Article from: TDM 5 (2019), in Editorial
A little over one year ago, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was signed in Santiago, Chile. The TPP-11 subsequently came into force on 30 December 2018. As of that date, the CPTPP entered into force for ratifying states, which included Mexico, Japan, Singapore, Australia, New Zealand, and Canada. On 14 January 2019, the agreement also entered into force for Vietnam. These milestones mark the conclusion of what has been a tumultuous and unpredictable treaty negotiation process.
The CPTPP is fundamentally an extension of the Trans-Pacific Strategic Economic Partnership (TPSEP) Agreement that came into force between Brunei, Chile, Singapore and New Zealand in 2006. This agreement liberalised trade in goods between the so-called Pacific 4 (P4) by calling for a total elimination of tariffs on goods originating in the P4 by 2015. In addition to elimination of border measures, the TPSEP addressed more specialized aspects of trade regulation such as rules of origin, sanitary and phytosanitary measures, technical barriers, trade in services, and competition policy. Maneuvers to expand the TPSEP to include other states in the trans-pacific region began and Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States (US), Vietnam and the P4 commenced talks for a broader economic agreement. Those negotiations eventually led to the drafting table, for what is the now-defunct Trans-Pacific Partnership (TPP) Agreement.
Many agree that if the TPP Agreement had come into force, it would have been one of the most significant trade deals to be negotiated in decades. The agreement was termed a "next-generation" trade agreement, building on existing rules of WTO Agreements and existing bilateral FTAs and covering new areas, including digital trade and economic commerce, intellectual property and state-owned enterprises (SOEs). Some economists estimated that the agreement would benefit all state parties, with the most significant benefits accruing to the US. In addition to the economic benefits that could potentially have been gained by the agreement, ratification of the TPP could have altered global economic politics in Asia by shifting power away from China to the US. This strategic pivot to Asian markets did not, however, crystallize for the US. During the 2016 US Presidential election campaign, the TPP (and its potential impacts on the US economy) was the subject of intense debate, with presidential candidates for both the Republican and Democratic parties suggesting that the deal was problematic. Hilary Clinton's resistance to the TPP was largely perceived as an "electoral convenience" to combat Donald Trump's more extreme position on the TPP and trade policy more generally, which is typically characterised as forceful assault on economic liberalism. Thus, it was not surprising that the US withdrew from the TPP ten days after US President, Donald J Trump, took office.
US withdrawal from the TPP prompted many to question how the other 11 TPP signatory states would respond - especially in light of the new US administration's stated preference for future bilateral versus multilateral trade treaties. A little over a year after US withdrawal from the deal, in March 2018, 11 of the would-be state parties to the TPP signed a revised agreement. The CPTPP, as it has been renamed, continues to be a significant trade deal both in its potential economic impact and terms. The agreement creates a free trade area representing a population of 500 million people and constituting more than 13 percent of world trade. The CPTPP also incorporates most of the TPP provisions by reference. Aside from removing references to the US, there are no changes to Chapters 1-4 (initial provisions and general definitions, national treatment and market access for goods, rules of origin, textiles), Chapters 6-8 (trade remedies, sanitary and phytosanitary measures, technical barriers to trade), Chapter 12 (temporary entry of business persons), Chapter 14 (electronic commerce), Chapters 16-17 (competition, state owned enterprises), Chapter 19 (labour), Chapters 21-25 (cooperation and capacity building, competitiveness and business facilitation, development, small and medium-sized enterprises, regulatory coherence), and Chapter 28 (dispute settlement). There are, however, 22 provisions included in the TPP that are suspended in the CPTPP because they were provisions included in the TPP at US' insistence. Those suspensions, which may be reinstated at some future date, largely impact the investment and intellectual property chapters (Chapters 9 and 18, respectively).
Given the CPTPP's recent entry into force, it is an appropriate time to assess the implications of the mega-regional agreement for companies already operating in this Trans-Pacific Region and those looking to explore those opportunities. As implementation of the CPTPP progresses, governments and policy-makers will also be cognizant of how this agreement impacts their regulatory autonomy in key areas of public policy. This collection of articles for TDM's Special on the CPTPP aims to address some of these issues. To that end, this Special includes meaningful contributions on CPTPP chapters addressing sanitary and phytosanitary measures, competition, state-owned enterprises and intellectual property and investment. Those contributions are outlined in greater detail below (Part II). We then provide some preliminary observations and note some of the themes that emerge after reviewing those contributions (Part III). This is followed by a brief conclusion (Part IV).
