With the ever-changing landscape of US trade agreements recently, it’s easy to lose sight of what’s happening in other countries. For multinational organizations with worldwide presence, you can’t afford to stop paying attention to global developments such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
What is CPTPP?
One significant development that is about to make an impact, is ratification of the CPTPP. This agreement is the child of TPP, which died once the US withdrew from it. The CPTPP agreement is written so that once 6 countries ratify it, it will immediately come into force for those 6, and the others can join when they ratify. According to Global Affairs Canada: “Once fully implemented, the 11 countries will form a trading bloc representing 495 million consumers and 13.5% of global GDP”.
Impact of CPTPP from a Canadian Perspective
For this analysis, we will use a hypothetical example of a Canadian manufacturer of chemicals, who trades with Mexico. This manufacturer has enjoyed the use of NAFTA when selling to Mexico, but in some cases has not been able to claim NAFTA. With CPTPP in place, it now has two options when selling to Mexico: NAFTA and CPTPP. Why would they choose CPTPP over NAFTA?
Well, first, there is the threat of cancellation of NAFTA: CPTPP could be viewed as a longer-term option. When you consider the time and effort it takes to configure and set up automation for free trade compliance, long term is an appealing feature.
Secondly, there are some scenarios where CPTPP may apply, but NAFTA did not. In other words, you could claim CPTPP on products that were not eligible under NAFTA. Some reasons for this include:
- Foreign Content
- De Minimis
- Product Specific Rules of Origin
Read more in the informative whitepaper Are you ready for CPTPP?