The case for CPTPP expansion
3.1
In its submission, the Department of Foreign Affairs and Trade (DFAT) endorsed the expansion of the CPTPP:
DFAT views the CPTPP as a suitable option to expand our trading opportunities, since the nature of the accessions process requires that any potential candidate, at a minimum, meet the CPTPP’s existing level of ambition.
3.2
DFAT stated that expanded CPTPP membership will bring deeper economic integration:
As a plurilateral FTA, the CPTPP has created additional and longer-term integration benefits for Australian businesses, exporters and consumers beyond those that can be achieved through bilateral FTAs. By establishing a common set of rules between the Parties, the CPTPP is a step towards streamlining and simplifying rules under existing FTAs for Australian business.
3.3
The Department of Agriculture, Water and the Environment (DAWE) suggested that Australia consider expanding the CPTPP beyond current free trade partners:
…expansion of the CPTPP membership to countries Australia does not have a free trade agreement with, as potentially providing opportunities for new market access and export growth, cooperation and economic integration.’
3.4
The Minerals Council of Australia was supportive of expanding the CPTPP in regards to Australian mining as ‘it's delivering significant economic benefits in participating economies, and it will deliver even more if other economies are included.’
3.5
Wine Australia, a statutory body operated under the Wine Australia Act that controls the export of grape products, cited a reduction in such protective measures as being beneficial and ‘welcome[d] any expansion to the membership of the CPTPP.’
3.6
Ms Rachel Triggs, General Manager Corporate Affairs and Regulation, Wine Australia advocated the expansion of the CPTPP saying:
We 100 per cent welcome the efforts to expand the membership of the CPTPP. Australian wine exporters have enjoyed a substantial tariff relief as a result of the CPTPP, particularly in Canada and Mexico, and they will enjoy relief in Malaysia when it ratifies the treaty. The most useful elements of the CPTPP to Australian wine exporters in addition to the tariff relief that's been enjoyed are around the technical barriers to trade.
3.7
DHL Express Australia endorsed ‘any expansion of the CPTPP as it would serve to address the unfortunate increase in Non-Tariff Barriers (NTBs) hampering trade, such as complex border clearance processes with prescriptive certificate of origin and refund policies’.
3.8
Standards Australia also supported the expansion of the CPTPP and particularly ‘the objectives of the Technical Barriers to Trade Chapters of the WTO Agreement and the CPTPP’ as:
…expanding the membership of the CPTPP this would in turn promote greater regulatory cooperation underpinned by harmonised international standards.
3.9
Mr Matt Worrell, Assistant Secretary from the International Organisations & Negotiations Branch at DAWE, noted that there can be difficulties in negotiating new trading agreements due to different trading procedures between economies:
…Australia tends to be more at the end of the spectrum where we are focused on outcomes while some other countries are more focused on process. That can sometimes be quite a challenging issue to discuss with countries because they want to make sure we have exactly the same process in our country as they're used to. It's a constant dialogue to try to come to some understanding, if we can, to make it easier to trade with them.
3.10
The Perth USAsia Centre noted that in its current form ‘the CPTPP lacks the scale to function as a standard in the global trade system’ and that for the CPTPP ‘to live up to its potential as a rule-making agreement, it requires an expanded membership base.’
3.11
The Northern Territory Department of Industry, Tourism and Trade, highlighted the international integration benefits delivered by expanding the CPTPP:
Promoting expansion of the CPTPP would represent a powerful signal for international economic integration in the face of the rise of protectionism. Furthermore, it would strengthen the global coalition of countries that support the rules-based system, including institutions such as the World Trade Organisation and regional cooperation forums in the Asia-Pacific.
3.12
The Perth USAsia Centre elaborated that ‘Australia stands to benefit greatly from CPTPP expansion’:
As a service- and technology-intensive economy, better-establishing its WTO Plus provisions as a standard in the global trade systems would greatly advance Australia’s trade interests. Market access gains – ranging from modest to significant, depending on the new member – will also open new trade opportunities. Improving the CPTPP’s regional coverage will also ensure that a high-standard model for trade liberalisation is secured for the Indo-Pacific. Australia should actively support and encourage the CP/TPP expansions agenda.