B. TDM Special on CPTPP : Outline of Contributions
Part I of this Special considers one of the most innovative features of the CPTPP - its Chapter on e-commerce. In this Professors Yoshinori Abe and David Collins consider the regulation of digital trade under the CPTPP. After outlining the history of digital trade provisions in trade agreements, Professors Abe and Collins provide an overview of the CPTPP's e-commerce chapter. Given the importance of the internet in the Canadian and Japanese market, the authors focus their analysis of the CPTPP's e-commerce provisions on small and medium sized enterprises (SMEs) in these jurisdictions. In so doing Professor Abe and Professor Collins acknowledge that the CPTPP's e-commerce chapter represents a threshold moment in the expansion of digital trade regulation under international economic agreements. In their view, many of the provisions in the CPTPP will facilitate trade in digital products and streamline commercial transactions to the benefit of SMEs in Canada and Japan. Nonetheless, the authors also caution that the extent to which SMEs from these jurisdictions are able to reap the benefits of the CPTPP will depend on SMEs obtaining appropriate knowledge and skills to seize the opportunities presented by the CPTPP's removal of trade barriers to digital trade. The authors' consideration of the CPTPP's legal obligations coupled with its practical implications for SMEs makes this piece a must-read for anyone looking to understand the intricacies of international trade regulation in the digital economy.
Part II of this Special looks at the CPTPP's chapters regulating state owned enterprises and competition. Inclusion of a chapter in the CPTPP aimed at regulating SOEs is largely the result of US initial involvement in negotiations for the original TPP. More particularly, development of rules governing SOE's was largely seen as a necessary counterweight to issues associated with the organization of China's economy. Whether the CPTPP's rules regarding SOEs could effectively manage this concern is the subject of Taku Nemoto's article. After identifying how SOEs - more particularly government treatment of these entities - create distortions in the market, this article critically examines whether the CPTPP's SOE Chapter could effectively address those market distortions. Taku Nemoto concludes that there are flaws within the CPTPP-based SOE rules that limit the effectiveness of these provisions. He further postulates that eventual inclusion of China in the CPTPP might actually create greater benefits for China than the other CPTPP state parties.
Our next article is a comprehensive look at the CPTPP's competition Chapter. Written by former Appellate Body Member and Professor Emeritus (Tokyo University), Professor Mitsuo Matsushita's contribution to the Special provides an insightful look at the rationale behind inclusion of competition policy in the CPTPP. Professor Matsushita's article explains and comments upon key provisions of the competition chapter, making this contribution a useful guidepost for those looking to understand how the CPTPP intends to regulate anti-competitive activities within the trans-pacific free trade area.
The final article in this Part considers whether potential new members to the CPPTPP will find the CPTPP's Competition and SOE chapters acceptable. More specifically, Sungjin Kang considers this question with reference to Korea, Indonesia and Thailand. After comparing provisions in the CPTPP's competition and SOE chapters with other economic arrangements entered into by Korea, Indonesia and Thailand, Sungjin Kang concludes that these states will not find the commitments outlined in the CPTPP's competition chapter difficult to accept. The SOE chapter is more likely to cause concern among these potential CPTPP parties given the importance of SOE's within their economies. Nonetheless, Kang sees potential for ratification of CPTPP by Korea, Indonesia and Thailand provided they are able to negotiate appropriate reservations.
Part III of this Special includes a series of papers that address various issues pertaining to the CPPTP chapter on investment protection. It is notable that roughly half of the contributions in this Special are devoted to the CPTPP's investment chapter.
We begin Part III with a contribution from Elijah Putilin and Harald Sippel, both lawyers with the Asian International Arbitration Centre (AIAC), about the impact of CPTPP ratification on Malaysia's investment regime. After providing an overview of the CPTPP and Malaysia's investment treaties with other CPTPP states, this paper addresses measures that Malaysia might implement, in the event that it ratifies the CPTPPP, to consolidate its investment law regime with other CPTPP members. The subject of this contribution is aimed at Malaysian investment treaty practice. Nonetheless, the underlying themes and strategies for practically addressing investment treaty overlap are relevant to other jurisdictions already impacted by, or prospectively impacted by, CPTPP ratification.
The next contribution in this part of the Special is written by Joaquin Terceño, Lexi Menish and Emily Stennett, all experts in international dispute settlement. In their paper they consider the intricacies of structuring investments in a post-CPTPP world. Their contribution provides a practical guide for those considering investment in the trans-pacific region. To that end this contribution outlines the substantive protections available to investors and their respective investments under the CPTPP and the eligibility requirements for obtaining those protections. Having done this, the authors conclude that the CPTPP maintains a comprehensive suite of investment protections and a means by which to enforce those protections in most instances, with the most obvious limitations occurring where ISDS is not available to an investor or is severely limited (as is seen in the case of a series of side letters concluded by New Zealand and other CPTPP state parties). To address these limitations Terceño, Menish and Stennett outline some helpful alternative strategies that prospective investors may consider as they contemplate structuring investments in the trans-pacific region.
