As the trade conflict between the United States and China continues, three free trade agreements are pressing ahead, including– the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), soon to enter into force, the Japan-EU Economic Partnership Agreement (JEEPA), recently signed and which represents 30% of global economic output, and the Regional Comprehensive Economic Partnership (RCEP), an agreement that includes both India and China and comprises the largest trading block in the region.
Specific developments include recent ratification by Mexico and Japan of the CPTPP that now requires ratification by four more signatories before entry into force. Additionally, CPTPP parties recently met to discuss and lay out a procedure for how other countries that are not currently members of the CPTPP can join the agreement. Japan and the EU recently signed JEEPA and hope it is ratified and enters into force early next year. And, separately, the RCEP’s Trade Ministers met in Tokyo in early July, with further working level negotiations planned in July and August 2018.
On 6 July 2018, Japan notified New Zealand, the depository for the CPTPP, that it completed all domestic ratification procedures. Japan is the second country to ratify the treaty behind Mexico, which did so on 26 April 2018. The treaty will enter into force 60 days after at least six of the eleven signatories have ratified the agreement. After entry into force, signatories who have ratified will start enjoying treaty benefits and reduced tariffs.
Japanese ratification is significant because it is the largest economy within the group. After entry into force, businesses from countries that have ratified the agreement will enjoy first-mover advantages in developing new relationships with treaty partners. With ratification complete, the Japanese government is also pressing other signatories to do the same, aiming for the treaty’s entry into force by the end of 2018.
The remaining CPTPP signatories are: Australia, Brunei, Canada, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.
The CPTPP is also unique in that membership is not limited to its current signatories. Article 5 of the CPTPP provides for other parties to join after its entry into force. Particularly, “any State or separate customs territory” may accede to the treaty, subject to “terms and conditions… agreed between the [CPTPP signatories]” and the new interested party.
South Korea, Thailand, Taiwan, the United Kingdom and Indonesia are among those who have expressed interest, while Colombia is the first to have formally expressed interest in taking part to the New Zealand government.
For more information about the substantive benefits the CPTPP will bring, please refer to our previous blog entry here.
The EU and Japan recently signed JEEPA at a time when the EU is also aggressively pursuing FTAs in the Asia Pacific region including the Singapore-EU agreement, the Vietnam-EU agreement and others, all of which have the potential to reduce the competitiveness of US businesses in those jurisdictions. The impact on US agriculture products could be significant. Japan is aiming to have the agreement ratified at the next Diet that is scheduled for this Fall and its entry into force by March 2019. By pushing the JEEPA forward, Japan is showing leadership for free trade, as it did when it recently ratified the CPTPP.
The free trade agreement most compared to the CPTPP is the RCEP, due to the number of overlapping parties. Unlike, the CPTPP, the RCEP’s terms are still undergoing negotiation, not available to the public and no agreement has been signed. RCEP parties comprise of the Association of Southeast Asian Nations (ASEAN) together with Australia, China, India, Japan, New Zealand, and South Korea. The ten ASEAN member states are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
On 2 July 2018, Trade Ministers of the 16 RCEP parties met in Tokyo to reaffirm their commitment to reaching an agreement by the end of 2018. Two out of 18 sections of the RCEP have been concluded so far, with trade negotiators meeting in Bangkok later this month for working level talks. Trade Ministers will meet in Singapore at the end of August 2018 during the ASEAN Economic Ministers’ Meeting for further discussions.