1.1
This chapter outlines the Trade Sub-Committee’s inquiry into expanding the membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and related background information.
1.2
On 20 October 2020, the then Minister for Trade, Tourism and Investment, Senator the Hon Simon Birmingham, referred to the Joint Standing Committee on Foreign Affairs, Defence and Trade (JSCFADT) an inquiry into expanding membership of the CPTPP. The terms of reference of the inquiry were to:
… examine potential new members of the CPTPP and the case for their accession based on Australia’s national interests, in particular regard to:
the opportunity for freer trade between Australia and potential new members;
the merit of the CPTPP as the vehicle to realise freer trade opportunities;
issues related to expanding and improving market access;
the impact of other members committing to similar high standards;
issues relevant to the values, rules and norms of the CPTPP;
the role of the CPTPP as a vehicle for economic collaboration and cooperation; and
any other related matters.
Conduct of the inquiry
1.3
A media release announcing the inquiry and seeking submissions was issued on 13 November 2020. The Committee held the first of eight public hearings on 17 June 2021.
1.4
The Committee invited relevant companies and organisations to make submissions. The Committee received 69 submissions and seven exhibits, which are listed at Appendices A and B.
1.5
Public hearings were conducted by the Committee in Canberra. The dates and locations of the hearings, together with the names of witnesses who appeared before the Committee are at Appendix C. Responses to questions on notice from the public hearings are at Appendix A.
Geographical scope of the inquiry
1.6
The primary focus of this inquiry was the United Kingdom, the People’s Republic of China (China) and the Republic of China (Taiwan, also known as the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu) as formal applicants to the CPTPP. Other areas of interest included major prospective Indo-Pacific economies such as, but not limited to, the United States of America, the Republic of Korea (South Korea), India, Indonesia, and the Philippines. On 29 December 2021, Ecuador had filed its application to join the CPTPP trade pact but owing to that timing after the inquiry’s call for submissions and public hearings, the Trade Sub-Committee received no evidence on Ecuador’s application, or interest in the CPTPP.
Previous related parliamentary committee inquiries
1.7
Previous parliamentary committee inquiries into Australia’s free trade agreements have included:
In 2016, the Joint Standing Committee on Treaties held an inquiry examining the Trans-Pacific Partnership (Auckland, 4 February 2016). The report was tabled in November 2016.
Once it became clear that the Trans-Pacific Partnership would not go ahead, the Joint Standing Committee on Treaties held a separate inquiry examining the newer Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) (Santiago, 8 March 2018). The report was tabled in August 2018.
In 2018 the Trade Sub-Committee of the JSCFADT held an inquiry into access to free trade agreements by small and medium enterprises. The report was tabled in February 2019.
In 2021, the Joint Standing Committee on Treaties held an inquiry on the Regional and Comprehensive Economic Partnership Agreement. The report was tabled in August 2021.
About the agreement
1.8
The first formal round of TPP negotiations was held in Melbourne on 15-19 March 2010, with the participation of over 200 officials from Australia, the US, New Zealand, Chile, Singapore, Brunei, Peru and Vietnam.
1.9
In his first days in office, United States President Donald Trump signed an executive order on 23 January 2017 removing the U.S. from the Trans-Pacific Partnership (TPP) and declared an end to the era of multinational trade agreements.
1.10
In an Oval Office ceremony, President Trump delivered on his campaign promise to formally withdraw from the TPP, which was negotiated by former President Barack Obama between 12 countries, including Australia. President Trump, who had previously argued the agreement would harm the US economy, said the order was a "great thing for the American worker" and a boost for US manufacturing.
1.11
The US exit represented a significant loss of market size, according to the Perth USAsia Centre.
However, the remaining “TPP11” group sought to preserve the agreement, to secure its advanced rule-making initiatives, and contribution to regional integration trade and investment integration. Before the US withdrawal was even formalised, Japanese Prime Minister Shinzo Abe visited Australian Prime Minister Malcolm Turnbull in Sydney where both governments agreed to salvage the deal.
1.12
As a submission from Department of Foreign Affairs and Trade (DFAT) noted ‘following [the US’] notification that it did not intend to become a Party to the TPP in January 2017, the CPTPP was a collaborative effort of the other 11 signatories to give effect to commitments negotiated in the TPP and was concluded with the goal of US re-engagement in the future’.
This Agreement is a separate treaty that incorporates, by reference, the provisions of the Trans-Pacific Partnership (TPP) Agreement (signed but not yet in force) with the exception of a limited set of provisions to be suspended. The 11 countries have a shared vision of the Agreement as a platform that is open to others to join if they are able to meet its high standards.
1.13
The Perth USAsia Centre believed US readmission may be encouraged by the CPTPP retaining ‘most of the regulatory provisions from the TPP, with only a small number of US-requested items suspended’.
These are concentrated in the area of intellectual property (IP); and several US-requested provisions for labour standards, state-owned enterprises and investor-state dispute settlement remain…Any decision to remove suspensions must be negotiated by consensus amongst the membership.
1.14
The CPTPP entered into force in Peru on 19 September 2021 as a free trade agreement negotiated between the following 11 economies:
1.15
According to DFAT these ‘11 economies have a combined GDP worth AUD 16.2 trillion, comprising 12.9 per cent of the global economy, and a combined population of over 500 million people.’
1.16
Brunei Darussalam, Chile and Malaysia are yet to ratify the CPTPP. Peru ratified the agreement at the Fifth Commission meeting in September 2021.
