One of the world’s biggest multilateral trade agreements has the potential to become a global game-changer and supplant a beleaguered world trade system, trade experts say.
That trade agreement – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – was formerly known as the Trans-Pacific Partnership (TPP) when it was the centrepiece of the United States’ strategic pivot to Asia. But not only has the agreement survived the disappointment of a US withdrawal, it has also attracted a host of non-Asia-Pacific countries that want a piece of the trade deal, thus increasing its significance as a global agreement rather than merely a regional one.
The original TPP was meant to be a trade pact for Asia-Pacific nations, but its current shape the CPTPP has attracted Britain, which has applied to join the trade pact, as well as mainland China and Taiwan, whose back-to-back applications mirrored their World Trade Organization (WTO) memberships 20 years ago.
Tim Groser, a former trade minister with CPTPP member country New Zealand, told the South China Morning Post in an exclusive interview that these moves could help revitalise or even replace the WTO, which has come under pressure from trade wars and a defunct appellate body – the highest global trade court.
The CPTPP has manifested the “spaghetti bowl” concept, where countries cut trade deals directly with each other, thereby bypassing the WTO, the long-standing forum for the establishment of global trade rules and trade agreements, Groser said.
“What is actually happening is that the spaghetti is all being put together in this sort of large multilateral or multilateral/plurilateral deal known as TPP … and of course, now we have this interest of China, the No 2 economy in the world, plus the customs territory of Taiwan, and the interest of the United Kingdom,” he said.
“If we get a geographically European country coming into what we have always up to now seen as an Asia-Pacific entity, it does transform this from a regional to an alternative global system.”
“If the WTO continues to go round and round in circles doing very, very little, which is the case of the last 25 years, and this agreement loses its Asia-Pacific specific regional character, and starts to acquire other members, I think there’s every reason to think it could become an alternative system of multilateral rules.”
Groser said world trade rules need updating, especially around digital trade, and coherent trading rules need to be put in place, especially in light of recent impediments to the WTO such as the US’s refusal to appoint judges on the WTO’s appellate body.
The edge that the CPTPP has over the WTO is that it improves a large number of existing trade rules and adds new trade benefits that would otherwise have to be negotiated separately between countries, says Deborah Elms, executive director of the Asian Trade Centre in Singapore, also a CPTPP member country.
“[The CPTPP] is hundreds of pages of new rules, all of which go beyond the WTO. So, it’s not just the WTO rules, it’s this on top of it … it’s also what members agreed to do to one another, and their schedules, so that you get concrete bottom-line benefits for companies – you can trade with zero tariffs into almost all of the markets at this point,” she said in the same interview.
“Already, you get better services and investment provision … you have better protection of your ideas and intellectual property rights, you have a look at [new] digital rules. There’s a lot that’s in there, in addition to the rules themselves.
“So it’s the rules, plus the specific benefits.”
The CPTPP’s advantage lies in its higher [trade] standards when compared with the WTO or another large trade pact – the Regional Comprehensive Economic Partnership (RCEP), added former Singapore trade minister George Yeo.
Along with Elms, Yeo agreed that more non-Asia-Pacific countries will be looking to join the CPTPP alongside Britain, mainland China and Taiwan.
Countries that were sitting on the fence about the CPTPP might also now realise that they do not want to miss out and may rush to apply at the same time in this round of applications spearheaded by the British, mainland Chinese and Taiwanese entities, Elms said. Yeo, who was trade minister when China became a WTO member in December 2001 – followed by Taiwan in January 2002 – noted the significance of China’s interest in the CPTPP, saying it reflected China’s aspirations to graduate to higher trade standards.
I think [mainland China and Taiwan] will always be in lockstep together Tim Groser, former New Zealand trade minister
Separately, Groser said the back-to-back applications by mainland China and Taiwan were not part of a “secret” deal cut by the two sides.
Like their WTO memberships, China – the mainland – and Chinese Taipei are two customs territories with independent statuses at the WTO. Historically, they have moved together on world trade matters, in line with the recognised one-China policy.
“So, I think the two will always be in lockstep together. And it would be extremely unusual if, for example, the Taiwanese authorities moved ahead of what mainland China was doing,” Groser said.
“So, it’s really a historical accident, but it’s actually a very useful historical accident. And I think it provides a little bit of flexibility for everyone, while sticking to a one-China policy.”
This article appeared in the South China Morning Post print edition as: CPTPP poised to be new powerhouse for trade