CPTPP: Overview and Issues for Congress

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement (FTA) formed by the 11 remaining members of the proposed Trans-Pacific Partnership (TPP) after the Trump Administration withdrew the U.S. signature in 2017. CPTPP—which retains most of TPP's provisions—reduces and eliminates tariff and non-tariff barriers, and establishes enforceable trade rules. CPTPP is in effect for all parties—entering into force for Australia, Canada, Japan, Mexico, New Zealand, and Singapore in 2018; Vietnam in 2019; Peru in 2021; Malaysia and Chile in 2022; and Brunei in 2023. To date, China, Costa Rica, Ecuador, Taiwan, and the United Kingdom (UK) have applied to join CPTPP. Others such as South Korea, Thailand, and Ukraine are considering applying. The UK is to become the first new member, after reaching an agreement in March 2023 on accession terms.

Members of Congress may have interest in monitoring and shaping the Administration's views on CPTPP, regarding

• U.S. leadership in regional trade rules. U.S. leadership, including through trade negotiating objectives mandated by Congress, was largely reflected in CPTPP commitments. TPP was originally signed under 2015 Trade Promotion Authority (TPA) legislation (P.L. 114-26, now expired) that set negotiating objectives and 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 the United States, such as the Regional Comprehensive Economic Partnership (RCEP), may disadvantage U.S. trade with members, as participants lower their trade barriers to other members but not the United States, and possibly set rules that may not align with U.S. interests.
• China's potential accession. China's economic heft and contrasting approach to certain U.S. priority trade issues (e.g., SOEs and digital trade disciplines) suggest its potential membership would have implications for U.S. interests in the region.

The Biden Administration has stated it is not currently interested in joining CPTPP, but recognizes the region's economic importance, and in May 2022, launched the Indo-Pacific Economic Framework for Prosperity (IPEF, see below). Some Members of Congress, industry, and other stakeholders have urged the Administration to consider participation in CPTPP or other trade agreements that seek to open markets further in the region. Others supported U.S. TPP withdrawal and are wary of initiatives like IPEF as a potential stepping-stone to joining CPTPP. Previously, the Trump Administration cited preference for bilateral trade talks and concerns over certain TPP provisions, such as on rules of origin, in its decision to withdraw from TPP.

U.S. Trade with CPTPP Members

The United States has significant trade and investment with the 11 CPTPP members, which, combined, accounted for 42% of U.S. goods trade (2022), 23% of U.S. services trade (2022) and 22% of foreign direct investment (FDI) stock (2021). Including all 16 CPTPP signatories and current applicants, these shares rise to 60%, 39%, and 37%, respectively—with China accounting for 13% of U.S. goods trade, and the UK accounting for 9% of services trade and 13% of FDI. As noted, CPTPP may disadvantage competition of U.S. firms in the region, especially in markets without existing U.S. FTAs, such as Japan and Vietnam (Figure 1); a limited U.S.-Japan trade agreement, in effect since 2020, has reduced some bilateral tariffs.

Figure 1. Current and Potential CPTPP Members without an Existing U.S. FTA

Source: Trade data from U.S. Census Bureau, tariffs from WTO. Note: MFN = most-favored nation tariff rates applicable on imports from WTO members (i.e., tariffs generally faced by U.S. exporters).

CPTPP Commitments

CPTPP incorporates the 30 original chapters of the TPP text, including its dispute settlement (DS) mechanism. However, it suspends indefinitely 22 specific TPP commitments (see below), which had been U.S. priorities and which CPTPP parties may reinstate through consensus. CPTPP also establishes new administrative procedures (e.g., accession) that replace those in TPP. Side letters to CPTPP clarify how specific commitments apply to certain parties (e.g., a five-year exemption from DS for data flow commitments and three-year exemption regarding certain labor obligations applying to Vietnam). Key provisions (with suspensions from TPP noted) include

Goods Tariffs. Immediate elimination of most tariffs among current members and eventual elimination of tariffs on roughly 99% of tariff lines. Tariff commitments for new members are subject to accession negotiations.

E-Commerce/Digital Trade. Requires free cross-border data flows and prohibits requirements to localize computing facilities, with certain public policy exceptions. Prohibits duties on digital products and requirements to share source code to gain market entry. Requires members to have privacy regimes in place nationally.

Environment. Requires countries to enforce and not derogate from their environmental laws to attract trade and investment, implement specified multilateral environmental agreements they have joined, prohibit certain fishing subsidies, and combat illegal wildlife trade. A provision broadening illegal wildlife trade to include determinations based on a trade partner's laws was suspended.

