CHINA FILES ADMISSION REQUEST TO CPTPP
Edmundo Elías- Fernández
On September 16, 2021, the Trade Ministry of the People’s Republic of China (“China”) formally filed an admission request to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”). The request was filed before Damien O´Connor, Trade Ministry of New Zealand, repository country of the CPTPP.
For China to join the CPTPP, the eleven countries of the CPTPP must agree on its admission, and China must evidence compliance with CPTPP trade rules, for example:
· Digital trade.
· Economic competitiveness.
· Intellectual property.
· Subsidies.
· Data standards.
· Labor regulation.
· Environmental regulations.
· Foreign investment.
However, several China’s practices such as state-owned companies benefits, irregular law enforcement and market controls, can complicate its admission to the CPTPP.
Does China’s admission to the CPTPP represents a challenge for Mexico?
The United States, Mexico, and Canada Agreement (“USMCA”) establishes that when any party wishes to execute a free trade agreement (“FTA”) with a non-market country, such party must notify the other parties for them to review and analyze such FTA.
If a party joins the FTA with a non-market country, will allow the other Parties to terminate the USMCA on six months’ notice, in accordance with article 32.10, section 5, of the USMC:
“Article 32.10: Non-Market Country FTA
(…)
5. Entry by a Party into a free trade agreement with a non-market country will allow the other Parties to terminate this Agreement on six months’ notice (…)”
In the case at point, if China is admitted to the CPTPP, Mexico and Canada will be entering into a FTA with a non-market country, which will allow the United States America (“US”) to terminate the USMCA.
If the USMCA is terminated, Mexico and Canada would suffer a huge economic down-fall, since the US is their respective first commercial partner, and the trade operations between said countries represents an important percentage of their economies.
Below please find a chart showing the percentage of the exportations made by Mexico and Canada with its principal trade partners:
A new opportunity for the United States to re-join the CPTPP
On the other hand, China’s request to join the CPTPP can represent an opportunity for the US to re-join said treaty, which they had withdrawn in 2017, since the US has few trade operations with Asia-Pacific region, so the CPTPP can be a great detonator to increase US-Asia-Pacific trade transactions.
We remain at your disposal for any questions regarding this newsletter.
Edmundo Elías-Fernández
eelias@rrs.com.mx
RAMOS, RIPOLL & SCHUSTER
Daniel Torres-Güémez
dtorres@rrs.com.mx
RAMOS, RIPOLL & SCHUSTER
Daniel Ascencio-Zamarripa
dascencio@rrs.com.mx
RAMOS, RIPOLL & SCHUSTER
