What Do CPTPP Member Country Businesses Think about the CPTPP?

In 2018, 11 countries—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam—came together to sign the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP is built on an extensive network of bilateral and regional trade agreements among member economies, but it breaks new ground, especially in freeing cross-border data flows and trade in digital goods, banning server localization, promoting consumer data privacy, and liberalizing trade in services. How do firms in CPTPP member economies perceive the benefits of these commitments? Which types of firms have benefited most?

To start learning about the CPTPP’s impacts to date, this project surveyed 530 firms in Australia, Mexico, Singapore, and Vietnam, all of which have ratified the agreement, from May 20 to June 18, 2021. The importance of the findings spans the CPTPP membership and countries around the world—they are pertinent to countries that have expressed interest in CTPPP membership, such as the Philippines, South Korea, and the United Kingdom; to countries that have adopted CPTPP-like digital trade provisions in trade deals in recent years; and to the many countries and regional groupings, such as the members of the African Continental Free Trade Area (AfCFTA) that are pursuing e-commerce agreements, as well as the World Trade Organization (WTO) members that are continuing their e-commerce talks in Geneva.

The survey yields seven main conclusions:

1. The CPTPP’s e-commerce provisions are very timely and relevant for the substantial set of CPTPP member country firms that already export, sell online, and access and leverage data across borders as a cornerstone of their businesses.

The CPTPP includes robust digital regulations, provides for deep market access, and most immediately, shapes the fortunes of firms that already sell online, export, and use data intensively in their operations. A substantial share of the surveyed firms engages in exports—38 percent of micro firms and 81 percent of large firms—and medium and large exporters especially derive a substantial share of their revenue from exports, including to the CPTPP region (Figures 1 and 2).

E-commerce uptake has boomed in the CPTPP region during Covid-19 and may produce the next crop of exporters—multiple surveys, including the one for this project, show that firms of all sizes that sell online via marketplaces and online stores are especially likely to engage in trade (Figure 3). While surveyed firms are largely in the early phases of using formal e-commerce channels, such as their own online stores or marketplaces, a majority use social media to market their goods and services and messaging apps to transact with customers (Figure 4). About a third of large firms are already taking advantage of regional and global marketplaces, including Lazada, Shopee, and Amazon.

The CPTPP’s e-commerce provisions are also critical for the many firms that access and leverage data across borders in their businesses. As many as 65 percent of the surveyed firms move data across borders; 16 percent transfer foreign individuals’ data; 16 percent transfer data to foreign affiliates; and 27 percent move data from overseas platforms (Table 1). Across firm size categories and industries, exporters are especially likely to transfer data across borders, including about their foreign customers and with foreign affiliates and business partners (Table 1). In addition, 41 percent of the surveyed firms use cloud computing services (that may also imply crossborder data transfer) to store their data.

2. The CPTPP is already delivering strong gains in terms of diversification of markets, new customers, and growth in sales, especially to member country firms that sell online and export; non-exporters benefit from better access to foreign suppliers and investment.

Larger, export-driven companies, in particular, responded that they have gained from the CPTPP: 45 percent of medium and larger firms that derive over 10 percent of their export revenues from the CPTPP region report that the CPTPP has helped them gain new customers; 39 percent have scored new sales; and 36 percent have been able to diversify into new markets (Figure 5). Micro and small exporters report similar or slightly lesser gains, including in terms of diversifying markets (31 percent) and reaching foreign customers (29 percent). These figures rise to 51 percent and 36 percent, respectively, for small online sellers that sell on Amazon, Alibaba, Shopee, Lazada, and other platforms and export to the CPTPP region.

Small firms that have not exported in the past, if they know about the CPTPP, tend to highlight broader benefits such as access to suppliers and expanded growth. However, small firms, especially non-exporters, have not even heard of the CPTPP—61 percent of non-exporter micro and small firms in the four countries state they do not know much about the CPTPP. As many as 37 percent of small exporters and 18 percent of small online-seller exporters report not knowing much about the CPTPP.

3. The surveyed firms—and especially small online sellers that use data—see the CPTPP’s provisions on free data transfer, ban on server localization, promotion of consumer privacy and protection, and liberalization of services as especially beneficial for their businesses.

On specific CPTPP provisions, CPTPP “users”—firms that export to the CPTPP region, or 41 percent of the surveyed micro and small firms and 69 percent of medium and large firms—tend to find the CPTPP’s key e-commerce provisions as very or somewhat beneficial for their businesses. The gains are especially great for online seller-exporters. Of small online seller-exporters, 73 percent find the provisions of the CPTPP that ensure free data transfer across borders as somewhat or very beneficial. Some 66 percent find the CPTPP’s ban on server localization to be beneficial, and 61 percent find the agreement’s liberalizing effects on trade in services to be important (Figure 6). Firms also highlight as beneficial the CPTPP’s provisions that commit members to protecting the consumer against unwanted spam and shielding consumers’ privacy.

The benefits are even greater for midsize and large firms; for example, 83 percent highlight free data transfer as beneficial while 76 percent highlight the CPTPP’s ban on duties on electronic transmissions (Figure 7). Comparable Vietnamese and Mexican firms that export to the CPTPP region prize the ability to move data—over 80 percent of Vietnamese firms see the CPTPP’s data transfer rules as “very” or “somewhat” beneficial for their business (Figure 8).¹

Meanwhile, firms that do not export to CPTPP countries value the agreement’s elimination of barriers to imported goods and services. A set of surveyed firms—about 13 percent on average—also worry about the competitive pressures of market liberalization. For example, 17 percent of midsize and large firms that sell online and export are concerned about their home country’s tariff liberalization having a negative impact. Non-exporters are least aware about potential impacts of the various CPTPP provisions.