This part of the Special also includes papers that consider the ever-elusive balance to be struck between investment protection and regulatory sovereignty. Here, Professors de Mestral and Côté provide us with an in-depth look at this issue by contrasting relevant provisions of the CPTPP with those in CETA. When compared against predecessor investment treaties, they acknowledge that both CETA and the CPTPP attempt to create greater balance between investor protections and host states' legitimate regulatory power. For example, both agreements incorporate exceptions and reservations that allow treaty parties to derogate from their trade and investment obligations. But, there are important distinctions between these two treaties which might confuse, rather than clarify, the boundaries of sovereign regulatory authority. How all of these differences will impact the equilibrium between investment protection standards and regulatory sovereignty remains, for Professors de Mestral and Côté , an open question.
Lee Carroll, an international arbitration expert, uses the issue of balance between investment protection and regulatory sovereignty in this part of the Special to discuss the legitimacy crisis facing investor-state dispute settlement (ISDS). After thorough consideration of the CPTPP's investment chapter, Ms. Carroll's contribution prompts us to reconsider whether equilibrium between investment protection and regulatory sovereignty should cause those practicing in the field to question the legitimacy of its arbitration mechanism. Instead of blaming ISDS for lack of balance within investment treaties, this paper focuses on the substantive disciplines within investment treaties and the subsequent rights that those disciplines create for investors and states alike. In this author's view the suite of disciplines included in the CPTPP aim to protect public welfare by ensuring that the investment protections incorporate those public welfare considerations. With the substantive disciplines of the CPTPP crafted in a manner that includes public welfare considerations, Ms. Carroll's paper reminds us of the important role dispute settlement mechanisms have in the interpretation and application of these disciplines.
Following on Ms. Carroll's paper, the contribution by Dr. Süsler and Ms. Wilson critically examines whether the CPTPP's provisions on ISDS reflect best practices and the underlying reasons for the suspension by some states of particular provisions regarding ISDS in the CPTPP. In their view, existing and future free trade agreements and investment treaties all potentially stand to gain from the periodic review of ISDS mechanisms and other related provisions. While both Dr. Süsler and Ms. Wilson acknowledge that there are no simple answers to the challenges presented by ISDS, they advocate for improvement within existing systems of ISDS as a way to manage those challenges.
Professor Gabriel Lentner addresses the relationship between intellectual property rights and international investment law. More specifically, he examines this relationship in the context of the CPTPP's investment chapter by considering the definition of an investment, the prohibition on expropriation and fair and equitable treatment. Professor Lentner's contribution provides a useful and illuminating discussion on the disjointed relationship that intellectual property rights have with the international trade and investment law regimes and the uncertain future of those rights in the wake of the CPTPP's ratification.
Finally, Aziah Hussin considers the potential for environmental counterclaims under the CPTPP's investment chapter. This contribution recognizes the close connection between foreign investment and the environment. More specifically, it notes that with increasing global initiatives that advance objectives such as environment protection, climate change mitigation, and sustainable development, there will be a greater need for the international investment law regime to balance the desire for increased foreign investment with environmental objectives. In Hussin's view, one way to do this is through counterclaims. This paper considers that mechanism with reference to existing jurisprudence on environmental counterclaims. In so doing, it sheds light on the possible interpretations of the parties' obligations and rights under the CPTPP.
In Part IV, Catherine Gibson's article provides an overview of the CPTPP's regulatory approach regarding measures implemented by CPTPP state parties in the area of human, animal, and plant health. In addition to the adoption of existing WTO obligations, Ms. Gibson highlights that the CPTPP's Chapter of sanitary and phytosanitary measures includes some innovations that go beyond what we normally see parties agree to in this area. She highlights the CPTPP's inclusion of private parties in the development of SPS measures and more detailed provisions on cooperation and transparency in the development of SPS measures as examples of these enhancements. These provisions, along with those addressing the science upon which states must base SPS measures, may have an impact on the regulatory autonomy of states within the free trade area to implement health measures that are not in conformity with international standards or guidelines. At the same time, this balance may be necessary to ensure that the CPTPP's market access gains in a variety of sectors, including agricultural goods, is not undermined by government-imposed SPS measures that are not based on scientific evidence.
