SUBMISSION TO THE MINISTRY OF FOREIGN AFFAIRS AND TRADE

GENERAL REVIEW OF THE COMPREHENSIVE AND PROGRESSIVE AGREEMENT FOR TRANS- PACIFIC PARTNERSHIP (CPTPP)

DECEMBER 2023

Summary

• This submission is made on behalf of the New Zealand International Business Forum (NZIBF). As individual NZIBF Members may make their own submissions, this document comments on more general or cross-cutting elements of the Review of the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP).
• NZIBF has long been a champion of CPTPP and its predecessor agreements. We warmly support efforts, including through this Review, to ensure that the Agreement remains the “gold standard” in the region and globally, delivering commercially- meaningful outcomes to businesses and helping to support overall economic resilience, security and growth in CPTPP economies. The Review comes at a time when the global trade environment is increasingly disrupted and challenging. This underscores the need for the Review to:
  1. complete the ‘unfinished business’ in the original Agreement in respect of comprehensive market access and the ability of businesses fully to utilise existing commitments;
  2. modernise the provisions of the Agreement, particularly in the areas of digital trade, sustainability and inclusion;
  3. improve the functioning of the existing provisions in the Agreement; and
  4. review the institutional arrangements for the CPTPP, including giving due consideration to the creation of a permanent Secretariat.
• Through the Review process, NZIBF considers that a greater emphasis should be given to transparency and a more active process of outreach to stakeholders. NZIBF also considers that, while the Review is important, it should not slow the process of expanding the Agreement through further accessions.

About the New Zealand International Business Forum

• NZIBF provides a voice to articulate the needs and priorities of New Zealand’s international business community, and in particular the importance of open markets, to the New Zealand Government and public stakeholders. The NZIBF Board brings together leaders from amongst New Zealand’s largest internationally-oriented companies and peak business organisations. (A list of Board members is at Annex A.)
• Incorporated in May 2007, NZIBF works with companies, business organisations and government agencies to implement projects in the international trade and economic sphere, including working to develop New Zealand’s key international business relationships and conducting research relative to New Zealand’s competitiveness. NZIBF receives no direct government funding for its core operating budget, but from time to time receives funding for jointly-funded projects. Funding is also provided in respect to the policy advice and support NZIBF provides to the New Zealand members of the APEC Business Advisory Council.

NZIBF Comments on the CPTPP Review

• The New Zealand International Business Forum appreciates the leadership shown by New Zealand as Chair of the CPTPP Commission in 2023, as well as the ongoing work by New Zealand and other CPTPP Members over preceding years, to ensure that the Agreement remains the “gold standard” in the region and globally. We welcome the explicit reaffirmation of this goal by CPTPP Ministers at their recent meeting in San Francisco.1
• To date, the Agreement has helped to create commercially-meaningful opportunities for many – although not all – businesses across the CPTPP economies. This has been particularly important during a challenging period marked by the ongoing COVID-19 pandemic, supply chain disruption, geopolitical tensions, rising protectionism, rapid digital transformation and increasingly visible climate change impacts, all of which have demanded considerable business resilience and agility.
• As we head into a likely more disrupted, contested and restrictive global trade environment in the period ahead, it will be essential that the Parties continue to work to keep the Agreement both relevant and ambitious. This will not only enable it to continue to provide opportunities for individual businesses in the region, but will also contribute meaningfully to shoring up economic security and resilient growth overall.
• The current Review is an important tool to achieve this goal, as is the ongoing work of implementation, monitoring and enforcement, and CPTPP’s further expansion. We welcome the agreement struck by Ministers at the CPTPP Ministerial Meeting on 15 November in San Francisco on Terms of Reference for the Review2, although we express some disappointment that our earlier feedback does not appear to have been reflected in any way in the final agreed Terms of Reference.
• The Terms of Reference as adopted include some important signposts of ambition for the process – particularly in relation to ensuring that the Agreement keeps pace with broader international developments and can be fully utilised by all kinds of businesses – but in other areas, they fall short of the ambition we seek. We set out below specific recommendations on a number of elements, some of which reflect our earlier comments on the Terms of Reference.

