Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership may be referred to as a free trade agreement between the countries Australia, Canada, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, Mexico and Japan. It is one of the largest free trade agreements negotiated till date. It was signed on March 8, 2018 at Santiago in Chile. It has not come into force and shall be effective after 60 days of ratification by the original signatories.

Features of the Agreement

The key features of this agreement are as follows:

Creating a free trade area

The Agreement calls for a free trade area to be created as per requirements of Article XXIV of GATT (envisages the need for a free trade area for facilitating trade between the constituent territories but not for raising barriers to trade) and  Article V of GATS (grounds for economic integration).

National Treatment

It requires the parties to give national treatment to the goods of the other State parties as per GATT provisions.  It means that a regional government will give treatment to the concerned goods no less favourable than it gives to like, directly competitive or substitute goods.

Eliminating customs duties

The Agreement stipulates that no party is allowed to increase customs duty on an originating good or adopt any new customs duty with respect to it. Rather, parties have been mandated to eliminate these customs duties as per commitments set forth in the annexure. There shall also be no provision with respect to waiver of customs duty conditional on fulfillment of a performance requirement.

In case of export for repair or alteration

If a good is exported to another Party’s territory for the purpose of repair or alteration, it has to still be exempted from customs duty although it undergoes a change in essential characteristics from the originating good.

Duty free entry

The agreement mandates duty free entry of commercial samples having almost negligible value and printed advertising material from the territory of a signatory party. There are some conditions laid down which need to be fulfilled for qualifying for this exemption.

Temporary admission

Some goods are to be granted duty free temporary admission which are as follows:

• Professional equipments like for press, software, broadcasting and cinematograph etc.
• Goods to be used only for display or demonstration
• Commercial films and advertising films and recordings
• Goods to be used for sports purposes.

Export and import restrictions

The Agreement prevents any restrictions on export or import of goods from another Party except as provided under Article XI of GATT 1994. The provision prevents restrictions of the following nature:

• Export and import requirements except that can be permitted for the enforcement of countervailing and anti dumping duty orders and undertakings.
• Import licensing that is dependent on fulfilling some performance requirement.
• Voluntary export restraints.

Committee on Trade in Goods

A Committee on Trade in Goods is to be established consisting of government representative from every signatory country. The Committee is to meet once in a year for the first five years after the Agreement enters into force.  Some of the functions of the Committee-

• To promote trade in goods between the parties by the methods of consultation on accelerating tariff elimination and other appropriate issues.
• Addressing the barriers to trade of goods that exist between the Parties. But it excludes those areas that are within the competence of other committees, working groups or other subsidiary bodies set up under this Agreement.
• Reviewing the Harmonized System under the Agreement so that it can be amended appropriately if future need arises and Party’s obligations are not altered.
• Resolving disputes arising between the parties.
• Additional work that may be assigned to it by the Commission.

Safeguard Measures

• The Agreement provides for conditions when safeguard measures can be applied which include global safeguards stated by the GATT and transitional safeguard measures. It also provides for the practices relating to antidumping and countervailing duty.
• The other provisions relate to financial services, technical barriers to trade, investment and sanitary and phytosanitary measures.

US –exit and Impact

The Agreement came in the light of a situation where US is being pressurized to bring down its import duties on aluminum and steel imports. So, its presence was quite fundamental to the Agreement. But Donald Trump keeping his promise in the campaign, withdrew from CPTPP.

However, given the unpredictable nature of US trade policy, the presence of US is not mandatory. In the absence of US, the role of Japan as a passive rule taker in the multilateral trading system can be explored.  The other members can also play a crucial role in reducing tariffs significantly that account for 13 per cent of the economy.

Future Prospects

The Agreement may see an expansion of Members in the near future. One such country is UK that has expressed its interest to join the Agreement in order to stimulate exports especially after the Brexit. US has also not totally closed its door on the Agreement. It may join in future if a ‘substantially better deal’ is given to the country.  It is a very ambitious Agreement that will cover a market of around 500 million people.