Monday, 10/12/2018
Comprehensive and Progressive Agreement for Trans-Pacific Partnership: toward a progressive and inclusive trade model
20/7/2018 10:44' Send Print
Minister of Industry and Trade Tran Tuan Anh (right) and representatives of other countries in the signing ceremony of the CPTPP in Santiago on 8 March. Photo: Xinhua News Agency/VNA

Why is it a "comprehensive" and "progressive" agreement?

After the initial feeling of "missing" when the United States announced its withdrawal from the 12-member Trans-Pacific Partnership (TPP), a TPP Summit was organized in Viña del Mar, Chile on 14 March 2017 to seek solutions and follow up directions. In terms of viewpoint, all 11 remaining signatories of the TPP (TPP-11) affirmed the desire to go for an agreement which shapes the global trade in future and agreed that TPP-11 should be maintained with high quality, and be comprehensive in all areas. In this new context, the TPP-11 members begin negotiations to achieve a "new balance." Overcoming difficulties and differences in negotiation rounds, after exactly one year TPP-11 ministers signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in March 2018 in Chile, the “successor” of the TPP. The CPTPP states: Article 1: Incorporation of the Trans-Pacific Partnership Agreement 1. The Parties hereby agree that, under the terms of this Agreement, the provisions of the Trans-Pacific Partnership Agreement, done at Auckland on 4 February 2016 (“the TPP”) are incorporated, by reference, into and made part of this Agreement mutatis mutandis, except for Article 30.4 (Accession), Article 30.5 (Entry into Force), Article 30.6 (Withdrawal) and Article 30.8 (Authentic Texts). The full text of the TPP when signed consisted of 30 chapters, with more than 1,000 pages, covering a wide range of areas, including trade in goods, investment, textile and apparel goods, government procurement, rules of origin, competition, state-owned enterprises, intellectual property, labor, environment, administration and institutional provision, dispute settlement, among others. Thus, according to Article 1 of the Agreement, the CPTPP is a new generation free trade agreement (FTA), not only relating to traditional sectors, such as tariff reductions, service market opening, technical barriers to trade, but also commitments on new and non-traditional issues, such as intellectual property, labor, environment, government procurement, State-owned enterprises with high demands and standards of transparency, binding and strict mechanism for dispute resolution. The concept and purpose of the CPTPP do not change as compared to the TPP.

A difference in contents compared to the TPP is that the CPTPP suspends the application of 22 provisions, including trade facilitation, investment, services, public procurement, intellectual property, environment and transparency, which were incorporated into the TPP at the request of the United States; the chapter on intellectual property changed the most. For example, the CPTPP postpones requiring member states to change their laws and practices to protect new drugs, including bio-products. The CPTPP also suspends the stipulation on extending patent duration due to patent provider’s delay or irrational delay in patent provision or provision of export license of some pharmaceutical product to member countries. In addition, members of the CPTPP will not need to extend the term of copy right protection from 50 to 70 years after the author's death. In the investment field, suspended provisions relate to the mechanism for dispute settlement between the government and investors. Accordingly, the CPTPP narrows the scope of allowing foreign investors having investment contracts with the government to use this mechanism to sue the government. The adjustment and new flexibilities are made "lighter" for the participating countries in the new context, facilitating their ratification of the Agreement. The CPTPP also adds provisions on entry into force, withdrawal, accession and future reviews of the CPTPP. For example, in terms of entry into force the Agreement shall enter into force 60 days after the date on which at least six or at least 50 per cent of the 11 signatories to this Agreement have ratified instead of the TPP's rules that in the absence of the ratification of parliaments of the 12 countries, the Agreement shall enter into force with the ratification of at least six parliaments and the combined GDP of these six signatories accounts for at least 85% of the combined GDP of the 12 signatories.

Explaining why two words "comprehensive" and "progressive" were added to the name of the Agreement, Canadian Minister for International Trade François-Philippe Champagne said that "comprehensive" reflects the high standards in the Agreement, such as in labor, environment, or small and medium-sized enterprises, and "progress" means all people in the Asia-Pacific region have opportunities to access to trade, making trade real to people and all sectors of the society benefit from trade. "We want to reflect through the name of the Agreement, that the Agreement is for everyone, not just for the benefit of big companies, and everybody can trade with new markets," he said, adding "the world will consider it as a model for progressive and inclusive trade." (1) "Comprehensive" and "progressive" are the overall objectives of the Agreement, ensuring the balance of interests of its members. In that sense, the name CPTPP received a very high consensus from members.

Expectations from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Although it can not bring equal benefits to all partners as well as for all sectors and population in each country, the CPTPP signatories hope that the Agreement will yield benefits from different angles.

