What is the CPTPP?
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a new free trade agreement (FTA) between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam signed on 8 March 2018 in Chile. This Agreement is a separate treaty that incorporates, by reference, the provisions of the Trans-Pacific Partnership (TPP) Agreement (signed but not yet in force), with the exception of a limited set of provisions to be suspended. The 11 countries have a shared vision of the Agreement as a platform that is open to others to join if they are able to meet its high standards.
The CPTPP entered into force for Australia, Canada, Japan, Mexico, New Zealand and Singapore on 30 December 2018. The CPTPP entered into force for Vietnam on 14 January 2019. The CPTPP will enter into force for Brunei Darussalam, Chile, Malaysia and Peru 60 days after they complete their respective ratification processes.
Importantly for Australia, the CPTPP ensures that the substantial market access package secured in the original TPP is maintained among the CPTPP Parties (i.e. covering goods and services market openings and commitments on regulations on foreign investment). This market access package delivers major new opportunities for Australian exporters, investors and firms engaged in international business. The outcome maintains the ambitious scope and high quality standards and rules of the original TPP.
Benefits for Australian exporters of goods
The Agreement eliminates more than 98 percent of tariffs in the free trade area. Highlights include:
- new reductions in Japan’s tariffs on beef, (Australian exports worth $2.0 billion in 2017);
- new access for dairy products into Japan, Canada and Mexico, including the elimination of a range of cheese tariffs into Japan covering over $100 million of trade;
- new sugar access into the Japanese, Canadian and Mexican markets;
- tariff reductions, and new access for our cereals and grains exporters into Japan, including, for the first time in 20 years, new access for rice products into Japan;
- elimination of all tariffs on sheepmeat, cotton and wool;
- elimination of tariffs on seafood, horticulture and wine; and
- elimination of all tariffs on industrial products (manufactured goods).
Benefits for Australian exporters of services
The Agreement enhances the level of transparency and predictability for Australian services exporters across the board, reducing some regulatory risks these firms confront internationally. Highlights include:
- recent reforms in the professional services sector in the CPTPP countries, for example in legal, architectural, engineering and surveying services, are legally guaranteed and enforceable;
- mining equipment services and technologies and oilfield service providers benefit from energy sector reforms in Mexico and Vietnam, and new rules on large State-Owned Enterprises, which help Australian providers to compete on an equal footing;
- financial services companies may provide the following cross-border services in Parties’ markets: (i) investment advice and portfolio management services to a collective investment scheme; and (ii) insurance of risks relating to maritime shipping and international commercial aviation and freight, and related brokerage;
- preferential temporary entry arrangements for Australian business people (and their spouses) into key markets, including provision for the granting of work rights for spouses in Brunei Darussalam, Canada and Mexico;
- universities and vocational education providers have legally guaranteed access to Brunei Darussalam, Japan, Malaysia and Mexico, and are able to supply online education services across the region;
- the phasing out of foreign equity limits in Vietnam's telecommunications sector five years after the entry into force of the Agreement and the ability to apply to wholly-own telecommunications ventures in Malaysia; and
- providers of private health and allied services will benefit from greater certainty regarding access and operating conditions in Malaysia, Mexico and Vietnam.
The Agreement provides new opportunities for Australian businesses to bid for government procurement services contracts, including:
- accounting, auditing and taxation services in Brunei Darussalam, Canada, Malaysia, Mexico and Vietnam;
- management consulting services in Brunei Darussalam, Malaysia and Mexico;
- computer and related services in all Parties, along with maintenance of office machinery in Brunei Darussalam, Canada, Malaysia, Mexico and Vietnam;
- architectural engineering and other technical services in Brunei Darussalam, Canada, Malaysia and Mexico;
- telecommunication and related services in Brunei Darussalam, Canada and Malaysia;
- environmental protection services in Brunei Darussalam, Canada, Malaysia, Mexico and Vietnam;
- education services in Brunei Darussalam, Canada, Japan, Malaysia and Mexico; and
- health and social services in Brunei Darussalam and Malaysia.
Benefits for Australian firms investing overseas
The Agreement includes important elements which deliver a more liberalised and predictable regime for the regulation of foreign investment, including in key sectors such as mining and resources, telecommunications and financial services. For example:
- Canada allows Australian investors to apply for an exemption from the 49 per cent foreign equity limit on foreign ownership of uranium mines, without first seeking a Canadian partner;
- Australian investments into Canada below CAD1.5 billion and into Mexico below USD1 billion will not be screened; and
- Australian investors also benefit from commitments offered by Japan, Vietnam and Brunei Darussalam to only impose conditions on foreign investment on the initial sale of interests or assets owned by the government.
The Agreement also promotes productive foreign investment in Australia by liberalising the screening threshold at which private foreign investments in non-sensitive sectors are considered by the Foreign Investment Review Board (FIRB), increasing it from $266 million to $1,154 million (indexed annually). Under the Agreement, the Treasurer retains the ability to screen investments in sensitive sectors to ensure they do not raise issues contrary to the national interest.
The Agreement’s investment obligations can be enforced directly by Australian and other Parties’ investors through an Investor-State Dispute Settlement (ISDS) mechanism. That mechanism includes a wide range of safeguards that protect the Government’s ability to regulate in the public interest, such as for public health. Australia’s tobacco control measures cannot be challenged.