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January 3, 2019

CPTPP trade pact takes effect

By Leonie Barrie

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – or TPP-11 – has finally come into effect.

The free trade deal was signed in March last year between 11 of the 12 countries that had been negotiating the Trans-Pacific Partnership (TPP) after President Donald Trump withdrew the United States from that pact.

The CPTPP, which has so far been ratified by Australia, Canada, Japan, Mexico, New Zealand and Singapore, came into force on 30 December 2018. The CPTPP will enter into force for Vietnam on 14 January 2019, while the remaining four countries – Brunei, Chile, Malaysia, and Peru – have yet to ratify the agreement.

Once fully implemented, the 11 countries will form a trading bloc representing 495m consumers and 13.5% of global GDP.

Many of the original TPP provisions remain intact in CPTPP, with customs duties on 95% of trade in goods due to be removed, including all textiles and apparel. Some products will see immediate duty-free treatment, while tariffs on other goods will be lowered gradually over a number of years until being eliminated entirely. The full schedule can be accessed in the re:source by just-style strategic planning tool.

The CPTPP has “yarn-forward” rules of origin, which means that fibres may be produced anywhere, but each component starting with the yarn used to make the apparel garments must be formed within the free trade area in order to qualify for duty-free treatment.

Vietnam is widely expected to be one of the biggest beneficiaries of the CPTPP, although an analysis on just-style warns buyers to prepare for limited growth in exports out of Vietnam as the CPTPP and EU-Vietnam free trade agreements will intensify competition for labour between the apparel industry and other export-oriented sectors: Can Vietnam reach its apparel export potential?

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