CPTPP sets effective date: A major turning point for the Pacific Rim

Canada's Minister of International Trade Diversification Jim Carr hands over the notification of the CPTPP ratification to New Zealand High Commissioner to Canada Daniel Mellsop. Photo: Cbc.ca

Determined to confront protectionism

The CPTPP was born in a chaotic context of the global geopolitical environment. The rise of protectionism, isolationism and populist movements, especially in the US, has caused the world's common commitments to be broken one after another. The Trans-Pacific Partnership Agreement (TPP) - the predecessor of the CPTPP, in which the US was once the leading factor, is not out of this vortex. The world was surprised and disappointed by the rapid collapse of promises to free trade and strategic commitments, giving way to toughness and pragmatism in all relationships. 10 months after US President Donald Trump announced the end of US participation in the TPP at the APEC Summit Week in Da Nang, the 11 remaining members participating in the negotiations agreed to continue the journey to support a free and open trade area as outlined, despite the lack of the largest partner, the US.

And it took only 5 months of work, by last March, for the remaining 11 Asia-Pacific countries to sign a new agreement to continue the path of eliminating tariff barriers in the region. The new agreement, renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), is considered the "right direction" for a progressive, open and fair trade in the 21st century, where there is no threat of trade wars. The fact that the CPTPP signing ceremony took place almost at the same time as the US President decided to impose tariffs on steel and aluminum imported from partners further made public opinion see this event as a strong message against the rising trend of trade protectionism in many parts of the world, which is becoming a barrier to global trade growth.

On the surface, the CPTPP marks the relentless efforts of the 11 member countries to revive the TPP. When US President Donald Trump, who has always blamed free trade for the loss of American jobs, announced the withdrawal of the US from the TPP when he first took office, there were doubts that the TPP would not be able to stand without the most influential country. However, the remaining 11 members still tried to promote this agreement with great determination. The renegotiation and rearrangement of the terms in the new CPTPP agreement without the US went smoothly, quickly proving that the remaining members were patient enough to pursue the trend of trade liberalization and multilateralization of economic relations despite heavy criticism from the populist and protectionist movements.

Japanese Minister of State for Economic and Financial Policy Toshimitsu Motegi affirmed that the CPTPP is a historic achievement that helps create free and fair rules in the 21st century in the Asia-Pacific region. The CPTPP not only brings benefits to member countries, but also creates new momentum for economic and trade cooperation and linkages in the region. With the CPTPP, member countries now have an effective tool to promote regional cooperation and integration. Efforts to revive the TPP, creating a potential CPTPP, are creating great opportunities for Asia-Pacific economies to continue leading the pace of global economic and trade growth.

There are still question marks

Located on three continents and in the Pacific Rim, CPTPP has a lot of potential. It is considered one of the largest free trade blocs in the world with a market of up to 463 million people and a total GDP of about 10,000 billion USD, accounting for 13% of global GDP. The "attraction" of CPTPP is even greater after "rearranging" some provisions of TPP, especially those related to the protection of intellectual property rights that cause damage to consumers in the region. Many large economies in the Pacific such as Indonesia, South Korea, the Philippines and Taiwan (China) and most recently Thailand have considered the benefits of joining CPTPP. In addition, the UK has also repeatedly expressed its desire to join the agreement after leaving the European Union (EU). That attraction is also contributing to the possibility of the United States returning to CPTPP.

However, the gap between expectations and reality in the world context raises many questions about the real effectiveness of the CPTPP, when there are only 2 months left for this agreement to officially take effect. In fact, the US withdrawal from the TPP - the predecessor of the CPTPP, has reduced the economic potential of the countries participating in this agreement. The US participation in the TPP will help the total exports of the 12 member countries reach about 26.6% of global trade, of which about 11.4% comes from intra-bloc trade, but the absence of the US has caused the total exports of the remaining 11 countries to decrease to 15.2% of global trade and 2.3% from intra-bloc. Not only that, the removal of tariff barriers according to the commitments will increase competitive pressure among member countries, forcing member countries in general and businesses in particular to transform and restructure in accordance with international practices. If this is not done, many businesses, especially in developing countries, are at risk of failing in their own domestic markets, being dissolved or going bankrupt. As a result, a number of workers will lose their jobs and the gap between rich and poor will widen.

Japanese Prime Minister Shinzo Abe and Canadian Prime Minister Justin Trudeau are two leaders actively promoting CPTPP. Photo: Quartz

It is necessary to frankly acknowledge that the highest goal when the TPP was initiated was to create a new geopolitical space in the Asia-Pacific through a multilateral free trade agreement. In particular, the administration of former US President Barack Obama, as the initiator of the TPP, wanted this agreement to become a pillar in its Asia-Pacific Pivot Policy, helping the US cope with the economic, defense and soft power rise of China. However, with the current administration of Donald Trump choosing to confront China directly with tariffs, the role of the CPTPP will fade a lot. It will be a secondary tool to deter and contain China, while the commercial purpose is no longer clear. President Trump still "prefers" bilateral free trade agreements, because that is where the US has more advantages in negotiations./.