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TPP-11 to implement CPTPP by end of 2018 – Are you ready for the opportunities and challenges?

Author(s): Shalu Atwal, Riyaz Dattu, Gajan Sathananthan

Oct 31, 2018

In our last international trade brief, we explained what you need to know about the Canadian International Trade Tribunal’s inquiry on steel safeguards and significant dates, including for the notice of participation. In this international trade brief, we discuss the implementation by year-end of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the challenges and opportunities this presents for Canadian businesses.

On October 30, Australia ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), triggering the 60-day countdown to the implementation of the 11-country agreement, expected to occur on December 30, 2018.  

Australia’s ratification follows that of Canada (the Canadian legislation received Royal Assent on October 25, 2018), New Zealand, Japan, Singapore and Mexico, thereby fulfilling the six-country threshold required for CPTPP implementation. Brunei Darussalam, Chile, Malaysia, Peru and Vietnam have yet to complete their ratification procedures. If they do not do so before December 30, the CPTPP will come into force only in the countries that have ratified. The CPTPP will thereafter become effective for the other nations upon completion of  their ratification process.   

As described in our earlier trade brief on the agreement, the CPTPP evolved from the Trans-Pacific Partnership (TPP), which was a comprehensive regional trade agreement negotiated between 12 countries bordering the Pacific Ocean including the United States (U.S.). However, on the heels of being inaugurated into his Office in January, U.S. President Donald Trump issued an executive order unilaterally pulling the U.S. out of the deal. As the TPP required ratification by at least six states that together accounted for more than 85% of the GDP of all signatories, the TPP could not proceed without the U.S.

The remaining 11 countries revived the deal, undertaking additional negotiation followed by the signing of the new deal on March 8, 2018, renamed as the CPTPP. The CPTPP incorporates, by reference, the provisions of the TPP agreement, with the exception of some provisions relating to intellectual property and investor-state dispute settlement, which were previously important issues for the U.S. participation in the TPP.

The CPTPP is one of the largest free trade agreements in the world. It will provide enhanced market access to key Asian markets. It also provides for increased participation in the agreement by providing accession provisions for other countries wishing to join the CPTPP.

Once implemented, 99% of Canada’s current exports to the CPTPP markets will enter tariff-free. It will also allow for the expansion of global supply chains and increase sourcing options for Canadian businesses.

Canadian businesses should closely examine the details of the CPTPP, so as to use it to their advantage, and also be ready for the inevitable challenges brought on by increased competition through the opening of the Canadian market to offshore competitors.