14 November 2017

The TPP is dead, long live the CPTPP

It is likely that the Comprehensive and Progressive Trans-Pacific Partnership will be finalised and signed in early 2018.
New Zealand International Law
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After more twists and turns than a Dan Brown novel, the 11 remaining member countries of the TPP (after the departure of the United States) have agreed on the core elements of the newly-titled Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

What was agreed?

Several changes have been made to the original TPP text.

  • Ministers have agreed to a number of provisions dealing with technical matters such as entry into force, withdrawal and accession. They have also agreed to suspend a number of provisions, the most significant of which include controversial aspects of the Investment and Intellectual Property chapters.
  • The provision that would have allowed overseas investors to sue governments for breach of an investment agreement or an investment authorisation has been suspended. Investors will only be able to sue governments for an alleged breach of the obligations set out in the Investment chapter itself. These are tightly bounded such that it would be very difficult to mount a successful action in respect of regulations on matters of public interest such as health or the environment.
  • Intellectual property provisions that have been suspended include controversial requirements for countries to grant data exclusivity to manufacturers of biologics, extend patent terms in the event of unreasonable granting authority delays or unreasonable curtailment, extend copyright protection to 70 years after the author's death, and to take certain measures to protect against the circumvention of technological protection measures used by copyright owners to restrict the use of their material stored digitally.
  • Also suspended is the provision in the Annex to the Transparency chapter that sets out certain "procedural fairness" obligations that would have applied to PHARMAC's operations.

Four issues remain to be resolved (mainly country-specific matters that do not directly involve New Zealand) before the text can be finalised for signature.

Although no final agreement has been reached, it seems likely that a new deal will now be signed in the first quarter of 2018.

What does it all mean?

Salvaging an Asia-Pacific trade deal is a positive outcome for New Zealand exporters who will benefit from improved market access into countries with which we do not currently have a free trade agreement – Japan, Mexico, Peru, and Canada.

It will also ensure that we do not fall behind overseas competitors (such as Australian beef exporters to Japan under the Australia-Japan bilateral deal).

The CPTPP is also significant in terms of what it signals about globalisation. On this score, one could plausibly take different views of the weekend's announcement.

  • One view is that, despite the public displays of brinkmanship, the deal represents business as usual. Some provisions have been suspended to account for the absence of the US, but otherwise, the essential trade agenda remains unchanged.
  • Alternatively, one could see the CPTPP as indicating a new way of doing business. Through the proposed ban on foreign buyers of residential property, the New Zealand government has already shown that it is not afraid to prioritise matters of public interest. The weekend's negotiations indicate that other governments are also reconsidering the appropriate content and scope of trade agreements.

Although the changes to the CPTPP text are not ground-breaking, there are signs that the winds of change are blowing. Governments across the CPTPP region have learned the public wants reassurance that trade agreements will not impinge on their ability to address the most pressing issues of our time, such as rising inequality and climate change.

In New Zealand, the Labour-led Government has said that, although it can tolerate the ISDS clauses in the CPTTP, New Zealand negotiators will not agree such clauses in the future.

When the Gillard Government in Australia tried the same approach in 2011 it didn't stick. But indications are that the rule-book for what should go into trade agreements is being rewritten. Some traditional elements are likely to give way or be softened. Other opportunities – such as using the dispute resolution mechanisms in trade agreements to enforce action on climate change – may instead be explored.

It would seem that trade agreements are not dead. But new ways of thinking may be about to take hold.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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