3.13
The Perth USAsia Centre detailed the recent developments surrounding the CPTPP and potential for an expanded membership:
Recent political and economic developments – including the election of the Biden Administration in the US, the COVID-19 pandemic, and an increase in protectionism and trade coercion – have seen eight governments signal in some way they are considering membership. The prospective members include the US, Korea, UK, Thailand, the Philippines, Indonesia, Taiwan, and China. The UK became the first country to formally apply for membership in February 2021, officially starting the accession process.
3.14
Former Australian Prime Minister, the Hon Tony Abbott AC welcomed the expansion of the CPTPP in his submission saying:
Expanding the TPP, ideally once more to include the United States, but along the way to include other significant economies, makes economic and strategic sense. Ultimately, and especially if all its members adhere to the rule of law, the larger the TPP becomes, the better for all participants.
The prerequisites for new CPTPP members
3.15
As outlined in Chapter One, the first CPTPP Commission meeting in Tokyo made a decision to establish the accession process for interested economies to join the CPTPP.
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.
3.16
Department of Foreign Affairs and Trade (DFAT) noted that expanding membership will not compromise the high standards of the CPTPP ‘with the aspirant economy required to demonstrate how it will comply with all of the existing rules in the Agreement.’
3.17
DFAT submitted that it welcomed any expansion to the CPTPP provided its terms and standards are adhered to by members:
The CPTPP is an open platform. New members are permitted if they can demonstrate their ability and willingness to meet the Agreement’s high standards and all existing Parties agree. All new members need to deliver against the comprehensive nature of the Agreement in terms of economic integration, high standard trade rules and enhanced market access.
3.18
DFAT expressed the view that Australia would benefit from the positive impact of new members adhering to high standards of the CPTPP:
The CPTPP’s high quality and ambitious rules create an overall package that is widely considered the high bar for FTAs. Adherence to these rules by new members will further Australia’s objective of achieving a single, high-standard, rules-based trading system in the Indo-Pacific region, consistent with the objectives of the 2017 Foreign Policy White Paper.
3.19
DFAT elaborated the standards defined the rules and norms that members need to adhere to in order to become a party to the CPTPP:
…one set of rules of origin and one standard set of documentation required to claim preferential tariff treatment. Common rules contribute to the functioning of global value chains by reducing the number of different regulatory settings businesses must navigate when they trade with multiple CPTPP Parties;
Rules for electronic commerce supporting the flow of data, protecting privacy and consumer rights and combating 'spam';
Provisions on state-owned enterprises to ensure these entities make decisions on a commercial basis and compete with private enterprises on a level playing field, without receiving unfair advantages from the governments that own them;
Commitments to combat bribery and corruption in international trade and investment, a first for Australia in an FTA;
Commitments to adopt or maintain domestic provisions which criminalise (and appropriately sanction) corrupt behaviour in matters that affect international trade or investment;
High quality standards for government procurement that are robust, transparent and allow suppliers to participate fairly in procurement processes;
Rules ensuring that governments do not discriminate against foreign suppliers when assessing tenders and awarding contracts; and
High standards on labour rights by reaffirming CPTPP Parties' obligations as members of the International Labour Organization (ILO) and requiring Parties to have laws at the federal level of government that enshrine the rights set out in the ILO Declaration.
3.20
DFAT First Assistant Secretary, Regional Trade Agreements Division and Chief Negotiator for the CPTPP, Ms Elisabeth Bowes, stated that potential new members must demonstrate a willingness to abide by the agreement’s high standards and rules and pass any relevant legislation prior to joining:
Before joining, any country, including Australia, would have to demonstrate that it has in place legislation and regulations that are consistent with the standards and rules in the CPTPP or that specifically implement the standards and rules in the CPTPP. In some instances, that requires legislative change, or would require legislative change in an accession country.
3.21
Department of Agriculture, Water and the Environment (DAWE) First Assistant Secretary, Trade, Market Access & International Division Mr Chris Tinning, noted that aspirant economies must commit to free trade measures, such as reducing tariffs:
One of the key criteria we want to see is a commitment to open trade as part of membership. Obviously, if a country has existing barriers then one big test we'd want to see is whether they are prepared to significantly move their domestic policies to reduce those barriers. That would be a key test we would have.