Expanding market access

• NZIBF is disappointed that the Review does not explicitly aim to complete the ‘unfinished business’ of the Agreement in respect of market access. This would enable it to meet the goal set out in the first sentence of the first paragraph of the CPTPP Preamble, to “establish a comprehensive regional agreement that promotes economic integration to liberalise trade and investment…” (emphasis added).
• In particular, while it is welcome that the Terms of Reference include the goal of “continu[ing] to promote trade and investment to bring economic growth and social benefits, [and] create opportunities for workers and businesses… ”, it is unfortunate that they do not explicitly seek to improve market access outcomes in those markets where comprehensive tariff elimination has not yet been achieved.
• This remains a key objective in respect of the original Parties to the Agreement, for some of which the existing commitments fall well short of commercially-meaningful access in sectors that continue to be protected by restrictive tariff rate quotas. In these cases, outcomes are by definition not comprehensive and do not represent full trade liberalisation, contrary to the CPTPP Preamble.
• Further, including an explicit provision about the need to continue to improve market access outcomes would also have served as an important signal to aspirant economies to calibrate their expectations around the high standards required for market access.
• We recommend that New Zealand to continue to press for the removal of all existing tariff rate quotas and residual tariffs.
• Should it not prove possible to achieve comprehensive liberalisation, improvements are needed both to tariff quota administration practices and to quota volumes in respect of potential future accessions.
• On tariff quota administration, experience to date shows that considerable work remains to be done to ensure that tariff rate quota administration does not undermine commercial opportunities or serve as a disguised barrier to trade. In that connection, we welcome the inclusion in the Review of consideration of how the Agreement can “facilitate maximum utilisation of the CPTPP by traders…”, and to “explore ways to further address the challenges posed by market-distorting practices”. On volumes, we are concerned that existing tariff rate quota outcomes risk further erosion as the CPTPP membership expands and more participants seek a share of current access.
• This review should allow parties to agree the principle that future CPTPP expansion must benefit all existing CPTPP members and not erode existing market access under the Agreement.
• To address these points, and consistent with the provision in the Review to “affirm the Agreement’s full implementation and identify areas for cooperation towards better operation of the Agreement”, CPTPP Parties should agree to clarify the treatment of tariff rate quotas. This could be done by developing a set of principles for the administration of tariff rate quotas and their treatment under future accessions. We would be happy to share further ideas for these principles if useful, but in short, key concepts are that:
  1. tariff rate quotas should be subject to continued reductions in out-of-quota and in-quota tariff rates and the expansion of the quota volumes, with the objective of progressively moving towards comprehensive tariff elimination for these products; and
  2. tariff rate quota administration must provide enhanced transparency and ensure fair access for all CPTPP members with an export interest, for example through regular reporting of quota utilisation, and ensuring return and reallocation periods which do not disadvantage members with longer shipment transit times.
• We recommend that New Zealand advocate for the development of a set of principles for tariff rate quota expansion and administration, including to establish expectations among Parties for quota expansion in the context of future accessions.

Modernising the Agreement

• We acknowledge the reaffirmation by Ministers at their 15 November meeting that their goal is that the CPTPP should be “dynamic and living”. Business models, technology, policy concerns and the global trading environment have not stood still since the TPP and CPTPP were signed; nor should the Agreement. In fact, not only do we consider that the Review should “take into account developments in international fora and the level of ambition in other agreements concluded by Members” (emphasis added), but that it should in fact seek to position itself in the vanguard of global standards-setting for regional economic integration.
• To that end, we welcome the inclusion in the Terms of Reference that the Agreement should “demonstrate leadership on emerging issues in areas such as the digital and the green economy”. In effect, the Agreement can be used as a testing ground for these and other evolving areas of trade policy and can as a result also serve as a building block for the multilateral rules-based trading system.