Finally, Part V of this Special is dedicated to the government procurement chapter (Chapter 15) of the CPTPP. In this part, Jędrzej Górski provides an in-depth look at the history of government procurement commitments in the pacific region. He then discusses the nuances of the CPTPP's government procurement chapter by highlighting its technical and linguistic improvements juxtaposed against predecessor procurement commitments between certain CPTPP state parties. This paper also outlines deficiencies in the procurement chapter, making it a useful overview for any business hoping to do business with governments in the Asia-Pacific region.
C. Preliminary Observations and Emerging Themes
All of the papers contained in this TDM Special make clear that there are many important topics that warrant further consideration regarding future the application and implementation of the CPTPP. Nonetheless, there are some preliminary observations about the foregoing contributions that are worth mentioning. The first observation relates to the variety of topics we see covered by this TDM Special. At the outset of this introduction, the CPTPP is properly described as a mega-regional economic agreement that touches on a broad range of economic activities. Indeed, like its TPP predecessor, it represents a new generation of economic agreement aimed at addressing a more comprehensive agenda that tackles, among other topics, economic liberalisation, regulatory harmonization, the provision of public services, and sustainable development. Indeed, the wide-ranging nature of the CPTPP's agenda is evidenced by the sheer number of topic chapters that make up the agreement. Despite this reality, most contributions in this TDM Special address the CPTPP's investment chapter. One hesitates to draw too many conclusions about this fact. Nonetheless, discussion of the CPTPP's investment chapter, more than any other, is interesting given the legitimacy crisis in which the international investment law regime currently finds itself. One of the underlying concerns that has given rise to this crisis is criticism that the international investment law regime intrudes on a host state's sovereign authority to regulate in the public interest. And, this is a theme directly taken up in many of the papers that make up Part III of this Special.
Contributions situated outside of the investment chapter, and addressed in other parts this Special, also illuminate the ever-present tension between sovereignty and regulation of international economic activity. This is seen very clearly in the contribution examining the CPTPP's SPS Chapter as Ms. Gibson queries whether innovations in this part of the CPTPP will be overly onerous on states wanting to impose measures that promote strict standards of food health and safety. Even where there is no direct mention of sovereign authority, such concerns underpin the discussion in many of this Special's contributions. Papers considering the likelihood of CPTPP ratification by states such as China, Korea, Indonesia and Thailand deal with this theme, albeit in a more oblique way. Interestingly, all of these contributions are located in Part II, where the discussion centres on the competition and SOE chapters of the CPTPP. Whether expressly stated or not, the theme addressed in these contributions is whether certain states will find it palatable to relinquish sovereignty in certain aspects of their economy to become part of the trans-pacific free trade area.
The final observation to be made about this collection of papers is connected to the comprehensive and newer nature of the mega-regional economic arrangements such as the CPTPP. Many of the contributions in this Special attempt to explain different aspects of the CPTPP so that a variety of players, including businesses, legislators, politicians, policy-influencers and policy-makers along with those advising them, understand how to operate within this emerging free-trade area. By highlighting emerging trends, innovations, deficiencies and uncertainties in different areas of the CPTPP, these contributions provide useful insight and prompt further exploration into the workings of this very important economic pact.
The papers in this TDM Special provide a useful starting point for further discussion and study about the inner-workings of the CPTPP and its impact on the various players in the Asia-Pacific region. The papers provide meaningful contributions on key chapters in the agreement and draw out themes, particularly those addressing the contours of sovereign authority within the international economic legal order, that will continue to frame discussions in global economic governance. Having said that, important work about the implementation, application, interpretation, and enforcement of the CPTPP remains. Issues such as trade facilitation and sustainable development, broadly conceptualized, will feature prominently in those discussions. And there is little question that the digital economy now plays a key role in the world marketplace, with states needing to think about the appropriate parameters of regulation in domestic and international spheres. Understanding how the CPTPP will impact the digital economy and those working within it will be another area that requires further inquiry and comment.
In addition to these issues, interesting questions about which states might eventually join the CPTPP remain. Is it possible that the U.S. would reconsider its withdrawal from the agreement or would China consider becoming part of the CPTPP? Given current reports that the U.S. and China may end their current trade war and come to some sort of economic agreement this seems an unlikely prospect, at least in the short term. Even if this was a possibility, there might be significant hurdles to overcome before either state would consider such a course of action. For example, China would have to accept a number of CPTPP chapters originally included in the TPP at the behest of the U.S. as part of its pivot to Asia under the Obama administration. Another interesting prospect relates to Brexit and the United Kingdom (UK)'s interest in joining the CPTPP should it depart the European Union (EU). This idea has been percolating in some circles ever since the Brexit vote, but there are significant challenges to a prospect, not the least of which is Australia's reported rejection of the idea given that the UK is not in the pacific. Whatever happens the CPTPP is now in play and its continued existence will generate an abundance of questions in need of answers.
