CPTPP: Overview and Issues for Congress

CPTPP: Overview and Issues for Congress

Updated June 16, 2023
CPTPP: Overview and Issues for Congress
The Comprehensive and Progressive Agreement for Trans-
stakeholders have urged the Administration to consider
Pacific Partnership (CPTPP) is a free trade agreement
participation in CPTPP or other trade agreements that seek
(FTA) formed by the 11 remaining members of the
to open markets further in the region. Others supported U.S.
proposed Trans-Pacific Partnership (TPP) after the Trump
TPP withdrawal and are wary of initiatives like IPEF as a
Administration withdrew the U.S. signature in 2017.
potential stepping-stone to joining CPTPP. Previously, the
CPTPP—which retains most of TPP’s provisions—reduces
Trump Administration cited preference for bilateral trade
and eliminates tariff and non-tariff barriers, and establishes
talks and concerns over certain TPP provisions, such as on
enforceable trade rules. CPTPP is in effect for all parties—
rules of origin, in its decision to withdraw from TPP.
entering into force for Australia, Canada, Japan, Mexico,
New Zealand, and Singapore in 2018; Vietnam in 2019;
U.S. Trade with CPTPP Members
Peru in 2021; Malaysia and Chile in 2022; and Brunei in
The United States has significant trade and investment with
2023. To date, China, Costa Rica, Ecuador, Taiwan, and the
the 11 CPTPP members, which, combined, accounted for
United Kingdom (UK) have applied to join CPTPP. Others
42% of U.S. goods trade (2022), 23% of U.S. services trade
such as South Korea, Thailand, and Ukraine are considering
(2022) and 22% of foreign direct investment (FDI) stock
applying. The UK is to become the first new member, after
(2021). Including all 16 CPTPP signatories and current
reaching an agreement in March 2023 on accession terms.
applicants, these shares rise to 60%, 39%, and 37%,
respectively—with China accounting for 13% of U.S.
Members of Congress may have interest in monitoring and
goods trade, and the UK accounting for 9% of services
shaping the Administration’s views on CPTPP, regarding
trade and 13% of FDI. As noted, CPTPP may disadvantage
• U.S. leadership in regional trade rules. U.S. leadership, competition of U.S. firms in the region, especially in
including through trade negotiating objectives mandated
markets without existing U.S. FTAs, such as Japan and
by Congress, was largely reflected in CPTPP
Vietnam (Figure 1); a limited U.S.-Japan trade agreement,
in effect since 2020, has reduced some bilateral tariffs.
commitments. TPP was originally signed under 2015
Trade Promotion Authority (TPA) legislation (P.L. 114-
Figure 1. Current and Potential CPTPP Members
26, now expired) that set negotiating objectives and
without an Existing U.S. FTA
congressional consultation and notification requirements
for U.S. trade agreements. The Obama Administration
viewed TPP as a tool to extend U.S. economic influence
and to shape or update regional, and potentially global,
trade rules to reflect U.S. priorities, especially on issues
that existing multilateral agreements do not address
substantively. Such issues include digital trade, state-
owned enterprises (SOEs), labor, and the environment.
• U.S. commercial competitiveness. CPTPP involves
three of the top four U.S. trade partners and may expand
to other major economies, potentially leading to greater
economic integration and trade liberalization among the

parties. CPTPP and other regional deals not involving
Source: Trade data from U.S. Census Bureau, tariffs from WTO.
the United States, such as the Regional Comprehensive
Note: MFN = most-favored nation tariff rates applicable on imports
Economic Partnership (RCEP), may disadvantage U.S.
from WTO members (i.e., tariffs general y faced by U.S. exporters).
trade with members, as participants lower their trade
CPTPP Commitments
barriers to other members but not the United States, and
CPTPP incorporates the 30 original chapters of the TPP
possibly set rules that may not align with U.S. interests.
text, including its dispute settlement (DS) mechanism.
• China’s potential accession. China’s economic heft and
However, it suspends indefinitely 22 specific TPP
contrasting approach to certain U.S. priority trade issues
commitments (see below), which had been U.S. priorities
(e.g., SOEs and digital trade disciplines) suggest its
and which CPTPP parties may reinstate through consensus.
potential membership would have implications for U.S.
CPTPP also establishes new administrative procedures
(e.g., accession) that replace those in TPP. Side letters to
interests in the region.
CPTPP clarify how specific commitments apply to certain
The Biden Administration has stated it is not currently
parties (e.g., a five-year exemption from DS for data flow
interested in joining CPTPP, but recognizes the region’s
commitments and three-year exemption regarding certain
economic importance, and in May 2022, launched the Indo-
labor obligations applying to Vietnam). Key provisions
Pacific Economic Framework for Prosperity (IPEF, see
(with suspensions from TPP noted) include:
below). Some Members of Congress, industry, and other
https://crsreports.congress.gov

