Fox were to succeed and take over leadership of the WTO it would be a fantastic development for this country and the world. Frustratingly, that would probably be just the point when traditional WTO advocates will start shouting about how it has lost its way. Remember, it’s UK=bad.
The post CPTPP: For some commentators Britain can simply do no right appeared first on Global Vision UK.