Upgrading digital trade

• The e-commerce chapter of the TPP/CPTPP was ground-breaking for its time, but considerable progress has been made since then among CPTPP Members in developing approaches to govern trade in the digital economy. There is accordingly a strong case for the Review to update Chapter 14 to reflect more modern approaches, such as those in the Digital Economy Partnership Agreement (DEPA).
• In particular, recognising the increasingly critical enabling role that digital technologies play in facilitating all kinds of trade, and the importance of strengthening supply chain resilience, the Review should seek to deepen and broaden binding commitments regarding the digital facilitation of trade. This is especially the case in respect of paperless trade and domestic electronic transactions frameworks.
• The DEPA provides a good starting point for this upgrading exercise, but we urge New Zealand to advocate for even more ambitious and binding provisions that would enhance interoperability and trust (for example, by providing for the alignment of legal frameworks governing electronic transactions, taking into account relevant provisions from model legislative texts such as the UNCITRAL Model Law on Electronic Transferable Records (2017)). This could be supplemented with agreement to cooperate on pilot projects and proof of concept work.
• Additionally, the existing E-Commerce Chapter should be broadened to include the range of issues that are addressed in the DEPA and other Digital Economy Agreements among various of the CPTPP Members, including for example e- invoicing, e-payments, digital identities, data innovation, emerging technologies including Artificial Intelligence, fintech and regtech, open government data, inclusion and small businesses, logistics, government procurement and standards and conformity. As in the DEPA, binding commitments should be made where possible, or the Agreement should seek to create a platform for knowledge-sharing and/or collaboration in areas where binding commitments may be premature. The emphasis throughout should be on approaches and mechanisms to foster interoperability across CPTPP economies.
• NZIBF calls for New Zealand to advocate for the upgrading of the e-commerce chapter, including in respect of paperless trade

Building sustainability

• We welcome the inclusion in the Review of consideration of how the Agreement could reinforce the links between trade and global environmental issues including climate change and biodiversity loss. There is considerable scope to leverage trade tools for better environmental outcomes: as is the case for the E-Commerce Chapter, while the CPTPP was a pathfinder on trade and sustainability when it was first negotiated, including on fisheries subsidies, considerable further work has taken place internationally in this area in the period since then that should be reflected in the environment chapter.
• The Review could usefully focus, among other areas, on: comprehensively liberalising trade in environmental goods and services; fostering trade and investment in renewable energy; the development of coherent sustainability-related standards to facilitate trade; agreement to eliminate fossil fuel subsidies and other environmentally-harmful subsidies, including in agriculture, and updating the provisions to reflect the recent outcomes on fish subsidies in the WTO; collaborate to counter green protectionism; work to support the decarbonisation of the shipping and maritime industry; fostering business collaboration and innovation, and promoting sustainable finance and green investment.
• NZIBF calls for New Zealand to advocate for further liberalisation and cooperation in areas that will accelerate decarbonisation and adaptation to a low-carbon economy.

Promoting inclusion

• NZIBF supports consideration in the Review of issues relating to Māori economic development and engagement in trade. The market access outcomes advocated above would contribute materially to these goals. In addition, the Review should give due consideration of the inclusion of intellectual property provisions relevant to Indigenous interests, including in respect of the protection of traditional knowledge. (Existing provisions relating to plant variety rights should also be fully implemented.) NZIBF also supports improvements in respect of the ability of all businesses, including micro-, small and medium-sized enterprises (MSMEs), to access the Agreement’s opportunities, and considers that targeted provisions aimed at promoting the participation of women-led businesses and entrepreneurs in trade should also be considered.
• NZIBF calls for New Zealand to advocate for the inclusion of provisions to support greater inclusion for Māori/Indigenous businesses, MSMEs and women entrepreneurs.

