ASIA-PACIFIC REGION: An Introduction to International Trade/WTO

Asia-Pacific partnership transcends other trade deals with its plurilateral promise

In June 2021, the 100th Committee on Regional Trade Agreements of the 164 member World Trade Organization considered the 11 member Comprehensive and Progressive Agreement for Trans-Pacific Partnership for acceptance as a permissible regional agreement under Article XXIV of the WTO’s historical constitution, the General Agreement on Tariffs and Trade.

It was obviously not an easy moment for the WTO, a body whose 20th century success now holds it back from solving 21st century problems. Perhaps without realising it at the time, the WTO’s publicity machine demonstrated the envy of an old warrior coming up against the new kid on the block… which is fitter, faster, and better able to interface with Apple, Samsung and Huawei.

The WTO has become a baseline for trade liberation but is no longer the liberator itself. Sure, over 75% of global trade occurs on MFN terms, which the WTO rightly trumpets “underscor[es] the continuing commercial importance of multilateral agreements at the WTO”. The competitive edge is however provided by more preferential tariffs under FTAs and RTAs, which the WTO notes govern 20% of global merchandise trade.

The word “merchandise” is a qualification that is as important to as it is limiting of the WTO. As well as dealing with tariffs on merchandise, CPTPP has services commitments that are sharper and better formed than those under the WTO’s GATS agreement. CPTPP also includes guiding principles and binding obligations on investment, government procurement, IP, competition, state enterprises, environment, labour, electronic commerce, and small and medium enterprises. Although the understandings on these new age topics may not be 100% populated by commitments, it is the acknowledgement that they exist and the guiding principles for the future development of the rules that provide value and positive flexibility for CPTPP members.

In progressive terms, real excitement in trade relations is to be found in CPTPP-related developments we have seen over the past three years. It is not only the CPTPP that is positively dealing with new trade challenges - however it is certainly doing so in the most promising way. Try these CPTPP announcements out for size and impact:

• China has positively advanced its desire to join, first announced in 2021. It is doing so despite the commonly held view that CPTPP “state enterprise” rules are designed to negatively impact trade and investment flows out of China, and despite criticism about China’s motives. Contradicting that criticism is the evidence of how China has utilised WTO membership for its trade and industrial development, and its adherence to WTO dispute settlement in that forum. China’s media applauds these domestic reform benefits and adds supply chain resilience and digital economy as topics China can expect to progress by joining CPTPP.

• UK, possibly the least trans-Pacific country in the world in geographic terms, has concluded joinder negotiations for its own membership which was approved by CPTPP members in July this year. In its media it highlights the CPTPP’s coverage of the movement of businesspeople, easier cumulative origin rules, standardisation of procedures for food safety regulations, and the rules around the transfer of data to other members.

• This year Ukraine has asked to join, further underlining the vigour and attraction of the CPTPP across the world and not just regionally. Ukraine is amongst the top ten agricultural producers in Europe and quite obviously sees the promise of an Asia-Pacific tie-up.

• In September this year, formal dispute settlement outside the beleaguered WTO system has been applied to resolve a dairy dispute between New Zealand and Canada. This is an early win for the institution itself. CPTPP has therefore encouraged and delivered dispute settlement outside the WTO and NAFTA/USCMA, a welcome novelty amongst the many RTAs and FTAs that have dispute settlement provisions that are never utilised.

The WTO is a member-driven organisation, with its many members driving in different directions. It has been unable, through no fault of its own, to integrate new trade issues into its agreements or to serve as an effective forum for progress to be made on that front. It is here where CPTPP excels:

• It has environmental relevance, with specific mention of particular issues of sustainability, climate change, carbon, conservation, etc, and multiple obligations stated in clear terms.

• There’s a chapter on cross border investment, with more-balanced circumstances for investor challenges, which in political and legal terms will serve to encourage rather than frustrate the accession of new members.

• CPTPP has separate chapters on financial services and telecommunications, which better focus on the specific features of those services rather than trying to homogenise their treatment within a general definition of services.

• For electronic commerce, provision is made for data privacy and non-localisation, there are legal frameworks allowing for the protection of protect personal information, consumer protection is recognised, interoperability between data privacy regimes is encouraged, and cooperation between consumer protection authorities has been enabled.

• A potent chapter on state enterprises and monopolies seeks to level the playing field by proscribing “non-commercial assistance”. CPTPP applies trade measures concepts of “injury” caused to domestic industries by foreign government support, thereby expanding the narrower condition of “financial contributions” under traditional subsidy rules.

• There are better articulated disciplines and more transparency required for trade measures investigations, topics which are not necessarily “new trade issues”, but which have certainly been at the forefront of exporter concerns about procedural fairness.

• There is also an ability to pre-emptively query proposals of other members that might contravene the CPTPP rules, providing greater political leverage for both complaining and responding members than the WTO’s DSU system.

The number of FTAs and RTAs notified to the WTO accelerated from the end of the Uruguay Round until 2010, then slowed down. For the most part, they focused wholly or mainly on preferential tariffs and rules of origin, with various and limited assurances regarding good faith in trade relations and with future consultations promised on other issues.

The WTO has seemingly irresolvable limitations on its ability to effect change in trade relations. Into this vacuum in plurilateral leadership has come the high quality CPTPP, a trading bloc of 580 million consumers covering 15.6% of global GDP, which addresses topics which have been an obstacle to coherence of purpose of the WTO.

The Asia Pacific region countries of Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Viet Nam, and now the United Kingdom, can be well-pleased with their achievement of a new age trade deal that promises to become the world’s most valuable plurilateral agreement.