 See Comprehensive and Progress Agreement for Trans-Pacific Partnership (entered into force 30 December 2018) is available a number of government websites. See e.g. Canada's website: <https://international.gc.ca/trade-comme rce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/index.aspx?lang=eng> (last accessed 1 May 2019).
 A useful overview of the CPTPP's timeline is available online: <https://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/timeline_negotiations-chronologie_negociations.aspx?lang =eng> (last accessed 1 May 2019).
 Trans-Pacific Strategic Economic Partnership (entered into force 28 May 2006), available online: <http://www.sice.oas.org/Trade/CHL_Asia_e/TransPacific_ind_e.asp>.
 See supranote 2.
 See Trans-Pacific Partnership, (text released 26 January 2016), available online: <https://www.mfat.govt.nz/ en/abou t-us/who-we-are/treaties/trans-pacific-partnership-agreement-tpp/text-of-the-trans-pacific-partnership>(last accessed 1 May 2019).
 See Brock R Williams, "Trans-Pacific Partnership Countries: Comparative Trade and Economic Analysis", Congressional Research Service (10 June 2013), online: <https://fas.org/sgp/crs/row/R42344.pdf> (last accessed 29 April 2019).
 See e.g. Peter A Petri & Michael G Plummer, "The Economic Effects of the Trans-Pacific Partnership: New Estimates", Working Paper Series WP 16-2, Petersen Institute for International Economics (January 2016), online: <https://piie.com/system/files/documents/wp16-2_0.pdf> (last accessed 11 March 2019). But see Jeronim Capaldo et al, "Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement", Working Paper Series 16-01, Global Development and Environment Institute at Tufts University (January 2016) online: <http://www.ase.tufts.edu/gdae/policy_research/TPP_simulations.html> (last accessed 11 March 2019) (where the authors predict more modest (sometimes even negative) economic benefits resulting from TPP ratification).
 See Daniel CK Chow, "How the United States Uses Trans-Pacific Partnership to Contain China in International Trade" (2016) 17 Chic J Int'l L 370 [Chow].
 See Stephen Boyle, "Hilary Clinton Opposes TPP while Donald Trump Threatens Tariffs - both their policies will leave people worse off", The Guardian (4 November 2016), available online: <https://www.theguardian.com/business/ 2016/nov/04/us-election-free-trade-hillary-clinton-tpp-donald-trump-tariffs> (last accessed 1 May 2019).
 Presidential Memorandum Regarding Withdrawal of the United States from the Trans-Pacific Partnership Negotiations and Agreement (23 January 2016), online: <https://www.whitehouse.gov/presidential-actions/presidential-memorandum-regarding-withdrawal-united-states-trans-pacific-partnership-negotiations-agreement/>. Here it is important to note that US withdrawal from the TPP is just one in a series of steps the US has taken in pursuit of its "America First" trade policy. The US administration has increased tariffs on many of its trading partners, including China, Canada, Mexico, Germany and Japan (see e.g. Proclamation No 9704, Adjusting Imports of Aluminum into the United States, 83 Fed Reg 11,619 (8 March 2018); Proclamation No 9705, Adjusting Imports of Steel to the United States, 83 Fed Reg 11,625 (8 March 2018)). It has also sought to renegotiate treaties such as NAFTA in order to reinvigorate American manufacturing sectors like the automobile industry.
 Chow, supranote 9.
 See e.g. Chao Deng and Lingling Wei, "U.S.-China Trade Deal in Sight After Progress on Tariffs, Market Access", The Wall Street Journal (1 May 2019), online: <https://www.wsj.com/articles/u-s-china-conclude-productive-trade-talks-but-sticking-points-remain-11556718515> (accessed 1 May 2019).
 See e.g. Chow, supranote 9.
 See e.g. Department for International Trade, "CPTPP will be a 'force for good' in promoting free trade", Press Release (UK Government) (30 December 2018), online: <https://www.gov.uk/government/news/cptpp-will-be-a-force-for-good-in-promoting-free-trade> (last accessed 1 May 2019).
 See e.g. Nick Miller, "Australian Trade Minister pours cold water on Britain's post-Brexit TPP plan", The Sydney Morning Herald (22 January 2019), online: <https://www.smh.com.au/world/europe/australian-trade-minister-pours-cold-water-on-britain-s-post-brexit-tpp-plan-20190122-p50sry.html> (last accessed 1 May 2019).