3.22
DAWE endorsed an expansion of the CPTPP provided members adhere to the CPTPP’s high standards:
Overall, the department is open to the accession of new members to the CPTPP on a case-by-case basis provided there are benefits to Australian agriculture and food exporters and where aspirant members adhere to the CPTPP accession guidelines, including demonstrating their commitment to meet the agreement’s high standards and common rules. Any new accession should provide commercially meaningful market access outcomes for Australia agricultural and food exporters.
3.23
Melbourne academic and international trade expert Professor Gabriele Suder endorsed the expansion of the CPTPP to a ‘selected number of addition members,’ citing the increased exposure generated for international businesses:
CPTPP allows access to previously more limited markets, through its depth of integrational provisions. CPTPP, without China to date, harmonizes key areas such as intellectual property, environment, labour, and rules around state-owned enterprises that offer companies a business environment more secure for their investment. Expanding CPTPP to a selected number of additional members has clear potential to extent diversification benefits.
3.24
Ms Dianne Tipping, Chair of the Board of Directors at the Export Council of Australia advocated a very open strategy for considering aspirant economies to the CPTPP:
We should be looking at everything, not particularly concentrating on some areas, saying, 'We should deal there,' or 'We should deal here.' We should be looking at everything, having a wide range of opportunities available to all our trade users and people within Australia—both import and export. The supply chain is really critical at the moment and we really need to make sure we keep it as open as possible but protected.
3.25
Chief Executive Officer at the Export Council of Australia, Mr Jorge Arnold similarly suggested that the CPTPP ought to be expanded to economies Australia does not consider as accessible as others:
It might seem counterintuitive, but we believe the better candidates to join the CPTPP would be those countries that have administrative systems that are less open or even different to Australia's. As these markets are currently difficult or are a bit more of a challenge to penetrate, their subsequent take-up of the agreement's high-level rules and market-access requirements would make their administrative systems less foreign and certainly more aligned with Australia's. Their membership would therefore ease trade processes for our exporters. With this perspective, we think India and Indonesia would be ideal candidates for joining the CPTPP.
3.26
Mr Bryan Clark, Director, International at the Australian Chamber for Commerce and Industry (ACCI) remarked that to accede to the CPTPP ‘…nations have to buy it off the shelf the way that it is. It should be a take-it-or-leave-it deal.’
3.27
Article Three, an Australian policy advisory firm specialising in Asia-Pacific trade, stressed that expanding the CPTPP must be done in a manner that does not diminish its existing quality:
The current rules and liberalisation commitments required from parties to the agreement should not be weakened to encourage or permit any particular economy to join. Doing so would alter the existing rights and obligations among the existing parties and potentially reduce the benefits of the agreement as a whole.
3.28
The American Chamber of Commerce emphasised that Australia should ‘ensure any expansion of membership of the CPTPP does not diminish but rather upholds the standards of the current Agreement.’
3.29
Dr Jeffrey Wilson from the Perth USAsia Centre emphasised that adhering to the CPTPP’s standards went well beyond the time of accession:
…joining any trade agreement, the WTO or anything else, is not just about saying that we have legislation on the books today at the time of accession that makes us nominally legally compliant with the treaty text. The existing membership has to be confident that, going forwards, that is going to be applied not just in in the main but also in the breach.
3.30
Dr Lennon Yao-Chung Chang from the Taiwanese Association of Australia Melbourne Chapter stated that consideration must be given to the trustworthiness of any new CTPPP members:
When considering new CPTPP members, one thing I really want to recommend is that we need to have a trusted partner. This trusted partner is a responsible partner who will follow the global norms and regulations, who won't be a country we need to worry about stealing our intellectual property at some stage or having negative competition with us… we don't want a player that is irresponsible and that will damage the development of our digital trade, digital health and critical infrastructure.
3.31
Mr Chris Tinning, First Assistant Secretary, Trade, Market Access and International Division at the Department of Agriculture, Water and the Environment (DAWE) affirmed that the department would conduct ‘a case-by-case analysis’ on each potential new member for benefits and risks to Australian agricultural exporters:
…we'd be looking at them as both a market opportunity and a potential competitor. Obviously, some potential members might have large agriculture exports and are therefore potential competition. Others don't.
3.32
The Department of Foreign Affairs and Trade (DFAT) affirmed that the ‘Australian Government’s position will always be informed by extensive stakeholder consultation and any decision to expand our trading opportunities through the CPTPP will be made on a case-by-case basis.’
