New features in the CPTPP
Today’s trade deals are broadening their focus, from just addressing tariff reductions to including issues that are challenging the world today, such as protecting the environment, encouraging the growth of small to medium businesses, and fair treatment of workers.
These goals are recognised through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), signed last week. On the day, Canada’s Trade Minister Francois-Philippe Champagne said: "We're very proud to show the world that progressive trade is the way forward. Trade is not a race to the bottom, it is a march to the top. The CPTPP aims to make trade real for all people.”
This is to be achieved through the CPTPP’s commitments to raise and safeguard high labour and environmental standards across the Asia-Pacific region, and to actively enable small and medium businesses to understand what has been agreed, take advantage of those opportunities, and to bring their unique challenges to the attention of the CPTPP governments.
There is yet work to be done on the details to establish how this can be achieved, but the aim of the CPTPP is to raise labour and environmental standards in the Pacific, reduce the impact of unfair practices, and promote sustainable development. As the Ministry for Foreign Affairs and Trade notes, these outcomes are the most comprehensive New Zealand has ever achieved in a free trade agreement, with the standards being made legally enforceable for the first time.
The CPTPP will be a world first for including a prohibition on granting or maintaining subsidies that contribute to illegal, unreported, or unregulated (IUU) fishing, or that negatively affect over-fished stocks. It also ensures the signatory countries will have laws and practices in place governing minimum wages, hours of work, and occupational health and safety. These additional measures, as noted above, are new in trade agreements, and are likely to have a significant impact on all businesses and commercial operations in New Zealand.
The media coverage to date has largely focused on the financial benefits from tariff reduction, as these are not inconsiderable. But as the CPTPP goes through the consultation process before being ratified by our Parliament, we need to focus on what the impact will be of the new environmental, labour, and health and safety provisions, many details of which are still in negotiation by the CPTPP countries.
Firstly, across all CPTPP countries, there should be similar laws and, most importantly, similar enforcement. One of the consequences of this will be a level playing field for these standards, so that lesser standards in one of the CPTPP countries does not advantage that country against another CPTPP country. How that will be achieved is a difficult question, with particular emphasis on how similar levels of enforcement can be achieved across the CPTPP countries, considering that a wide range of economies and standards are represented by these countries. For example, are the standards to be required going to be those that Japan or Australia currently require, or those of Vietnam?
What it could mean for New Zealand companies is that higher standards and greater compliance could be required in these areas; the likelihood of lower standards would appear to be a non-existent.
This will need to be a key focus point during the consultation rounds before ratification with the New Zealand Government: what are the standards, how will these standards be made uniform across the CPTPP countries, and how will consistent enforcement be achieved across them. We are considering how to address these issues and make appropriate submissions, but the ramifications are far reaching, so this will take time.
This trade agreement is about much more than tariffs and market access.
- Mike Chapman, CEO