From the perspective of economic and social benefits, the CPTPP helps member countries have new opportunities and potentials in economic cooperation, trade exchange with each other. Although economic benefits are lower with the withdrawal of the world's No.1 economy, according to the simulation analysis using a model of the multinational multidisciplinary Global Trade Analysis Project (GTAP) the net benefits that CPTPP members gain from trade liberalization will be about 0.3% of their total GDP, equivalent to US$37.3 billion in the medium term, with global welfare rising to about $21 billion. All 11 members will be more beneficial participating in the CPTPP than if not. However the level of benefits derived from the Agreement is not the same for the members. According to estimation, Malaysia is likely to benefit the most (2% of GDP), followed by Vietnam and Brunei (about 1.5% of GDP), then Singapore (1% of GDP). New Zealand of the Oceania also benefits at 1% of GDP. Among Latin American members, Mexico and Chile have the largest gains compared to other countries in the region (0.4% of GDP). (2)

According to a report by the Department of Global Affairs (Ministry of Foreign Affairs) of Canada, the CPTPP will bring the country greater benefit than the TPP, reaching CAD 3.4 billion by expanding its access to markets of the CPTPP members without competition from the United States. Canada, which has maintained low tariffs, has a great advantage to promote trade liberalization with its seven Asia-Pacific partners, which have no bilateral FTAs, namely Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam. New Zealand believes the CPTPP will boost its GDP from 0.3% to 1%, equivalent to $1.2 billion to $4 billion respectively a year. In addition to economic benefits, The CPTPP is expected to generate more jobs, reduce poverty and improve the quality of life for its members. Australian Minister of Trade, Tourism and Investment S. Ciobo said the CPTP would help create new jobs for Australia in areas such as agriculture, production, mining, and services.

From the perspective of trade liberalization, the CPTPP participating countries agree on a roadmap to eliminate almost all import taxes; service and investment liberalization will be implemented on the basis of complying with commitments. Therefore, CPTPP is considered a "symbol" of the trend to promote trade liberalization in the region and in the world, a "world of trade diversification, multilateralisation" in the context of increasing trade protection, and focusing on bilateral trade. Chilean President Michelle Bachelet said that market opening up, economic integration and international cooperation are the best tools to create opportunities and prosperity for the economy.

The signing of the CPTPP also contributes to accelerating negotiations on the Regional Comprehensive Economic Partnership Agreement (RCEP). Japan, which plays a central and leading role and supports TPP revival, expects that CPTPP with high standards can become "a model for many other multilateral trade agreements," including RCEP.

In addition, the CPTPP, together with its independence in its view on trade liberalization, creates a balance in competition with regional super-FTAs, bringing home to member states status and strength in negotiation and renegotiation of multilateral FTAs in some regions. For example, it helps members of the CPTPP which are participating in the RCEP negotiations improve "negotiating capacity," or provide more opportunities and status for Canada and Mexico in the renegotiations on the North American Free Trade Agreement (NAFTA) at the request of the United States.

As an open deal, not a separate and close "playground," the CPTPP expects that the number of members will not stop at the existing number of 11. In fact, the CPTTP is receiving the attention of some countries, such as Britain, South Korea, Thailand, among others. At the World Economic Forum in Davos in January 2018 President of the United States D.Trump stated the United States might "reconsider its decision to withdraw from this agreement if there is a better deal."

Vietnam with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Implementing the Party's consistent view of multilateralisation, diversification and international integration, Vietnam has made important contributions to meetings and left a deep imprint in the negotiations to complete the signing of the CPTPP. In particular, as the host country of the Asia-Pacific Economic Cooperation in 2017 (APEC 2017), Vietnam together with Japan "maintained, discussed, reach consensus and sought ways to balance the interests of countries."

The conclusion of the negotiations, which led to the signing of the Agreement, was said to be a "breakthrough achievement of APEC 2017." This affirms that Vietnam has demonstrated its role in promoting free trade and regional economic integration while facilitating development of bilateral relations between Vietnam and CPTPP member countries. Japanese Minister of Economy Toshimitsu Motegi said: "... Japan is very grateful to Vietnam for its effective cooperation during the past time," (3) and reaffirmed that Japan would continue to fulfill its role to coordinate, guide and create linkages in order to make the CPTPP effective soon. Australian ambassador to Vietnam Craig Chittick maintained that Vietnam accomplished a great mission as host of APEC 2017 and played an important role in completing negotiations. Vietnam has demonstrated its role in promoting free trade and economic integration in the Indian-Pacific ocean region. New Zealand ambassador to Vietnam Wendy Matthews also noted that the CPTPP made great strides at the APEC 2017 Summit and was confident that the CPTPP contributed to the good relation between the two countries. Dr. Nicholas Chapman of the Japan International University held that Vietnam’s participation in the CPTPP shows its confidence in free trade, as well as the role of free trade agreements towards the goals of international integration, diversification and sustainable development of Vietnam. Canadian Minister of Foreign Trade affirmed that Vietnam was an important part of the negotiating process, and that Vietnam was always at the side of Canada, sharing the view that for a trade agreement to bring about benefits to people, it is necessary to be fully aware that each country has different levels of development. Canada wants to strengthen its relationship and trade activities with Vietnam, and, the two countries would coordinate to put the CPTPP into force.