Other issues

• NZIBF welcomes the provisions in the Terms of Reference to consider improvements in other areas, including in respect of upholding labour rights, improving working conditions and living standards, and strengthening cooperation and capacity on labour issues; support for global value chains, and strengthening supply chain resilience; exploring ways to further address the challenges posed by market- distorting practices; and further reflecting on Members’ interests in the context of the CPTPP’s Investor-State Dispute Settlement mechanism, in which NZIBF still sees value.

Incorporating ‘lessons learned’ to date

• We welcome the acknowledgement in the ‘Methodology’ section of the Terms of Reference that the Review should take account of the work of all committees, relevant developments in international fora and in trade and investment policy, and the views of stakeholders. We also welcome the exchange of data foreseen on utilisation and trade flows of both merchandise trade and trade in services (to which we would add, digital trade flows), and would argue that a broader assessment of business and other stakeholder experience with the Agreement should be part of this exercise. These will all be important inputs to shape the Review and ensure that the Agreement remains fit for purpose.
• NZIBF calls for New Zealand to seek improvements to the operation of the Agreement based on implementation experience and lessons learned to date and that input from business and other stakeholders should be sought as part of this exercise.

Institutional arrangements

• NZIBF considers that it would be valuable to revisit the concept of the creation of a permanent secretariat to support the operation of the Agreement. This would not necessarily replace the current CPTPP Commission structure, but could serve to reduce the administrative burden on the rotating Commission Chair; could enhance the monitoring mechanism of the CPTPP (consistent with the provisions of the Terms of Reference); and could support the ongoing evolution of the “living” Agreement by providing analytical and data support where useful.
• NZIBF calls for New Zealand to advocate for the creation of a permanent CPTPP Secretariat.

Transparency

• NZIBF underscores the value of close engagement with stakeholders, including business and other groups, in shaping, implementing and being able to benefit from the Agreement. The recent CPTPP Business Dialogue in San Francisco, held on the margins of APEC, was both a useful exercise and a good example of what should take place more regularly and certainly each time CPTPP Ministers meet. We are concerned at the lack of public profile that the current Review appears to have been given to date by CPTPP Parties, and would encourage a more active process of outreach, consultation and transparency through the conduct of the Review, and in sharing its findings.
• NZIBF calls for enhanced transparency and more active outreach through the Review process.

Relationship between the Review and Accessions

• NZIBF welcomes the interest of potential aspirant economies to join the CPTPP, provided that they can meet the Agreement’s high standards. We consider that the expansion of the Agreement would not only help to create new commercial opportunities for businesses in any acceding markets, but would also generate dynamic gains across all markets through enhancing global value chains, innovation and connectivity. While we strongly support the Review, we would not want the Review to slow or impede the accessions process. We are concerned that the time taken to complete the Review may introduce added complications.

Recommendations to the New Zealand Ministry of Foreign Affairs and Trade

NZIBF recommends that the Ministry:

• note the NZIBF’s strong support for the Review of CPTPP;
• consider the specific recommendations made by NZIBF for the Review, including that New Zealand should:
  1. press for the removal of all existing tariff rate quotas and residual tariffs;
  2. advocate for the development of a set of principles for tariff rate quota expansion;
  3. advocate for the upgrading of existing provisions on digital trade, along the lines of DEPA, and especially in respect of paperless trade;
  4. advocate for further liberalisation, reform and cooperation in areas that will accelerate decarbonisation and adaptation to a low-carbon economy;
  5. advocate for provisions that support greater trade inclusion by Māori/Indigenous businesses, MSMEs and women entrepreneurs;
  6. seek further administrative and procedural improvements across the Agreement based on implementation experience and lessons learned to date;
  7. advocate for the creation of a permanent CPTPP Secretariat;
  8. enhance transparency and outreach, particularly with the CPTPP business community, through the Review process.
• note the NZIBF’s concern that the Review should not slow or impede the process of future accessions to the Agreement.