On January 23rd, the eleven remaining members of the Trans-Pacific Partnership (TPP) agreement announced the conclusion of their discussions on a revised free trade agreement. Re-branded the “Comprehensive and Progressive Trans-Pacific Partnership” (CPTPP), the new deal will be signed in March at a ceremony in Chile. In concluding the agreement, Canada continues to expand and diversify its major regional trade agreements beyond the North American Free Trade Agreement (NAFTA), which is currently undergoing difficult negotiations with uncertain outcomes. The CPTPP also updates the terms of trade between Canada and Mexico.
The United States withdrew from the TPP on January 30th last year, after the agreement had been concluded with the other eleven members: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Viet Nam. At that time, the legal text had been finalized, and all that remained was implementation and ratification. The TPP would have covered about 40 percent of the world’s GDP (valued at US$28.5 trillion). Without the United States, the CPTPP’s coverage is significantly less — around 13.6 percent of global GDP (US$10.2 trillion). However, notwithstanding the absence of the United States, the Agreement creates important new opportunities for Canadian exporters in the CPTPP region.
For example, Canadian agricultural and fishing industries will have preferential market access to important consumer and industrial CPTPP markets. The progressive elimination of customs tariffs will provide Canadian goods with a competitive advantage over US exports to those markets. While trade between the United States and CPTPP countries will certainly continue, the new agreement can be expected to shift the competitive landscape in favour of Canadian producers, providing them with new export and supply chain opportunities. In Japan, the single largest CPTPP economy, Canadian enterprises will also be able to trade on even footing with competitors who have been enjoying the benefits of Japan’s bilateral agreements with Mexico and Australia.
Conclusion of the CPTPP also creates a new trade dynamic between two of the three NAFTA members, Mexico and Canada, with potential implications for the current NAFTA re-negotiations. For example, commitments to implement stricter intellectual property protections were important concessions to US demands in the original TPP. They include extended copyright and patent terms, fixed market protection measures for certain pharmaceutical products (e.g., biologics), and other commitments that would have required Canada to implement new IP rules that are more stringent and less flexible. However, these provisions are “suspended” in the negotiated outcomes of the CPTPP, indicating that Canada and Mexico may no longer be interested in making such concessions. On the other hand, Canada and Mexico may find it difficult to deny US NAFTA demands that are equivalent to TPP provisions that remain part of the CPTPP. It also remains to be seen how differences will be reconciled in the CPTPP and any re-negotiated NAFTA with respect to the rules of origin for motor vehicles and automotive parts, particularly in relation to minimum regional value content thresholds.
In November, Canada expressed concerns over insufficient protection in the CPTPP for Canadian “cultural industries” (i.e., Canadian media, including print publications, films, music, and television and radio broadcasting). Its reluctance on this and other points prevented the parties from signing an agreement-in-principle at the APEC Summit. However, it appears that the parties have since agreed that this issue, among others, will be resolved through side letters rather than by re-opening and substantively amending the current text of the agreement. Until the negotiated outcomes become available in a consolidated CPTPP text, a joint Ministerial Statement sets out the roadmap for final CPTPP discussions (see http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/statement-declaration.aspx?lang=eng).
In the context of the United States’ withdrawal into protectionist and anti-globalization policies on trade, plurilateral regional agreements like the CPTPP and the Canada-EU Comprehensive Economic and Trade Agreement (CETA) are important to Canada not only because they provide new and alternative trade opportunities for Canadian stakeholders, but also because they offer unprecedented competitive advantages over US exporters in important international markets. Neither Japan nor the European Union are currently engaged in bilateral negotiations with the United States (negotiations between the United States and the European Union concerning the Trans-Atlantic Trade and Partnership (TTIP) agreement are currently suspended).
The text of the original TPP and commentary on its relationship to the CPTPP is provided by the Ministry of Foreign Affairs and Trade, New Zealand, and available online at: https://www.mfat.govt.nz/en/trade/free-trade-agreements/agreements-under-negotiation/cptpp-2/tpp-and-cptpp-the-differences-explained/.
Tereposky & DeRose regularly provides advice on international trade agreements, including the NAFTA, the CETA, and the forthcoming CPTPP. Should you have any questions regarding potential opportunities under these trade agreements or any other trade related issues, we are at your disposal.