CPTPP and the art of living dangerously

By Stephen Jacobi [1]

As published by Newsroom, 6 December 2024

There’s not much shouting about TPP these days, but more passion would be a good thing.

Time was when “TPPA” could bring tens of thousands to the streets.  These days the annual Ministerial meeting of the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) sails under the headlines.  Much of the earlier hype was wildly exaggerated of course. The “US exit” took out a lot of heat.  Today with an avowed protectionist about to dust off the chairs at the White House once again, CPTPP stands, somewhat shakily, as a bulwark against a much more inward-looking world.

TPP has never been about doing things quickly.  To trade geeks CPTPP is known as an “open plurilateral”.  That means the agreement can be progressively expanded as new members join.  Its precursor, the so-called “P4” agreement between Brunei, Chile, New Zealand and Singapore, kicked off back in 2002.  P4 became P5 when the US – kudos to then Trade Minister Phil Goff – joined the party in February 2008.  It took another eight years to get from P5 to P12.   With most of the work done, stripping out the US took less than 18 months.  The first economy to join CPTPP is the UK – their accession negotiation took two years and will enter into force once eight members have ratified later this month.

Why do these things take so long?  It’s because negotiating the removal of trade barriers and putting in place high quality, innovative trade rules is a complicated business. Sensitive matters of economic and commercial policy are at stake and not just tariffs – CPTPP reaches deeply into domestic economic management in areas such as competition, sustainability and the digital economy.  The more members, the more complexity.  That was enough to make TPP amongst the twelve a serious undertaking. When the US withdrew this “fellowship of the ring” led by New Zealand (kudos to Ministers McClay, Parker and O’Connor), Japan and Australia, courageously decided to continue their quest for more open and secure markets.

Times today are not what they were.  The world is gradually turning away from openness and substituting protectionism and “industrial policy” (read: subsidies).  The pandemic disrupted the ongoing work programme.  This did not however deter seven other economies from submitting applications to join – China, Chinese Taipei, Ecuador, Costa Rica, Uruguay, Ukraine and Indonesia.  These are a mix of very large and smaller economies and one which is currently at war.  Although it arguably shouldn’t, geopolitics is likely also to complicate things further. It doesn’t take a mathematician to work out that at this rate CPTPP’s membership could be subject to a state of permanent negotiation for the foreseeable future. 

Meeting in Vancouver earlier in November, with Canada in the chair, CPTPP Ministers made the welcome but rather cautious decision that the accession process could start for Costa Rica, the smallest candidate and not the first after the UK to apply (that was China).  It could be asked whether that decision really takes account of either the still fragile state of the global economy or the uncertain situation faced by business.  Ministers were careful not to rule out any candidacies, pointing to the three principles which they had adopted when they met in Auckland in July 2023.  At that meeting it was confirmed that accessions needed to be decided by consensus of all the parties and that aspirant economies would need to demonstrate they could meet the high standards of the agreement. 

A third principle was also added – one not enshrined in the text of CPTPP itself: economies would need to demonstrate “a pattern of complying with trade commitments”.  Can you see where this is headed?  Costa Rica appears to have passed the test, and the others “not yet”.  It is curious though that this test needs to be passed before the accession negotiation can start – one might have thought this was something that would be confirmed as part of that negotiation.  In regard to the last principle, it can hardly helped escape notice that Canada has been found to be in breach of its trade commitments in its dairy dispute with New Zealand.

Does it really matter if all this takes time?   It does matter to those economies who find themselves still in the queue with no real inkling of when their processes could start if at all.  It has been proposed that a sort of competitive tension could be created by starting several processes at the same time and seeing who can get to the finish line first.  After all, trade agreements should be about promoting competition, shouldn’t they?  If for example China says it can meet the Auckland principles, let them prove it. If we want China, Indonesia and others to comply with trade commitments, what better way of doing so than starting the formal process.

It probably also matters to other economies who have yet to show their hand.  South Korea, Thailand and the Philippines all fall into this category.  Lastly it matters for CPTPP’s credibility.  This agreement has always sought to be the standard bearer for high quality, but much of CPTPP was negotiated years ago. To their credit Ministers have been engaged on a general review which is likely to take another year at least to complete. The ball is now in Australia’s court to lead this process, but the risk is that the wider political and economic factors impacting on CPTPP will stymie members’ ability to make the visionary and hard-hitting decisions needed at this time.

Trade agreements cannot be imposed by force.  They require persistent and careful negotiation, the sort of negotiation at which New Zealand has over-time excelled. But they also need leadership.  At risk of recalling something like the gathering of the Ents (in the Lord of the Rings), Ministers collectively must be bolder and bring back the passion and resolve which characterised CPTPP’s earlier days.

[1] Stephen Jacobi is the Executive Director of the NZ International Business Forum