Our previous international trade brief discussed the increased chances of NAFTA remaining in play after the sixth round of renegotiations. In this international trade brief, we discuss the implications of the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership for Canadian businesses.
On January 23, 2018, the Minister of International Trade, François-Philippe Champagne (the Minister), confirmed that Canada had reached an agreement with Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam to form a new trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
This announcement comes one year to the day that President Trump announced, immediately after his inauguration, the withdrawal of the United States from the Trans-Pacific Partnership (TPP), the precursor agreement to the CPTPP. The U.S. withdrawal appeared to doom the agreement. However, pushed largely by Japan, the parties managed to reach an agreement without the U.S. and concluded negotiations in Tokyo early in 2018. The parties to the agreement represent 495 million people and $13.5 trillion in combined GDP, representing approximately 14% of the global economy. The parties are all located around the Pacific region but are geographically dispersed and have economies that are in very different stages of development, including some of the fastest-growing economies in the world.
The text of the new agreement is expected to be released next month and likely to be based largely on the provisions of the TPP. An overview of some of the key terms of the TPP can be found in our earlier Osler Update on the agreement.
Significant tariff reductions will be one of the key benefits of the agreement to Canadian exporters. For example, the Minister referred to Vietnamese steel tariffs, which are currently at 40%, dropping to zero by the 10th anniversary of the agreement's implementation.
Some key changes from the original TPP have been announced. These include the use of side letters with each of the other 10 parties to maintain Canada’s cultural industries protection. The Minister also referred to signing a side letter with Japan regarding access to the Japanese auto market. Though the specific terms of this side letter have yet to be released, they will likely include provisions that will allow Canada to enforce Japan’s obligations around market access in the automotive sector and a “most-favoured nation” clause to ensure that any additional benefits provided by Japan to other countries in future trade agreements would apply to Canada as well.
Beyond these changes, several provisions of the TPP have been announced as suspended in the CPTPP. These include the suspension of provisions that allow for
- mandatory customs exemptions for express shipments less than a certain amount;
- investor-state dispute resolution for “investment agreements” and “investment authorizations” (which apply mostly to natural resources, energy generation/distribution and large infrastructure projects); and
- enhanced intellectual property protection, including:
- patents for “new uses” of known products and products derived from plants;
- patent term extensions for unreasonable delays in approval or unreasonable curtailment of pharmaceutical products;
- increasing the protection of pharmaceutical test data;
- extending copyright protection to 70 years after the author’s death;
- preventing the circumvention of technological protection measures and similar protections for rights management information systems;
- mandatory offences against the manufacturing or distribution of technology used to decode an encrypted program carrying satellite signals without the authorization of the lawful distributor, or to receive an unlawfully decoded signal; and
- requiring internet service providers to take down copyright-infringing material from their networks.
Interestingly, having decided to abandon the TPP a year ago, the U.S. administration has indicated that it may be interested in rejoining the other 11 other countries in a potential restoration of the TPP. However, this could delay the implementation of the CPTPP, which some of the parties to this renewed agreement have indicated will not be entertained.
The CPTPP is expected to be signed by the 11 parties in Chile on March 8, 2018. The implementation of the CPTPP will likely take some time after that, with ratification required in at least six of the 11 nations that are party to the agreement.
Canadian businesses should look into reviewing their strategies and determining how this new global agreement could be used to expand potential supply sources and markets.