US president Donald Trump’s
withdrawal from the Trans Pacific Partnership (TPP) on his first day in office
left the TPP highly uncertain. After several attempts to clarify the way ahead,
the rest of eleven TPP economies (TPP11) have recently agreed to continue the
momentum to conclude the agreement, with some amendments. In particular, they
have excluded certain topics of specific interest to the US (e.g., IPR), but
the other text is intact including several issues that are important for the
US.
The name of the new agreement
will be the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP). The renewed agreement CPTPP, with a changed name and
somewhat different content, provides an opportunity for president Trump to
develop his own legacy with a new trade agreement that meets the economic and
strategic interests of the US, embodying his vision. This would be a good
complement to his recently-concluded trip to Asia, and will provide a
substantive basis to connect economies in the region within a forward-looking framework
of a new, amended agreement. Trump is presently engaged in renewing NAFTA, the
US trade agreement with Canada and Mexico (both members of TPP11). If the US
considers engaging with CPTPP, perhaps there could be a basis to see the
emergence of a Comprehensive Asia Pacific Free Trade Agreement (CAPFTA), which
takes account of the sensitivities of both the US and the eleven economies that
are a part of CPTPP.
The approach has to be for all parties to recognise that the CPTPP provides a
framework for an evolving agreement where just like the transition periods it
provides for reducing tariffs, the mechanisms and approaches in the agreement
could be used by Trump to begin developing a new Asia Pacific Trade Partnership
Agreement by the second half of 2018, by which time the contours of a revised
NAFTA would be clearer. This would help give a significant effect to Trump’s
emphasis on a “free, fair and reciprocal” trade agreement in the form of a new
agreement, CAPFTA. Six points are worth keeping in mind in this context to help
build a practical, step-wise approach to consolidate and further develop
economic and strategic partnerships in Asia and the Pacific with members of the
CPTPP.One, the tariff reductions
incorporated in CPTPP would substantively meet the US concern that other
economies have not adequately provided market access similar to that provided
by the US. Since the agreement has both developed and developing economies,
covering a wide range of GDP per capital, it will provide the possibility for
others to learn from the experience of less developed economy members taking on
ambitious market-opening commitments.
Two, much of the concern
about non-level playing field in international trade relates to non-tariff
barriers (NTBs). The provisions in CPTPP that enhance transparency, and
establish a mechanism which allows member countries to raise their concerns
regarding NTBs of other members for a timely resolution. These are important
steps for addressing NTBs in external markets, and need to be developed
together with other economies. Importantly, efficient operation of such
mechanisms requires feedback based on experience. Therefore, based on their
experience, members of the agreement participating in this process would help
improve the system to better address specific concerns relating to NTBs, and
also determine the extent and direction of change in these procedures. Without
a country being part of the revised agreement, there would not be such an
opportunity to do so.
Three, the provisions of the CPTPP include a process for review and evolution
in the agreement based on experience. That is a very powerful mechanism which
also includes the possibility of potentially raising new issues relevant to
members, and discussing ways of finding solutions for them. Significantly, the
CPTPP mentions some new areas which may soon require additional discussions or
negotiations. In a potential CAPFTA, this could include new policies or issues
considered to adversely affect the level playing field. Experience suggests
that such new concerns will continue to arise over time, and a forum such as
CAPFTA, including a large part of the global economy to discuss them would be
very useful to address them. Four, an ambitious CPTPP agreement has been made
possible by allowing longer than usual transition periods. This makes it easier
to carry a larger burden that may arise due to the agreement. Without such
flexibilities enabling the management of the difficulties faced by different
members, it would not be possible to achieve either a high ambition or a wide
membership of such an agreement. Thus, the framework of existing and
potentially new flexibilities within an agreement would help provide a basis
for expanding the scope of the agreement to a much wider set of countries than
the original members.
Five, the new trade agreement
could be developed through incremental steps towards the final revised
agreement. Thus, for example, some parts of the agreement which relate to
addressing NTM concerns and regulatory coherence, could be some “early
harvests”. Thus, some benefits of CAPFTA could become available even before the
final agreement is concluded. Six, the potential agreement CAPFTA could provide
in a single step, the possibility of enlarging the scope of its trade regulations,
as with US as a member, additional economies would be more likely join the
agreement over time. Such a process had begun after the conclusion of TPP
itself. Thus, president Trump has the possibility of building on the momentum
from a revised NAFTA, to extend his approach and legacy to a much larger
potential agreement, the CAPFTA, and more substantively addressing concerns
relating to a “free, fair and reciprocal” trade agreement.
Source: Daily Freeman, U.S.A Thursday, 30 November 2017