CPTPP: Overthinking the entry into force of the United Kingdom's Accession Protocol - rules of origin and decision-making

Peru’s recent ratification of the United Kingdom’s (UK) Accession Protocol to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), means the Protocol is now set to enter into force on 15 December. However, as the UK itself notes:

Before Peru, five other CPTPP members ratified the terms of the UK’s accession: Japan, Singapore, Chile, New Zealand and Vietnam. This means the agreement will come into force with those members by 15 December, and subsequently with other members as they ratify.

This means that until the other five CPTPP Parties (the non-ratifying Parties) ratify the Protocol, they won’t have treaty relations with the UK under the CPTPP and won’t have to treat the UK as a full CPTPP Party (i.e. their commitments won’t apply in relation to the UK and vice-versa).

Given the plurilateral nature of the CPTPP, I was wondering if this could cause some potential complications for the operation of the agreement. In this post, I’ve sketched out two potential issues that the CPTPP Parties could face in implementing the UK’s membership during this transitional period.¹

Rules of origin

First, CPTPP’s rules of origin (which determine if a good gets access to preferential tariff commitments), allow for a good to use inputs from and production in multiple CPTPP Parties to establish its ‘originating good’ status and thereby obtain preferential tariff treatment. The rules of origin provisions all refer to “the Parties” - e.g. referring to processing of materials in the “territory of one or more of the Parties” or referring to goods “produced in the territory of one or more of the Parties”.

Given that for the non-ratifying Parties the UK is not yet a CPTPP ‘Party’, they don’t have to recognise UK inputs into goods when determining origin. On the reverse, the UK doesn’t have to recognise non-ratifying CPTPP Parties’ inputs into goods when it applies the CPTPP’s rules of origin.²

This means when implementing CPTPP tariff preferences, there could be some additional complexity around meeting origin requirements during this transitional period. Particularly for any supply chains structured around CPTPP Parties, the usual benefits of cumulation may not immediately extend to exports to the UK depending on the Parties involved.

A poor diagram showing that New Zealand and Japanese input could contribute to a good’s CPTPP originating content when it gets to the UK, but not input from Mexico (yet). Image attributions: here, here, here and here.

Institutional decision-making

Second, each CPTPP body (such as the various committees or the CPTPP Commission) is made up of representatives of each Party. Article 27.3 specifies that the default rules is that these bodies are to “take all decisions by consensus” of the Parties present at the relevant meeting.

CPTPP, Article 27.3

While the UK is a “Party” for all the CPTPP Parties that have ratified its Accession Protocol, could the non-ratifying Parties object if the UK ever sought to break consensus at a meeting?

In practice, this is unlikely to a major problem. The experience with the CPTPP while waiting for some signatories to ratify the original agreement indicates a level of flexibility in terms of accommodating those signatories in decision-making. However, things could get more complicated if/when the next accessions start in earnest or more contentious decisions have to be made.

It will also be interesting to see if the entry-into-force thresholds for the next CPTPP accession are any different to what was agreed for the UK.³ The original Trans-Pacific Partnership Agreement (TPP) required all Parties to have ratified each accession candidate’s “terms and conditions” of accession:

TPP, Article 30.4(6).

That approach avoided the issues set out above, although could also lead to lengthy delays for new CPTPP Members (on top of the long time candidates have already waited just to start their accession negotiations).

1. Some other potential areas to consider in this vein are tariff rate quotas (TRQs), safeguards and denial of benefits provisions. Although I think these are more likely to be edge cases. TRQs are sensitive/commercially important, but a Party is probably unlikely to actually try to prosecute an argument around their access to TRQs during the (hopefully) short period before it ratifies the Accession Protocol. Similarly, given the time periods expected here, it would seem unlikely for safeguards or denial of benefits issues to arise in practice.

2. On both of these scenarios, could there be GATT MFN implications if they decided to nonetheless apply the rules of origin as if all CPTPP Parties had ratified the UK’s Accession Protocol?

3. Hopefully by then all the CPTPP Parties will have ratified the UK’s Accession Protocol.