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The 11-member pact known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP has been signed by five Asean economies as well as Japan, Australia, New Zealand, Canada, Mexico and Peru – and China is considering joining. Photo: AP

Amid US-China trade war, could EU be next to join the CPTPP?

  • Experts predict economic uncertainty facing Asia won’t end even if the US and China resolve their trade tensions
  • To hedge against future disruptions, the 11-nation trade bloc known as CPTPP could join forces with the EU, suggest regional experts in an Asia Society paper

As Asian economies grapple with the fallout from the ongoing trade war between the US and China, greater cooperation with Europe may become an increasingly attractive prospect, experts say, diversifying partnerships and fortifying the region against future economic shocks.

The region’s 11-member pact known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP – signed by five Asean economies as well as Japan, Australia, New Zealand, Canada, Mexico and Peru – could expand to include the European Union.

The Asia Society Policy Institute last week released a report detailing how Asian economies could continue to benefit from trade despite uncertainties generated by the US-China stand-off. The report said the EU should consider joining the CPTPP, enabling it to become part of the Pacific regional supply chain.

Explained: the CPTPP trade deal

The EU has or is in the process of negotiating free trade agreements with every CPTPP member nation except Brunei, and is by dollar amount the third-largest importer from and exporter to CPTPP members – behind only the US and China.

“The CPTPP builds on what the EU has already accomplished in its agreements with individual Asian countries,” said Wendy Cutler, vice-president of the Asia Society Policy Institute and former US trade negotiator for the Trans-Pacific Partnership, the CPTPP’s previous iteration.

Trade tensions between the US and China could persist at least into the medium term, said Cassey Lee, senior fellow at Singapore’s ISEAS-Yusof Ishak Institute, which could lead to a restructuring of supply chains and a decline in investments across the region.

Asian nations may therefore need to look as far as Europe to ensure stability from a diverse set of trading partners, Lee said.


The CPTPP, already in effect for seven of the 11 current member states, is expected to be ratified by the remaining members by the end of this year. Indonesia, South Korea, Thailand and the UK have also expressed interest in joining.

One of the world’s largest free trade agreements – representing more than 13 per cent of global GDP – the CPTPP lowers tariffs and increases trade connectivity among member states, and provides options for dispute settlement as well as protecting the free flow of information across borders.

The agreement is widely seen as embodying the highest international trading standards, with prohibitions on child labour, forced labour and employment discrimination. It also contains detailed environmental protection provisions, as well as being the first to prohibit subsidies to fisheries which could encourage overfishing.

Beijing ‘looking into joining trans-Pacific trade pact’ to hedge against US

“The CPTPP has high standards, promotes high levels of investment and could definitely be an improvement over many existing trade agreements,” said Tu Xinquan, dean of the China Institute for WTO Studies at University of International Business and Economics in Beijing.

Closer economic integration between Europe and Asia – which has partly modelled its multilateral trading approach on the European Economic Community – could benefit both regional economies, experts say.


Michael Plummer, professor of international economics at Johns Hopkins School of Advanced International Studies in Bologna, wrote in European economic journal Intereconomics that tit-for-tat tariffs between the US and China not only create uncertainty and jeopardise investment in Asia – they risk undermining the entire global trading system which has propelled Asia’s economic growth.

The CPTPP would lower nearly all tariffs, allowing goods, services and investments to move more freely across the markets of member states.

Why the CPTPP could be the answer to the US-China trade war

For example, under the agreement, the agreement eliminates 99 per cent of tariffs on Canada’s trade with Singapore, and 88 per cent of tariffs on Mexico’s trade with Singapore. The CPTPP is Singapore’s first preferential trade agreement with these nations.


China is negotiating its own multilateral trade agreement: the Regional Comprehensive Economic Partnership (RCEP), which will include Asean nations as well as India, Japan, Korea and Australia. However, China is also considering joining the CPTPP.

“We are still in the process of studying how the CPTPP could influence China,” said Tu, who advises the Chinese Ministry of Commerce on trade policy. “As it stands, the current agreement might be a good one but there are still aspects which could be difficult to accept.”

The Peterson Institute for International Economics has projected that if China were to join the CPTPP, global income gains from the agreement could quadruple to US$632 billion.

The Asia Society report points out potential sticking points for the EU could include the provisions on trade in agricultural products and labour standards. According to Lee at ISEAS, the EU’s existing trade agreements with CPTPP nations already foreshadow future difficulties.


“If these agreements differ in important areas, particularly agriculture, this may rule out the EU for the short term,” Lee said.

The CPTPP prevents member states from excluding agricultural commodities from the agreement. Even Japan, which has long protected its domestic rice production, has agreed to allow for a quota on rice imports under the agreement. But the EU has taken a notoriously protectionist stance on agriculture in its trade agreements, and the “no exclusion” policy of the CPTPP may be tough for the union to meet, Cutler said.

However, she said the deal which CPTPP members eventually agree with Australia and New Zealand could serve as a model for the EU to engage with the bloc.

The CPTPP would be a great way for Europe to engage in the region, and good for multilateralism
Michael Plummer, professor of international economics

The potential expansion of the multilateral agreement presents an opportunity for Asia and Europe to take the lead on setting global standards for trade, experts said, given that the US under Donald Trump has taken an inward-looking approach.


“The fact that e-commerce negotiations were just launched at the WTO shows how far international rules are behind the pace of technological developments,” Cutler said. “Looking ahead, we need not only to look at the rules but also the model for trade agreements broadly.”

Plummer from Johns Hopkins in Bologna agreed.

“With some of its cutting-edge chapters, the CPTPP would be a great way for Europe to engage in the region, and good for multilateralism,” Plummer said, although he expected the CPTPP to remain focused on Asia in the immediate future.

“EU decision-making is complex, and there will surely be sticking points. But this is not only feasible – it’s a smart move.”

This article appeared in the South China Morning Post print edition as: world’s biggest trade bloc could include europe