Letter to President Biden re: CPTPP – Do Not Drop Your Slice of the Pie

Dear Mr. Biden,

With respect to your recent statement that you will rejoin the Paris Climate Agreement, we kindly request you to also reconsider the possibility of your coming back to the CPTPP.

Dropping the CPTPP means that the U.S has lost access to government procurement of other CPTPP countries, which amounts to USD 1.469 trillion. The high standard of the government procurement chapter in the CPTPP can nowhere be found in existing international agreements. Moreover, it could take the U.S another decade to reach a bilateral agreement with government procurement standard as high as in the CPTPP. It is of utmost importance for the U.S to save time, jobs, and of course, billions of dollars by rejoining the CPTPP instead of negotiating a new one.

We believe the following facts will help with your decision and clearly show how CPTPP would help you to make America great again. What may interest you is the extremely high number of government procurement in the CPTPP country members from which America could benefit.

As you may already know, the population of the CPTPP countries exceeds 513 million people as of October 2020. The CPTPP countries account for 44.8 percent of U.S. total exports and 37.6 percent of U.S. general imports in 2014. By cutting over 18,000 taxes in regards to CPTPP, there would be a great benefit for American im- and exporters by enabling them to enter new markets.
As the U.S. international trade commission estimates, the U.S. exports of goods and services to the world would expand by USD27.2 billion by 2032 thanks to the CPTPP, while U.S. imports would expand by USD48.9 billion.

In the following table, the data of each CPTPP country is listed to show you the procurement market American investors may get access:

GDP (USD) Government procurement’s percentage of GDP (%) Total value of Government procurement (USD)
Australia 1.33 trillion 13.15 174,489,500,000
Brunei 10.65 billion 4.1 436,665,000
Canada 1.6 trillion 13.43 214,881,800,000
Chile 245.41 billion 2.9 7,116,890,000
Malaysia 336.33 billion 25 84,082,500,000
Mexico 1.04 trillion 5.16 53,664,600,000
New Zealand 193.55 billion 14.69 28,432,495,000
Peru 195.76 billion 17.6 34,453,376,000
Singapore 337.45 billion 10.25 34,588,625,000
Vietnam 340.6 billion 12 40,872,000,000
Japan 4.91 trillion 16.22 796,402,000,000

Note: Data taken in 2019 based on the IMF’s World Economic Outlook database, October 2019.

As shown above government procurement of the CPTPP states is $1.469 trillion in total!

How could America not want to get a slice of this fat pie?

The great advance of the CPTPP will be that even the three countries Vietnam, Malaysia and Brunei which have not agreed to coverage of their government procurement ever before and are currently not covered by an existing U.S. Free Trade Agreement or the Government Procurement Agreement of the WTO (GPA), have undertaken to do so. This is a key export opportunity for U.S. goods producers and services companies. Currently Chinese companies profit the most. 90% of power, mining, manufacturing, ferrous and chemical projects of state-owned companies in Vietnam are awarded to Chinese contractors. China State Construction Engineering Corp. (CSCEC) keeps winning important contracts although it has a poor track record and has even been blacklisted by the World Bank due to bribery charges. With CPTPP that market would be open to US companies which probably would be welcomed.

Some Asian-Pacific and other countries have formal policies in place disadvantaging foreign tenderers. CPTPP will make it possible for the first time that an American cooperation could sue for example the Republic of Vietnam or Malaysia. The procedural and legal changes regarding government procurement will enable U.S. exporters to reach markets that were closed before and compete more effectively.

In addition Canada has agreed to replace the commitments in NAFTA and update them to the level of CPTPP. The new level of GPA is based upon the WTO 2014 guidance and provides stronger commitments than the NAFTA.

America cannot wait until bilateral agreements might be settled!

On 08 March 2018, the CPTPP was officially signed in Santiago, Chile. As international agreements like NAFTA (4 years), COMESA (16 years) or SAFTA (9 years) require a lot of time to be settled, bilateral agreements will do so as well. And there is no guarantee of success. In fact it is rather unlikely. Countries like Malaysia, Brunei and Vietnam took huge steps by agreeing to a regulation of government procurement. How long a bilateral agreement would take, may be shown by the European Union – Vietnam Free Trade Agreement (EVFTA) which took 5 years to reach the final negotiation. However, the EVFTA does not reach the standard of the CPTPP regarding the Chapter on Government Procurement. The creation of a fair, transparent, predictable and non-discriminatory market should not be postponed. The level of GPA might be as high as never before. It is extremely unlikely that a better agreement could be negotiated but more likely that the U.S. will be replaced by China or Russia. Japan’s Prime Minister Shinzō Abe already stated that China would be a possible replacement. But not only Japan would turn towards China. Negotiations of Australia, New Zealand, Vietnam, Malaysia, Singapore, Brunei regarding an FTA with China already began. This is the time for the U.S. to take advantage of the CPTPP to create an alternative economic power balance in Asia against China.

Skipping this agreement would cost America billions of money and would cut off American jobs. Negotiating bilateral agreements would cost America many years, billions of Dollars and it is highly unlikely that it would reach a GPA standard that would be even close to CPTPP.

Does the U.S. have time to wait to rejoin the CPTPP?

The answer is NO!

Dr. Oliver Massmann

Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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