The Cabinet Meeting on October 12, 2021, discussed the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership" (CPTPP). The agreement garnered renewed attention in September after China expressed interest in becoming a member. Taiwan followed suit in submitting its application, while the United Kingdom applied for membership of CPTPP early this year. International stance, particularly that of China, has prompted countries with strong economic and trade relations with China to reconsider joining the CPTPP.
KResearch has analyzed and compared two scenarios: Scenario 1: Currently, both Thailand and China are members of the Regional Comprehensive Economic Partnership (RCEP), which has yet to formally launch its free trade agreement. Scenario 2: If CPTPP accepts the United Kingdom, Taiwan, China and Thailand as its new members, Thailand will be among the countries that will gain access to key markets, putting it on the same level as its ASEAN rivals. Effectively, CPTPP is set to become the world's largest FTA – covering one-third of global GDP, surpassing RCEP. Under the assumption that Thailand and China become members of both agreements, the following observations can be made in regard to their differences:
- Market access: RCEP is a free trade framework that is most relevant to Thailand. Since Thailand has long-standing FTAs with other member states, membership with CPTPP would not affect the competitiveness of Thai exports at present. Compared to RCEP, CPTPP will give Thailand more opportunity to establish FTAs with new markets including Mexico, Canada, the United Kingdom and Taiwan. This presents a great opportunity for Thailand to export its rubber products, fruits and seafood to Canada, automobiles, mobile phones and HDDs to Mexico, processed chicken and motorcycles to the United Kingdom, as well as air conditioners and auto parts to Taiwan.
- Production: Both CPTPP and RCEP are multilateral FTAs which share the outstanding feature of being large trading blocs that comprise many countries. This is beneficial to investors as operators can move their production more freely. The difference is that RCEP consolidates Asian production bases and markets for maximum efficiency, while CPTPP focuses on combining production bases from many countries in the Americas, Europe and Asia. This could be considered its key selling point that sets CPTPP apart from any other FTA in the world.
- Regulations: RCEP primarily established the regulations for market entry and investment, while CPTPP involves deeper issues than other FTAs, covering other aspects of free trade including labor standards, environmental standards, free flow of information, and government procurement. Therefore, CPTPP is undeniably a challenge for each member state in elevating their regulations within the agreed time frame amid the difficulties of avoiding negative consequences.
In conclusion, if Thailand and China join CPTPP, Thailand's manufacturing sector and exports, which are reliant on foreign investment stand to benefit the most. Access to new markets would allow Thailand to remain competitive against its rivals. Thai operators would also have the opportunity to become part of a large supply chain that combines all factors of production from various parts of the world, as opposed to benefits from RCEP which are mainly limited to Asia. However, there are sensitive issues that the government must evaluate concerning CPTPP, especially the conditions that are not specified in RCEP in the area of practices related to intellectual property rights protection that must be in line with international guidelines namely the adoption of pharmaceutical patent and new plant variety protection that could have far-reaching impact on the general public and farmers. Although Thailand has already made some adjustments in these matters, it remains challenging to implement such changes within the time frame outlined in CPTPP. The main challenge for the Thai government will likely lie in fostering a clear understanding among all parties involved, and enacting a plan to mitigate impacts, thus easing any existing tensions.