1.17
In its submission, DFAT noted that the six ratified parties (Canada, Japan, Mexico, New Zealand, Singapore and Vietnam) represent a significant share of Australia’s export market, and ‘in 2019, over one-quarter of our total merchandise exports went to the CPTPP Parties for which the Agreement is currently in force, worth nearly AUD 90 billion.’
1.18
Regarding the unratified parties, Ms Elizabeth Bowes from DFAT stated that ‘[i]n terms of reasons for why they have not yet ratified, it's fair to say that political developments in most of those countries and/or the impact of COVID-19 have certainly had an impact on the ability of those countries to ratify the agreement.’
1.19
The CPTPP is regarded as a high quality, comprehensive free trade agreement made up of 30 chapters that aim to support sustainable and inclusive economic development and bring together eleven economies that account for 13.5 per cent of world GDP. Parties to the CPTPP agreement resolved to:
Establish a comprehensive regional agreement that promotes economic integration to liberalise trade and investment, bring economic growth and social benefits, create new opportunities for workers and businesses, contribute to raising living standards, benefit consumers, reduce poverty and promote sustainable growth.
1.20
Described as a modern trade agreement by the UK Government’s Department for International Trade, the CPTPP ‘not only lowers or removes tariffs in goods’ but ‘also reduces a range of non-tariff barriers to trade and investment’ by tackling regulatory barriers to trade in services, for example. DIT believed the CPTPP goes further than many existing FTAs in promoting agreed standards in areas such as labour and the environment.
1.21
The Committee notes increasing interest from third-party economies to become members of the CPTPP. In chronological order, the United Kingdom, the People’s Republic of China (China) and the Republic of China (Taiwan) have submitted formal application requests. The Republic of Korea (South Korea) has also announced its intention to apply. Ecuador has filed its application on 29 December 2021 to begin the process for accession to the CPTPP trade pact but no evidence was received owing to being so recent.
1.22
The Committee understands that consensus among ratified parties is required to agree to the accession of any aspirant economy. As such, the Australian Government will determine whether it supports expanding membership of the CPTPP in general, and whether it supports the accession of each applicant in particular.
The accession process
1.23
In 2019, the first CPTPP Commission meeting in Tokyo made a decision to establish the accession process for interested economies to join the CPTPP.
1.24
In the 2019 CPTPP Commission Comprehensive and Progressive Agreement for Trans‐Pacific Partnership (CPTPP) Accession Process (the Accession Process) that has since been published by DFAT online, the CPTPP Commission outlined the following benchmarks for accession:
Aspirant economies must:
(a) demonstrate the means by which they will comply with all of the existing rules contained in the CPTPP; and
(b) undertake to deliver the highest standard of market access offers on goods, services, investment, financial services, government procurement, State‐owned enterprises and temporary entry for business persons. These must deliver commercially‐meaningful market access for each Party in a well‐balanced outcome that strengthens the mutually‐beneficial linkages among the aspirant economy and the Parties, while boosting trade, investment and economic growth, and promoting efficiency, competition and development.
1.25
The Perth USAsia Centre noted while the ‘bridging’ CPTPP agreement suspended the accession mechanism of the TPP, it replaced it with a ‘simplified accession mechanism of its own’.
This mechanism allows any “State or separate customs territory”to take membership, subject to terms negotiated with the other members, following entry-into-force.
1.26
Chapter 30 of the CPTPP agreement outlines it is open to accession by ‘any State or separate customs territory’ as agreed by members.
The provision for a “separate customs territory” to accede to the CPTPP provides a legal mechanism for “non-state” members to join: for example a supranational trade bloc (e.g. the EU), or customs territories separately recognised under international trade law such as Taiwan or the People’s Republic of China’s “Special Administrative Regions’ (SARs) Hong Kong and Macau.
1.27
The Accession Process stated that ‘[a]spirant economies must notify New Zealand, as CPTPP depositary of their formal request to commence negotiations on acceding to the CPTPP.’
1.28
Following notification, if the CPTPP Commission decides to commence the accession process, it will ‘establish a working group to negotiate the accession of the aspirant economy (‘Accession Working Group’),’ as outlined in the Accession Process.
1.29
The Accession Working Group ‘will comprise government representatives from each Party,’ as stated in Accession Process. The aspirant economy will negotiate with the Accession Working Group ‘its market access offers and demonstrate how it will meet the Benchmarks.’
1.30
Then, ‘[a]fter finalising negotiations, the Accession Working Group will submit a written report… to the Commission on terms and conditions for the aspirant economy’s accession to the CPTPP,’ as detailed in the Accession Process. Further, ‘this written report will be approved by consensus.’
1.31
Once it has received the report, the Accession Process states that ‘[t]he Commission will determine, by consensus, whether to approve the terms and conditions for the aspirant economy’s accession to the CPTPP.’
1.32
The Department of Foreign Affairs and Trade (DFAT) submitted that for economies to become a party to the agreement, ‘prospective members would need to clearly demonstrate their commitment to implementing the agreement’s high standard trade rules and to delivering significantly enhanced market access.’
1.33
Ms Elisabeth Bowes from DFAT stated that for potential new members to accede to the CPTPP, ‘[a]mong the parties to the agreement—the seven members that have ratified—there must be a consensus to agree accession of any economy to the agreement.’
1.34
DFAT further submitted that ‘[f]or any economy which submits a formal request for accession, DFAT will undertake extensive stakeholder consultations with industry bodies, business and civil society to inform our negotiating positions and to ascertain priority areas for market access negotiations.’