4. Data privacy, data transfer, and consumer protection rules are among the greatest challenges to exporting online for firms in the CPTPP region—especially among the most promising online seller firms.

Digital economy and policy issues are a critical challenge for firms in the CPTPP region that seek to export online. Some 43 percent of the surveyed firms that export are especially concerned about data privacy rules in foreign countries, and 32 percent worry about data localization and complex online consumer protection rules as key challenges for growing their exports. These challenges are even more pressing for small firms that export and sell online—62 percent and 38 percent see data privacy and data localization, respectively, as challenges for growing their online sales (Figure 9). Also, consumer protection rules in foreign countries and concerns about intellectual property rights trouble firms. The next set of online seller-exporters—firms that already sell online at home but do not yet export—worry especially about their ability to comply with foreign market access rules, manage logistics costs, and navigate diverse digital regulations, including diverse national consumer protection laws. Firms in Vietnam feel particularly challenged to meet data privacy and consumer protection rules (Table 2).

Policymakers that want to enable small firms to grow their online sales and exports need to focus first and foremost on ensuring that trade partners have clear and compatible data privacy rules and championing free data transfer domestically and abroad. Protecting online sellers’ intellectual property is another high priority. Governments may also consider promoting the adoption of emerging privacy-preserving technologies such as encryption and confidential computing as a means for small firms to manage their users’ data privacy while also being able to leverage data for insight and innovation.

5. The CPTPP and other trade deals are not as important for CPTPP region firms as major firm-specific events such as locking in the biggest customers or scoring a big investor, but roughly a fifth of firms see the CPTPP as enabling exports in particular.

The CPTPP is just one of many events in companies’ lifecycles. It is of similar importance as some other trade deals such as the North American Free Trade Agreement (NAFTA) and the Regional Comprehensive Economic Partnership (RCEP), but not nearly as important as firm-specific events such as scoring an important client, starting to export, or starting to sell online. Likewise, external shocks such as Covid-19 have been more impactful than any single trade deal (Table 3). Similar to NAFTA and the RCEP, the CPTPP is seen by nearly a fifth of firms as not having much impact. Covid-19 has been a bigger event and external shock for regional firms, making it harder for over a third of firms to compete and pushing firms to focus on their domestic market. Setting out to sell online has made firms more interested in bolstering their e-commerce and digital capabilities further.

6. If they could renegotiate the CPTPP, the surveyed firms would want to ensure the agreement is implemented and enforced—Vietnamese firms are especially concerned about the quality of implementation.

Enlightened emerging market governments, especially in Latin America (e.g., Mexico, Colombia, Peru, and Costa Rica), have entered into trade agreements with larger economies such as the United States to first and foremost “lock in” good domestic economic policies in such areas as investor protections, competition policy, trade facilitation, and services-sector liberalization, using the credibility of a rigorous trade deal to attract investors. Emerging CPTPP member economies, especially Vietnam, could similarly use the CPTPP to showcase commitment to high-quality rules. There are, however, question marks about some member countries’ commitments to enforcing CPTPP provisions and transposing CPTPP rules into their domestic legal frameworks. In survey data on the implementation of the e-commerce chapter and investor provisions, Mexico and Vietnam receive the worst marks for enforcement from the surveyed firms that export to the CPTPP region, while Japan and Singapore are largely seen as having good enforcement records (Figure 10). Empirically, application of CPTPP rules is still inconsistent. For example, Vietnam has, after ratifying the CPTPP, adopted a restrictive cybersecurity law that requires tech companies to remove content the government deems offensive and to localize data within Vietnam. Likewise, Mexico has, after ratifying both the CPTPP and United States-Mexico-Canada Agreement, discussed regulations that would complicate cross-border data transfer.

Enforcement is also a high priority for the surveyed firms. Asked what they would do if they could renegotiate the CPTPP, they would want better enforcement, lower taxes on online sales, better rules on online liability (e.g., potentially, safe harbor laws promoted in USCMA and CAFTA-DR) and protection of intellectual property (Figures 11 and 12). Firms would also like to see trade negotiators address and promote corporate digital identity solutions to promote trust in digital transactions. They would also want to expand the agreement’s scope, for example, to ensure free cross-border flows of financial services data and address digital standards, so that digital platforms in different member states could interoperate.

7. To grow their sales into the CPTPP market, firms want information about foreign customers, market opportunities, and e-commerce capabilities.

The CPTPP region’s firms have learned about opportunities the CPTPP presents mostly from business associations, suppliers, and customers, and exporters have accessed (and gone after) this information much more than non-exporters (Figure 13). In Vietnam, awareness about the CPTPP, a flagship agreement for the country, appears to be much better than in other economies; Vietnamese firms have also secured information about the agreement from the government. Firms in all countries highlight information about business opportunities within CPTPP markets and digital marketing and e-commerce capabilities as essential for taking greater advantage of the CPTPP (Figure 14). This calls for virtual matchmaking events, e-commerce export promotion and capacity-building for firms to reach buyers in the CPTPP region, and much more extensive work and financing to support firms’ digital marketing and digital transformation.

Kati Suominen is an adjunct fellow (non-resident) with the Europe, Russia, and Eurasia Program at the Center for Strategic and International Studies in Washington, D.C.

This report was made possible by support from Google.

This report is produced by the Center for Strategic and International Studies (CSIS), a private, tax- exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2021 by the Center for Strategic and International Studies. All rights reserved.

¹ The differences across countries are not driven by cross-country differences in sector distribution or firm size—data on CPTPP exporters are comparable across countries.