CPTPP: Overview and Issues for Congress
Goods Tariffs. Immediate elimination of most tariffs
Organization (ILO) principles and rights on freedom of
among current members and eventual elimination of tariffs
association and collective bargaining, and elimination of
on roughly 99% of tariff lines. Tariff commitments for new
forced labor, child labor, and employment discrimination in
members are subject to accession negotiations.
matters related to trade and investment. U.S.-proposed
E-Commerce/Digital Trade. Requires free cross-border
bilateral labor plans with Brunei, Malaysia, and Vietnam,
data flows and prohibits requirements to localize computing
which included additional commitments (e.g., allowing for
facilities, with certain public policy exceptions. Prohibits
independent unions in Vietnam), are excluded from CPTPP.
duties on digital products and requirements to share source
Dispute Settlement (DS). Includes a DS mechanism to
code to gain market entry. Requires members to have
enforce commitments, though some exemptions apply.
privacy regimes in place nationally.
Accession. Requires unanimous consent among members to
Environment. Requires countries to enforce and not
begin market access negotiations (the UK has been the only
derogate from their environmental laws to attract trade and
applicant to reach this step). If talks proceed, parties are to
investment, implement specified multilateral environmental
determine whether an applicant is qualified to join based on
agreements they have joined, prohibit certain fishing
market access offers (e.g., tariffs) and ability to adhere to
subsidies, and combat illegal wildlife trade. A provision
CPTPP rules. Such approval for China may be difficult for,
broadening illegal wildlife trade to include determinations
given global concerns about its trade practices and
based on a trade partner’s laws was suspended.
industrial policies.
Government Procurement. Requires nondiscriminatory
Comparison to Other Trade Initiatives
treatment toward domestic and foreign firms in government
IPEF. U.S. aims for IPEF vary from CPTPP and past U.S.
purchasing decisions above certain thresholds. Two
FTAs, as the Administration does not seek coverage of
suspended provisions relate to (1) procuring entities and
tariffs and market access. IPEF involves select trade issues
efforts to promote compliance with labor laws, and (2) a
mandate to reopen procurement negotiations in three years.
under negotiation by USTR, e.g., labor, environment, the
digital economy, agriculture, transparency, competition
Intellectual Property Rights (IPR). Protects patents,
policy, and trade facilitation. Commerce is leading IPEF
copyrights, trademarks, and includes disciplines on trade
talks on supply chains, decarbonization and infrastructure,
secrets to combat cyber-theft, with various phase-in
and tax issues. U.S. officials envision both cooperative and
periods, notably for Vietnam. Protections were narrowed
binding commitments, but it is unclear what enforcement
due to suspensions relating to: scope of patentability,
mechanisms IPEF may have. See CRS In Focus IF12373,
patent term extensions, test data for marketing approvals,
Indo-Pacific Economic Framework for Prosperity (IPEF).
and requirements for criminal penalties for certain IP
infringements. Also suspended are: biologics commitments,
USMCA. The most recent U.S. FTA, the U.S.-Mexico-
extended term for copyrights, and provisions on legal
Canada Agreement (USMCA), has much in common with
remedies and safe harbor for internet service providers.
CPTPP in its breadth and depth, but also key differences.
Investment. Removes barriers and provides protections for
Some USMCA commitments are more extensive (e.g.,
foreign investors in CPTPP countries, including
labor, SOEs, digital trade), while others are less extensive
nondiscriminatory and minimum standards of treatment,
(e.g., procurement). USMCA also includes more restrictive
though each country has exempted some sectors or
ROOs on autos. USMCA does not include IPR provisions
practices. Includes investor-state dispute settlement (ISDS),
for biologics, and limits the application of ISDS, issues that
though countries may block investors’ claims against
were also affected by suspended provisions in CPTPP.
tobacco control measures. Due to suspensions, ISDS does
not apply to certain disputes such as investment agreements
RCEP. RCEP includes China, Australia, Japan, New
between investors and a central government authority (e.g.,
Zealand, South Korea, and the ten ASEAN members, and
relating to natural resource rights or infrastructure).
took effect in 2022 for most members. Like CPTPP, RCEP
Rules of Origin (ROOs). Sets requirements to determine
lowers trade barriers and sets rules among the participants,
whether goods originate within the territory of CPTPP
but has generally less extensive commitments (e.g., lower
members and are eligible for CPTPP benefits (e.g., autos
levels of tariff cuts, broad exceptions from DS, including
require 45%-55% regional value content depending on
digital trade) and omits issues covered in CPTPP such as
calculation method to qualify for tariff elimination).
labor, environment, and SOEs. See CRS In Focus IF11891,
Services. Provides core obligations of nondiscrimination
Regional Comprehensive Economic Partnership (RCEP).
(national treatment and most-favored nation treatment),
Issues for Congress
market access, and local presence on a “negative list” basis
(i.e., covering all cross-border services sectors, except those
Key oversight and legislative issues that Congress may
specifically excluded). Includes separate obligations for
consider, including through any renewal of TPA, include:
financial services, with sector-specific exemptions.
• What are costs and benefits of different approaches to
State-Owned Enterprises (SOEs). Requires countries to
regional economic engagement (CPTPP, IPEF, RCEP)?
direct SOEs to make purchase and sale decisions based on
Should other approaches be considered? Should the U.S.
commercial considerations, enforce regulations with regard
seek to join or negotiate agreements like CPTPP?
to SOEs impartially, and ensure subsidies and other
• What scope exists for changes to CPTPP if the United
noncommercial assistance to SOEs do not cause harm to
States were to consider joining? What are the
other member countries, with exceptions, including for
implications of the UK joining CPTPP and of China’s
smaller (revenue) SOEs and provision of public services.
potential membership?
Worker Rights. Requires countries to adopt and not
derogate from laws consistent with core International Labor
https://crsreports.congress.gov

CPTPP: Overview and Issues for Congress
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IF12078
Cathleen D. Cimino-Isaacs, Specialist in International
Trade and Finance

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https://crsreports.congress.gov | IF12078 · VERSION 5 · UPDATED