3.33
Ms Amelia Shaw, Policy Manager, Trade and Rural Affairs at Grain Growers stressed that as the CPTPP expands, Australian farmers and agricultural exporters must be protected as their market access increases:
Grain Growers recognises that expanding the membership of the agreement presents economic and political opportunities through the growth of trade liberalisation provisions, especially for mutual recognition of tariff. Principally we believe that consideration of new members should be done in the context of understanding the operating environment, noting Australian farmers are some of the least subsidised farmers globally and that our competitive advantage should not be disadvantaged or in jeopardy.
3.34
Mr Jon Berry from Article Three countered concerns of losing market access advantages currently enjoyed through free trade agreements which may be lost through the CPTPP:
…as an outwardly focused exporting economy, Australia benefits in the long run from growing global liberalisation generally. Having additional major global economies sign up to the liberalising commitments of this agreement, as well as the rules around TBTs, state owned enterprises, dispute resolution and so on, promises to benefit competitive economies such as ours over the longer run.
3.35
Mr David Rynne, from the Australian Sugar Milling Council highlighted potential risks to Australian business posed by expanding the CPTPP, should competitor producers gain the same advantages as Australian ones:
[O]f all the revenues that we gather and earn as an Australian sugar industry, 74 per cent is reliant on global or sugar export sales—and 78 per cent of the revenues from that is from just three markets: South Korea, Japan and Indonesia. While it's not an issue for us today, and they are the three highest earning markets that we could possibly access, this could become problematic for us, especially if other exporters, our competitors, negotiate comparable trade and market access terms to ours under other bilateral or plurilateral trade agreements and, in particular, if consumer preferences for sugar continue to go the way they are going.
3.36
DAWE also noted that for countries which Australia does have an existing free trade agreement but are not yet CPTPP members, ‘CPTPP ascension could potentially further enhance agricultural trade outcomes.’
3.37
The Northern Territory Department of Industry, Tourism and Trade suggested that the CPTPP could go further to improve market access for smaller business:
Expanding the CPTPP may help simplify the ‘noodle bowl’ problem of multiple trade agreements, but in some cases makes the situation more complex. Given the poor record of firms accessing the benefits of agreements, more needs to be done to facilitate access, in particular for the small firms in Northern Australia.
3.38
Australian Business in Europe noted the difficulty experienced by small and medium enterprises accessing the advantages of free trade agreements, and suggested that further work is needed to improve business outcomes:
We have heard anecdotally that small and medium-sized businesses have difficulty in accessing the opportunities offered by free trade agreements. We acknowledge that DFAT have attempted to make the benefits as transparent as possible through a website portal. We believe that there may be a need for more help and support for Australian businesses looking for export opportunities and note that the role that the European “chambers” play in encouraging trade and opportunities between SMBs from European countries and Australia. We suggest that DFAT may wish to consider initiatives aimed at strengthening its links with the Australian expatriate business community, and accessible through the ABIE network for example, to complement the available DFAT and Austrade resources and provide mutual benefit and support.
3.39
ActionAid outlined that it does not support any expansion of the CPTPP due to concerns over the human rights and the ongoing impact of the COVID-19 pandemic:
…expanding the membership of the CPTPP risks worsening the agreement’s already considerable threats to gender equality and sustainable development in developing countries. These concerns are particularly critical at a time when COVID-19 has demonstrated the fragility of global supply chains and exposed serious failings in the global trade system, particularly regarding access to medicines and healthcare, workers’ rights, food security, and the right of governments to regulate.
3.40
The Perth USAsia Centre suggested ‘three expansion objectives that Australia must balance:
Size: This would focus on the US, as its accession alone will almost triple the size of the bloc.
Speed: This would prioritise the UK and/or Korea, as the most ‘CPTPP-ready’ potential candidates.
Scope: This would emphasise Indo-Pacific members (Korea, Thailand, Indonesia and Philippines) to ‘fill in regional gaps’ in the CP/TPP.’
3.41
The Committee recommends that the Australian Government continue to embrace an ambitious free trade agenda by working with other CPTPP members to expand the CPTPP to include new members that:
a)support an open, transparent and stable trading environment in the Indo-Pacific;
b)demonstrate an ability and willingness to meet the agreement’s high standards including a commitment to deliver against its rules and norms; and
c)offer export potential through enhanced market access.