The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), formerly known as Trans-Pacific Partnership (TPP), will enter into force on 30th December 2018 after Australia became the sixth country to ratify the deal in October. An overview of the agreement, which includes Canada and New Zealand, is provided here.
What Is The CPTPP?
The CPTPP started life as a small multilateral trade agreement signed between Australia, Brunei, Canada, Chile Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
However, it was always intended that further countries would be invited to subscribe to the agreement. In November 2008, Australia, Vietnam, and Peru announced that they would be joining, followed by the United States a year later. Malaysia came on board in October 2010, and then Canada and Mexico in June 2012, and, finally, Japan in July 2013. Collectively, these countries came to be known as the TPP12.
However, President Donald Trump’s first act upon entering the White House in January 2017 was to pull the US out of the TPP. Consequently, the remaining participants went back to the negotiating table to conclude a revised deal. This was signed in Santiago, Chile, on 8 March 2018 and is now referred to as the CPTPP.
The CPTPP was ratified by New Zealand on 23 October 2018 and by Canada two days later. Japan, Mexico and Singapore have also ratified the agreement.
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TPP Benefits & Impact
The CPTPP has been described as one of the most comprehensive regional free trade agreements ever negotiated. It encompasses a huge market place with a combined gross domestic product of approximately USD10 trillion and close to 500 million consumers.
Once in force, the agreement will eliminate 98% tariffs on industrial goods immediately, with tariffs on some sensitive items phased out over longer time frames. Importantly, tariffs on textiles and apparel, which are important contributors to economic growth in several TPP markets, will be removed as part of the agreement. Two tariff reductions will take place within three days of the TPP-11's entry into force – one on 30 December and another on 1 January. In total, the CPTPP tariff commitments comprise more than 100,000 tariff lines.
According to the New Zealand Government, the CPTPP includes four of the country’s top 10 trading partners, including Australia, Japan, Malaysia and Singapore. Together, the 10 other CPTPP countries are the destination for 30% of New Zealand’s goods exports, worth NZD15bn (€9bn), and 31% of the country’s services exports, worth NZD6.8bn. The CPTPP countries were also the source of 64% of New Zealand’s total foreign direct investment of NDZ66bn in 2017.
The volume of trade between Canada and the other CPTPP countries is also substantial and set to grow further as a result of the elimination of tariffs. The Canadian Government says that CPTPP countries as a group are Canada’s third-largest trading partner. Bilateral trade between Canada and other CPTPP countries, including both goods and services, amounted to CAD105bn (€70bn) in 2016, accounting for 8.1% of Canada’s total trade. Two of Canada’s top five trading partners, Mexico and Japan, are CPTPP countries. Bilateral foreign direct investment between Canada and CPTPP countries amounted to CAD122.2bn in 2016.
The CPTPP is due to enter into force 60 days after ratification by the sixth member country. As mentioned above, this means that the agreement will enter into force on 30 December 2018.