Info Service on WTO and Trade Issues (Mar18/06)
12 March 2018
Third World Network
The new CPTPP trade pact is much like the old TPP
Published in SUNS #8638 dated 9 March 2018
Penang, 8 Mar (Martin Khor*) - The new agreement that eleven countries
are signing on 8 March in Chile in place of the Trans-Pacific Partnership
Agreement (TPP) is like old wine in a new bottle - without the United
States but retaining most of its controversial elements.
The TPP seemed to have died when President Donald Trump pulled the
United States out of it early last year.
But the remaining 11 members have rescued it almost intact, giving
it a new name, the Comprehensive and Progressive Agreement for Trans-Pacific
The 11 countries, nicknamed the TPP11, are Chile, Peru, Mexico, Canada,
Japan, Vietnam, Malaysia, Brunei, Singapore, Australia and New Zealand.
The original TPP had been pushed along most adamantly by the US before
Trump became President, with Japan as the next big advocate. They
succeeded in getting into the lengthy text many controversial chapters
and provisions, including on investment policy and protection, government
procurement, state-owned enterprises, intellectual property (IP) and
For some developing countries in TPP, especially Vietnam and Malaysia
which do not have bilateral trade agreements with the US, the attraction
was to get more open markets for their exports, especially to the
US, which has the biggest market in the world.
With the US now out, the main benefits for them in the CPTPP would
The developing countries generally dislike the other aspects, especially
procurement, state owned enterprises and IP, as these intrude into
their domestic arena and seriously restrict what policies they can
retain or introduce. But they were willing to accept these, though
reluctantly, in exchange for more exports to the other TPP countries.
With the US out of the picture, the cost-benefit balance has shifted.
The benefits have reduced, but the costs remain as long as the controversial
issues are retained.
The CPTPP text shows that 22 provisions (out of the over 1,000 total
provisions) of the TPP have been "suspended", rather than
This is in anticipation that the US might return. The chances of that
are quite good, as Trump has announced the US may reconsider its decision
to withdraw, if it got a better deal.
If the US re-joins, it is likely the eleven countries will lift the
suspended provisions and the CPTPP would in effect become the TPP
The suspensions are mainly in the IP chapter. Some of the extreme
clauses which the US insisted on (but which many others were unhappy
over) will not come into effect in the CPTPP.
Suspended are some provisions that adversely affect access to medicines,
including obliging the TPP countries to allow patents for a second
use of a medicine, and for new methods for using the medicine. Also
suspended is a clause to extend the normal patent term of 20 years
if a country delays granting a patent for a new medicine.
But some other TPP provisions on IP remain. In particular, countries
must join an international treaty known as UPOV91 under which farmers
will not be able to save and exchange seeds that are protected by
big corporations, but have to buy the costly seeds in order to plant
Most other provisions that are suspended are of minor importance,
and thus much of the original TPP remains.
The most problematic issues retained in the CPTPP include:
* Investment liberalisation. Countries have to open up to other CPTPP
members' companies and investors to enter and invest in their territory.
They could take over the business of some domestic producers and service
* Investor protection. Foreign investors can bring host governments
to an international tribunal for loss of present and future profits
or reduced value of their assets if government introduces new economic,
social or environmental policies that affect their business or even
their business expectations.
* Government procurement. Most governments in developing countries
give preferential treatment to local companies when granting construction
and other projects. This preference is also provided when the government
purchases materials and services. Under the new agreement, these preferences
will be ended as foreign firms from CPTPP countries will have to be
given equal treatment as local firms in government procurement above
a certain level. The aim is to enable foreign firms to obtain more
business and revenue. But the disadvantage to the host country is
that their ability to provide a boost to local firms and the domestic
economy (as under the original procurement policy) would be severely
* State owned enterprises (SOEs). In many countries, SOEs play multiple
significant economic and social roles. Under the CPTPP, these roles
will be much constrained and reduced by new rules that prohibit or
make it more difficult for SOEs to obtain financing or preferential
treatment from the government. The rules also prevent SOEs from giving
preferential treatment (for example, in their procurement) to other
local firms. The aim is to enable foreign companies to better compete
with the SOEs and obtain more market share.
* Intellectual property. Despite some provisions being suspended,
the CPTPP has remaining clauses that can have negative effects such
as higher costs for medicines, educational materials and farm inputs.
Policy makers should have done new cost-benefit analyses of the CPTPP,
especially since the main TPP benefit of US market opening is now
lost in the new agreement. But very few countries have done a new
analysis, or they have not revealed the results.
Would it really be worthwhile for the developing countries in the
CPTPP to lose so much policy space (i.e. the ability and freedom of
a country to formulate its own policies in accordance with its own
priorities and national goals), in order to gain new but limited export
This question is made more pertinent because of two factors. One,
the new opportunities are limited because of the absence of the biggest
player, the US. Two, the extra exports are offset by the inflow of
new imports, so that the trade gains may be meagre, or even negative
if the extra imports exceed the extra exports.
But then, some decisions including whether to join a trade agreement
are sometimes made without careful enough study. Also, sometimes,
decisions are taken based not only on economic costs and benefits,
but on geo-political and other factors.
[* Martin Khor is the Executive Director of the South Centre.]