It can be said that positive comments and assessments of Vietnam's role in APEC 2017 in general and in completing and concluding the CPTPP in particular demonstrate that the Party’s viewpoint "Vietnam is a responsible member of the international community" is being materialized. In addition, Vietnam’s role in promoting the formation of the CPTPP also shows its proactive, active integration into the international economy as set out in the documents of the Party Congresses. Vietnam has participated in many bilateral and multilateral FTAs, negotiated the RCEP, provided opportunities for increased benefits from markets, and accelerated innovation and capacity building to meet the high standards of new generation FTAs. At the same time, before signing the CPTPP, Vietnam had signed a new generation FTA with the European Union (EVFTA), decided to join and sign the TPP-12 which shows that Vietnam had anticipated opportunities, challenges; opportunities, impediments to promote trade liberalization, and international integration. And so, Vietnam has been spiritually and materially prepared to join the CPTPP.

Given that the US withdraws from the CPTPP, Vietnam's benefits are forecasted to greatly decrease in terms of access to the US market, because at present Vietnam has gained a trade surplus with the United States and there is an impressive increase over the past years, though the two countries have not signed FTA. However, benefits from the CPTPP are not small for Vietnam. Assessing the impact of CPTPP on Vietnam's economy, the Ministry of Planning and Investment predicted that the CPTPP could help Vietnam's GDP increase by 1.32% or US$1.7 billion and possibly 2.01% with tariff reductions and service liberalization under the scenario of service opening. It is estimated that Vietnam could increase its total export turnover by 4 percent (equivalent to $4.09 billion). The CPTPP can help Vietnam reduce the number of people under the poverty line by 1 million. As assessed by the World Bank, multilateral trade agreements such as the CPTPP are expected to further boost Vietnam’s investment and export driven growth model. According to Ousmane Dione, World Bank Country Director for Vietnam even under conservative assumptions, it is estimated that CPTPP would increase Vietnam’s GDP by 1.1 percent by 2030. Assuming a modest boost to productivity, the estimated increase of GDP would amount to 3.5 percent from the CPTPP. The sectors that most benefit from the CPTPP are food, beverages, tobacco, garments, leather goods, textiles and apparel.

Implementing the CPTPP creates new opportunities and options for exporters with preferential tariffs when accessing the market of 10 partner countries, especially with those Vietnam does not have FTA, such as Canada, Mexico, and Peru. Businesses have opportunities to join the supply chain of many large corporations in the world, especially supply chain of electronics and high technology; import machinery and equipment of developed countries with modern and advanced technologies to help improve the competitiveness of businesses. The import and export market is restructured, more diversified, creating new balance in trade relations with other countries, reducing excessive dependence on a certain market or market region.

In foreign direct investment (FDI), with stronger commitments on investment and opening of service markets, the CPTPP is expected to promote foreign investment, accelerate economic restructuring, absorb modern technologies, create jobs and form new production capacities to take advantage of export opportunities and participate in regional and global value chains, thereby creating momentum for the economy to enter a period of higher economic growth.

However, besides great opportunities there are many challenges. Challenges have existed in all committed areas from trade in services, investment, public procurement, environment, labor to intellectual property, among others. High commitments in the CPTPP require Vietnam to adjust elements that are non-commercial but trade-related, such as laborers’ rights, environment, and labor which pose many challenges to institutional reform.

Recognizing that opportunity itself cannot become a reality, but depends on the level of readiness of the subject, and if well prepared in advance, challenges can be turned into opportunities; opportunities and challenges can transform one another. It is hoped that the implementation of the CPTPP will put pressure on Vietnam to "go beyond itself", accelerate the process of institutional reform, improve business environment in a more open, transparent and predictable way, more efficiently allocate resources, restructure the economy and, improve the quality of growth. High standards on transparent administration and objective behavior of the state apparatus as committed are also norms that Vietnam is aiming to build a socialist law-governed State of the people, by the people and for the people.

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(1) Canada affirmed that Vietnam is an important part of the CPTPP negotiations, https://www.vietnamplus.vn/canada-khang-dinh-viet-nam-la-mot-phan-quan-trong-trong- dam-phan-cptpp / 491654.vnp
(2) Contents, impact and prospects of the CPTPP, http://nghiencuuquocte.org/2017/12/13/noi-dung-tac-dong-va-trien-vong-cua-hiep-dinh- cptpp /
(3) Vietnam's role in signing the CPTPP is highly appreciated in the international arena, http://www.trungtamwto.vn/tin-tuc/quoc-te-danh-gia-cao-vai-tro-cua-viet-nam-trong-viec-ky-ket-cptpp

This article was published in the Communist Review, No. 907 (May 2018)

Nguyen Anh