On 31 October 2018, Australia was the 6th country to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, also referred to as TPP-11). Vietnam is the 7th nation to ratify the CPTPP on 15 November 2018.
Also ratified by Canada, Japan, Mexico, New Zealand and Singapore, the CPTPP will come into force on 30 December 2018 (60 days after Australia’s ratification). Other signatories yet to ratify the CPTPP are Brunei, Chile, Malaysia and Peru.
The CPTPP is based on the TPP (following the withdrawal of the United States of America) with the suspension of some provisions.
What does this mean for Australian business?
Once in force, the CPTPP will impact key areas of trade and commerce across the Australian economy. The Australia government has stated that it “will help support Australian businesses to grow and see annual benefits of up to $15.6 billion to our national economy by 2030”. State parties are required to reduce barriers to trade and foreign investment. Significant changes include the elimination of tariffs on AUD$12.7 billion of Australia’s dutiable exports to countries party to the CPTPP. Private foreign investment is projected to increase, as the FIRB threshold for private foreign investment is set to be lowered for signatories to the CPTPP.
Regionally, the CPTPP is designed to facilitate a flow of trade and investment between State parties. It provides Australian businesses with future growth opportunities, improved benefits in supply chains and certain investment protections for Australian businesses investing in the other State parties.
Investor-state dispute settlement (ISDS)
The CPTPP provides certain investment protections for investors of State parties, such as no expropriation, no discrimination and minimum standard of treatment.
Investors are given access to investor-state dispute settlement (ISDS) such that claims may be brought in international arbitration for any alleged breaches of these protections. However, one of the TPP provisions suspended is the extension of ISDS to investment contracts or investment authorisations.
In addition, New Zealand has signed side letters to exclude or limit ISDS with 5 signatories to the CPTPP.
Australia has amended existing legislation to assist with Australia fulfilling its obligations under the CPTPP when it comes into force. These amendments include:
- Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Act 2018 No. 127 (Cth)
- Customs Tariff Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Act 2018 No. 128 (Cth)
- Foreign Acquisitions and Takeovers Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Regulations 2018 (Cth)
This particular suite of laws will implement changes to Australia’s tariff system to allow favourable treatment for goods defined as Trans-Pacific Partnership originating goods. These laws will not commence until the CPTPP comes into force for Australia.