Trade goes on

Trade goes on

Context:

On 8th March, 11 Asia-Pacific countries, including Japan, Australia and Canada, signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in Chile.

About CPTPP:

• The CPTPP incorporates the original Trans-Pacific partnership (TPP) agreement, with suspension of a limited number of provisions, while still seeking to maintain the high standard of the agreement.
• Tariffs schedules are kept as negotiated with custom duties on 95 per cent of trade in goods to be removed in the long run.
• Commitments to liberalise in key areas such as textiles, technical barriers to trade and sanitary and phytosanitary measures, competition, state-owned enterprises and small- and medium-sized enterprises, labour, and dispute settlement, are still intact
• List of Suspended Provisions: These provisions were part of the original TPP text. 20 provisions from chapters on trade facilitation, investment, services, public procurement, intellectual property rights (IPR), environment and transparency have been suspended
• These rules – included earlier in the TPP at the US’ insistence – have now been put on hold, but could be reinstated in the future.
• The countries signing the agreement, which account for more than 13% of the world economy, have agreed to bring down tariffs on cross-border trade by as much as 98% after domestic ratification.
• More countries are expected to sign the CPTPP in the future, and there is hope that a post-Trump U.S. may join the bloc.

What was the original TPP about?

• In 2005, the Trans-Pacific Strategic Economic Partnership comprising four countries – Brunei, Chile, New Zealand and Singapore – was signed.
• That pact was then expanded and became US-led during the Obama administration.
• Dubbed the TPP12, it was initialled in February 2016, and member countries are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
• The 12 countries signed the deal – which set a new standard for global trade – on Feb 4, 2016.
• But on Jan 23, 2017, US President Donald Trump signed a Presidential Memorandum to withdraw the US from the TPP. The TPP could not enter into force without the US, as it accounts for 60 per cent of the combined GDP of the 12 TPP members.

Concerns:

• The CPTPP is, in effect, the original Trans-Pacific Partnership struck during the Barack Obama presidency minus the U.S.
• The CPTPP, as it looks to expand influence by adding other countries into its fold, will need to address some problems as well.
• One of the points of criticism of the TPP, even in its original form as a 12-member agreement, was the alleged influence of special interests in dictating its broad framework.
• The TPP text, which has in large part been incorporated into the new deal, had also been flayed for mandating labour and other regulations that increase the bureaucratic burden on businesses.
• Many have cited the size of the agreement, which runs into several chapters and thousands of pages, to contend that the benefits from tariff reductions may be cancelled out by the massive increase in regulatory requirements.

Way Ahead:

• Addressing the concerns will strengthen the chances of more countries joining the agreement.
• A simpler trade agreement can also help the cause of transparency and lower the chances of lobbying by special interests in the future.
• Amid palpable fears of a global trade war, the survival of a free trade agreement despite the sudden pullout of the U.S. offers some respite to the supporters of free trade.