Sunday, 31 January 2021

CPTPP: What do you mean by "comprehensive"?

While we're on the subject of CPTPP, I thought it interesting that the media's third favourite trade wonk, Hosuk Lee-Makiyama (and to my mind the only one ever saying anything worthwhile), should confirm much of what I had assumed. In an older paper written for Daniel Hannan's Initiative for Free Trade (IFT), Makiyama writes:

First, CPTPP and other FTAs do not contain provisions that actually set regulatory standards, but ensures the sovereigns regulate in the most non-discriminatory fashion possible. In other words, CPTPP and other trade agreements voluntarily bind its members to refrain from certain, specific discriminatory practices, like a rulebook against discrimination in national legislation – but do not replace the national legislation itself. This is how CPTPP (and other FTA texts) deal with a complex matter like food safety in just sixteen pages, while the national legislation often runs several hundred pages long – the current UK law, implemented via EU regulation (Regulation No 882/2004) on feed and food runs 196 pages in the Official Journal.

Second, six members of the CPTPP have existing agreements with the EU. In order to ensure consistency between agreements, these countries had to be certain that none of the commitments in their bilateral FTAs with the EU could or would contradict potential TPP pledges. In other words, these countries have already scrubbed commitments which could cause potential conflicts between the CPTPP text and the EU FTA template, as they have signed up to both. In addition, Japan, New Zealand and Australia also had comprehensive mutual recognition agreements (MRAs, based on conformity assessment) with the EU, even prior to their EPA/FTAs. In highly regulated sectors, such as on motor vehicles, Japan and Australia have also unilaterally accepted or incorporated European standards into their systems.

Evidently, as nothing in the CPTPP agreement precluded Japan and other CPTPP countries to conclude a comprehensive FTA with the EU as well, the UK would in theory be able to pursue both. However, in the opposite direction, whether the EU body of law in its entirety would pass CPTPP commitments, is a different question that is discussed in the following sections.

First off, one would note the disparity of language. The agreement is often described both deep and comprehensive, which it may well be through the narrow prism of tariffs, but by way of the above, it is neither deep nor comprehensive. What it confirms, though, is that in terms of standards and regulations, as discussed here yesterday, it does not go much further than the WTO baseline and merely reinforces WTO principles and ongoing trends in regulatory coherence initiatives.

It is also important to note that CPTPP remains a thin agreement precisely because key members prioritise deeper and more comprehensive agreements with the EU. This point has evidently escaped Daniel Hannan and the various luminaries behind the IFT. In particular, Korea has adopted the EU's REACH system for chemicals. This prioritisation of EU trade is an inherent expansion limit to CPTPP, and I suppose acts as a safeguard against it becoming anything more political. 

What Makiyama doesn't say, is that the respective EU FTAs primarily adopt global regulations and not "EU standards". In the case of motor vehicle, all EU FTAs, including our own, adopt the full stack of UNECE regulations. This is becoming a curious blind spot in the trade fraternity.

Moreover, if the mutual recognition on conformity assessment within CPTPP is tailored so as not to offend the EU, then it doesn't present the obstacles I was imagining, but by the same token, it is not likely to be comprehensive, thus of limited value. That further substantiates my belief that CPTPP is not at all comprehensive. The only slam dunk argument I can see is that it simplifies and improves rules of origin among signatories, but that will very much depend on how it interacts with EU rules. They cannot be looked at in isolation when it comes to complex value chains. 

As to food safety, Makiyama does indeed make the point that it is necessarily a complex area, and a territory upon which CPTPP fears to tread, thus it cannot be said that the agreement does very much at all for non-tariff barriers, and nothing beyond which the parities are already committed to via their own WTO rule based EU FTAs. Meanwhile, by way of geography, the UK's SPS regime will continue to be heavily influenced by the EU whether the government yet knows it or not.

More than anything, the UK's accession looks more like a dual-use move; to establish a diplomatic presence in Pacific trade conversations, and to broadcast our "Global Britain" credentials. It certainly won't live up to the hype, and so far as the consumer is concerned, against the unfolding consequences of leaving the single market, it is likely to make no noticeable difference.

As with Brexit, the CPTPP debate will largely concentrate on tariffs, ignoring services, and will completely neglect any consideration of non-tariff barriers. As per the discussions over the TCA, Geneva will remain the elephant in the room. That neither the media or its rent-a-quote trade wonks are remotely aware of it speaks volumes. 

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