The United Kingdom recently announced its intention to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade agreement between 11 countries including Canada, Japan, and Australia. This move marks a significant shift in the UK’s economic and political relationships following Brexit. However, the decision to join this partnership will not come without challenges.
From an economic standpoint, joining CPTPP presents opportunities for the UK to expand its trade relationships with Asia-Pacific countries. In particular, it provides access to markets such as Japan that would have been difficult to enter otherwise. Additionally, membership in CPTPP means lower tariffs on goods traded between member countries which could benefit UK businesses seeking to export their products.
However, there are also concerns about the potential negative impact of joining CPTPP on certain sectors of the UK economy.
Uk Joining CPTPP: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
At a virtual ministerial meeting late on March 31, 2023, The UK signed to join trans-Pacific trade bloc partners and to be one of the CPTPP. Being the 12th member of the CPTPP, the United Kingdom’s predicted accession to the regional trade bloc represents the first enlargement of the grouping since the CPTPP came into effect in 2018. The CPTPP is one of the world’s most comprehensive free trade agreements (FTA). The overall GDP of its member states (some of the world’s most prominent and fastest-growing economies) is $13.5 trillion. The United Kingdom’s probable acceptance, likely to be finalized at the future CPTPP ministerial meeting in Auckland, Newzealand in July, represents a crucial victory for post-Brexit UK leadership and the CPTPP itself. However, it also means that CPTPP members now encounter difficult decisions about the applications of five other economies—including China and Taiwan.
Pre-requirements to join the deal
Liz Truss formally applied to join CPTPP on February 1, 2021; there are obligatory elements that the United Kingdom had to meet to join the CPTPP’s requirements like high standards for market access stipulations, binding investor-state dispute settlement (ISDS) requirements and sanitary and phytosanitary measures. The accession mechanism, chaired by Japan, needed the United Kingdom to reach agreements with ten other CPTPP members, Australia, Chile, Malaysia, Mexico, Brunei, Canada, Peru, New Zealand, Singapore, and Vietnam.
Achievement for Tories and pro-Brexits: “We make a deal.”
UK accession to the CPTPP is a winning card for UK Prime Minister Rishi Sunak. Conservatives in the UK government have long advocated Britain’s accession to the CPTPP to promote “Global Britain” post-Brexit. Supporters of Brexit from the European Union see two reasons to be pleasant about CPTPP. Firstly, it’s a great victory at a time when one of Britain’s other major trade hopes — a big deal with the United States — is going nowhere, and gloomy predictions about Britain’s economy have some Brexit-backers feeling regretful. Euro-skeptics also argue joining CPTPP will hinder any hope of rejoining the EU by requiring alignment with the Indo-Pacific bloc’s rules and standards at the expense of Brussels’ regulations.
What is the actual outcome of joining trans-Pacific trade bloc?
According to the UK Department for Business and Trade, accession to the CPTPP would qualify UK businesses for tariff-free access to over 99 per cent of goods exported to a market of CPTPP with over 500 million customers. Joining CPTPP also gives the UK considerable economic growth potential via financial services and digital trade CPTPP members. For over fifteen years, it has been estimated that the UK joining the CPTPP would grow British GDP by only 0.08 per cent—a relatively minor figure given Britain’s existing trade agreements with most CPTPP members. The bloc is focused on decreasing tariffs. Members mutually drop ninety-eight per cent of their taxes on goods. A critical feature of the pact is that it permits different parts of final products — such as automobiles — to enter member nations tariff-free.
CPTPP member states, economic pros and cons
CPTPP member states have an overall population of 500 million and a GDP of £9 trillion. For comparison, although the EU has the same size, with a GDP of £11 trillion, the value of the UK total trade to the EU is much higher, at £557 billion. CPTPP, as an area, shares 7.8% of the UK’s total trade. In 2019, UK service suppliers exported £28.8 billion worth of services to CPTPP members, and the average annual growth in trade among 2016-2019 with members was 8%. Disquieting has also been raised that joining CPTPP will cause the lowering of food standards. For the UK, the value of the CPTPP should thus be seen in the context of a more comprehensive foreign geopolitical strategy beyond trade. In the UK’s latest Integrated Review 2023, the Government reaffirmed the importance of the ‘Indo-Pacific tilt’, which the CPTPP provides a core policy framework. The CPTPP could enable the UK to enhance strategic ties with like-minded countries to protect a free and open Indo-Pacific region.
The Office for Budget Responsibility predicted the post-Brexit trading relationship between the UK and EU would decrease long-term productivity by 4% relative to remaining in the EU.
Together with issues that the UK will come under pressure to decrease standards on food and the environment to compete with other CPTPP countries, this means the deal has raised some criticism from unions and others.
Companies should consider the variant characteristics of CPTPP.
The effect of CPTPP on business will differ depending on the market sector. Government modelling showed that the economic gains of accession are widely distributed, but the automotive, beverages and tobacco sectors faced the most significant potential improvements. Traders may benefit from additional barrier decreases, new quota sizes and more pliable rules of origin, which support more competitive trade in goods. UK industries can use a more varied range of inputs when exporting to CPTPP countries while persistently qualifying for lower tariffs. Businesses in affected sectors should also consider the increased levels of competition they could meet in the domestic market through possible cheaper imports.
Businesses should be engaged in a tariff analysis to assess precisely how the representation of their products could be affected. Business trading in goods with Malaysia could lead to more benefits significantly. Thanks to the new agreement, those eager to import or export interests across numerous CPTPP territories may profit from a more holistic assessment of operating models.
The UK can use its membership in the CPTPP to strengthen its global profile by influencing trade and international governance.
The Prime Minister, Rishi Sunak, said joining the bloc would put the UK “in a prime position in the global economy to seize opportunities for new jobs, growth and innovation” and added that it would put the UK “at the centre of a dynamic and growing group of Pacific economies.”
Despite the significant strategic benefits of accession, the UK’s joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will not lead to global cheer at home. According to a UK government analysis from 2021, the most significant potential gains from the deal are for the drinks, tobacco and motor vehicles sectors. Still, the semi-processed food sector is likely to be hit hardest. UK-EU tensions and the UK government’s threat to unilaterally withdraw from Brexit have raised the alarm in member states of the Trans-Pacific Partnership about Britain’s reliability as an international partner and upholder of the law. According to reports, the promise of a more stable relationship between the UK and the EU, thanks to the Windsor Framework, helped unblock the UK’s accession to the agreement.
