Since its inception in 1995, the World Trade Organization (WTO) has largely failed to make substantial progress on 21st century trade issues. In the context of stalled multilateralism, Multi-country regional free trade agreements (FTAs) are seen as increasingly important vehicles for fostering trade integration between willing partners. As geopolitical tensions in the Indo-Pacific have intensified since 2016, these mega-regional trade agreements have also assumed increased geo-economic importance.
The Trans-Pacific Partnership (TPP), signed between 12 Pacific countries in 2016, was the centerpiece of the Obama administration’s strategic pivot to Asia. It was designed to counter the growing influence of the Chinese state capitalist business model in the region and its associated preferences regarding the role of the state in the economy.
Modern trade relations offer countries greater prosperity by providing economies of scale and comparative advantage.
When President Donald Trump withdrew the United States’ signature from the deal in January 2017, one veteran Chinese analyst observed: perhaps the biggest strategic mistake the United States has ever made. “ While this may sound hyperbolic, it reflects the importance of high-quality 21st century trade deals in an era of heightened competition between economic systems and models of governance.
Modern trade relations offer countries greater prosperity by providing economies of scale and comparative advantage. They also promote greater economic interdependence through the convergence of rules and standards that govern the production and trade of goods and services, as well as a multitude of activities abroad. Therefore, modern FTAs shape international standards of economic governance in a way that post-war agreements focused on reducing tariffs and quotas did not.
After the United States’ withdrawal from the TPP, it was Japan’s leadership and status as the group’s second-largest economy, alongside Australian backing, that helped revive the trade initiative. Despite the acronym change to CPTPP, the new agreement signed in March 2018 is virtually identical to the TPP, except for a small number of suspended intellectual property provisions that the United States had sought, but whose other parties were not particularly supportive.
By harmonizing and deepening trade ties between CPTPP member states, the agreement aims to correct China’s ability to bias regional trade in favor of state capitalism due to its growing market dominance. The CPTPP also provides a more meaningful regional trade integration model than the Regional Comprehensive Economic Partnership (RCEP). The latter is a shallow area, centered on ASEAN trade agreement, which, among other things, lowers tariffs and lowers rules of origin barriers for members, but unlike the CPTPP, it has little or no commitments on labor, environment, intellectual property and public enterprises. Thus, the RCEP requires much less commitment to domestic reform from China than membership in the CPTPP would require.
US domestic politics are currently militating against the possibility of Washington returning to the CPTPP. President Joe Biden’s very slim Democratic Party majorities in the US House and Senate, combined with Republican and Rust Belt opposition to the deal and midterm elections slated for November 2022 , mean that re-joining the CPTPP is possible, but highly unlikely. soon for the United States. In contrast, China has officially applied to join the CPTPP. The demand, while unexpected, speaks volumes about China’s desire to influence the regional trade architecture in the absence of US leadership, and raises serious questions for current CPTPP members about the best way forward. , especially with regard to China’s objection to Taiwan’s accession to the trade pact.
This creates an opportunity for Brussels to step up and enter the CPTPP. The EU has the potential to become a regional trade policy counterweight to China, which the European Commission has called a “systemic rival” since 2019. An EU membership in the CPTPP would not necessarily exclude China’s membership in the group, nor should it be presented as a geopolitically confrontational decision. On the contrary, it may make it easier for existing members to consider allowing Beijing to join the CPTPP on more stringent terms. The addition of an EU-sized trading bloc would significantly increase the CPTPP’s coverage, consolidate its liberal and global character, and strengthen the capacity of CPTPP members to maintain the high standards and inclusiveness of the agreement in the country. possible accession negotiations with China.
The EU has the potential to become a regional trade policy counterweight to China, which the European Commission has called a “systemic rival” since 2019.
From an Australian perspective, the EU is for the most part a trusted and like-minded partner, despite some obvious trade policy divergences. The EU is already Australia’s second largest trading partner and second largest source of foreign investment, but the relationship is underestimated. In addition, bilateral relations were strained in September 2021 by the cancellation by Australia of its future attack class submarine program, led by the French majority-owned Naval Group, in favor of a Australia, UK and US trilateral security pact. . As a result, negotiations on an Australia-EU FTA, first launched in June 2018, appear to have stalled in October 2021 ahead of a twelfth round of talks.
An application for EU membership in the CPTPP should not only be welcome, but be actively supported as a founding member of the CPTPP. This would help restore much needed confidence and momentum in Canberra’s relationship with Brussels. As Canberra strives to secure a full FTA with Brussels, much of this work could also feed into a European application for CPTPP membership.
This guidance note is based on two intersecting arguments. First, the document describes the geo-economic objectives of the original TPP and the current TPPP. We argue that the strategic value of the CPTPP aligns both with the EU’s Indo-Pacific strategy and with Australia’s interest in securing a liberal rules-based trade order. Second, we address the complementarities and obstacles to eventual EU membership. We conclude that the first outweighs the second and, on this basis, we recommend that Australia support an EU membership in the CPTPP.