Government Procurement. Requires nondiscriminatory treatment toward domestic and foreign firms in government purchasing decisions above certain thresholds. Two suspended provisions relate to (1) procuring entities and efforts to promote compliance with labor laws, and (2) a mandate to reopen procurement negotiations in three years.

Intellectual Property Rights (IPR). Protects patents, copyrights, trademarks, and includes disciplines on trade secrets to combat cyber-theft, with various phase-in periods, notably for Vietnam. Protections were narrowed due to suspensions relating to: scope of patentability, patent term extensions, test data for marketing approvals, and requirements for criminal penalties for certain IP infringements. Also suspended are: biologics commitments, extended term for copyrights, and provisions on legal remedies and safe harbor for internet service providers.

Investment. Removes barriers and provides protections for foreign investors in CPTPP countries, including nondiscriminatory and minimum standards of treatment, though each country has exempted some sectors or practices. Includes investor-state dispute settlement (ISDS), though countries may block investors' claims against tobacco control measures. Due to suspensions, ISDS does not apply to certain disputes such as investment agreements between investors and a central government authority (e.g., relating to natural resource rights or infrastructure).

Rules of Origin (ROOs). Sets requirements to determine whether goods originate within the territory of CPTPP members and are eligible for CPTPP benefits (e.g., autos require 45%-55% regional value content depending on calculation method to qualify for tariff elimination).

Services. Provides core obligations of nondiscrimination (national treatment and most-favored nation treatment), market access, and local presence on a "negative list" basis (i.e., covering all cross-border services sectors, except those specifically excluded). Includes separate obligations for financial services, with sector-specific exemptions.

State-Owned Enterprises (SOEs). Requires countries to direct SOEs to make purchase and sale decisions based on commercial considerations, enforce regulations with regard to SOEs impartially, and ensure subsidies and other noncommercial assistance to SOEs do not cause harm to other member countries, with exceptions, including for smaller (revenue) SOEs and provision of public services.

Worker Rights. Requires countries to adopt and not derogate from laws consistent with core International Labor Organization (ILO) principles and rights on freedom of association and collective bargaining, and elimination of forced labor, child labor, and employment discrimination in matters related to trade and investment. U.S.-proposed bilateral labor plans with Brunei, Malaysia, and Vietnam, which included additional commitments (e.g., allowing for independent unions in Vietnam), are excluded from CPTPP.

Dispute Settlement (DS). Includes a DS mechanism to enforce commitments, though some exemptions apply.

Accession. Requires unanimous consent among members to begin market access negotiations (the UK has been the only applicant to reach this step). If talks proceed, parties are to determine whether an applicant is qualified to join based on market access offers (e.g., tariffs) and ability to adhere to CPTPP rules. Such approval for China may be difficult for, given global concerns about its trade practices and industrial policies.

Comparison to Other Trade Initiatives

IPEF. U.S. aims for IPEF vary from CPTPP and past U.S. FTAs, as the Administration does not seek coverage of tariffs and market access. IPEF involves select trade issues under negotiation by USTR, e.g., labor, environment, the digital economy, agriculture, transparency, competition policy, and trade facilitation. Commerce is leading IPEF talks on supply chains, decarbonization and infrastructure, and tax issues. U.S. officials envision both cooperative and binding commitments, but it is unclear what enforcement mechanisms IPEF may have. See CRS In Focus IF12373, Indo-Pacific Economic Framework for Prosperity (IPEF).

USMCA. The most recent U.S. FTA, the U.S.-Mexico-Canada Agreement (USMCA), has much in common with CPTPP in its breadth and depth, but also key differences. Some USMCA commitments are more extensive (e.g., labor, SOEs, digital trade), while others are less extensive (e.g., procurement). USMCA also includes more restrictive ROOs on autos. USMCA does not include IPR provisions for biologics, and limits the application of ISDS, issues that were also affected by suspended provisions in CPTPP.

RCEP. RCEP includes China, Australia, Japan, New Zealand, South Korea, and the ten ASEAN members, and took effect in 2022 for most members. Like CPTPP, RCEP lowers trade barriers and sets rules among the participants, but has generally less extensive commitments (e.g., lower levels of tariff cuts, broad exceptions from DS, including digital trade) and omits issues covered in CPTPP such as labor, environment, and SOEs. See CRS In Focus IF11891, Regional Comprehensive Economic Partnership (RCEP).

Issues for Congress

Key oversight and legislative issues that Congress may consider, including through any renewal of TPA, include

• What are costs and benefits of different approaches to regional economic engagement (CPTPP, IPEF, RCEP)? Should other approaches be considered? Should the U.S. seek to join or negotiate agreements like CPTPP?
• What scope exists for changes to CPTPP if the United States were to consider joining? What are the implications of the UK joining CPTPP and of China's potential membership?