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The UK Will Join the CPTPP — What Does This Mean for Trade?

On 31 March 2023, the United Kingdom formally announced its plans to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This marks the most significant trade deal for the UK since leaving the EU

Although some critics are skeptical of the decision, Prime Minister Rishi Sunak recently stated the deal puts the UK in a “prime position” to grow its economy.

But what is the CPTPP, what are the international trade implications of the UK joining this pact, and what can we expect to see from it going forward?

What is the CPTPP?

The CPTPP is a trade agreement between 11 Indo-Pacific nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The trade bloc grants each nation access to the others’ markets. Cumulatively, the countries in the CPTPP generate about 14% of global GDP. 

The UK is the first non-founding member to join, and will have the second-largest economy in the pact after Japan.

In its formative period during the Obama administration, the CPTPP was originally called the Trans-Pacific Partnership (TPP). The US was in negotiations to join the pact, but President Trump withdrew from the deal on the first day of his presidency in 2017.

Why is the UK joining CPTPP?

The UK applied to join the pact in 2021 in an attempt to strengthen global trading links after Brexit. 

The short-term gains of the UK’s presence in the CPTPP are marginal. Since Brexit, the UK had existing trade deals with all of the founding countries in the trade bloc except Brunei and Malaysia — and those two countries only account for 0.5% of the UK’s total trade. 

Many UK companies don’t have existing dealings with CPTPP nations, given their distances from the mainland. However, UK exports to these countries — mostly dairy, whisky, and cars — already totalled £60.5 billion in 2022

Even with changes to the trading agreements with a handful of CPTPP countries, the UK’s Department for International Trade estimates the UK will add only 0.08% to the national economy over ten years through its CPTPP participation. 

Detractors note that the UK’s CPTPP participation may not do much to offset the impact of Brexit. The Office for Budget Responsibility estimates the post-Brexit trading relationship with the EU will reduce UK productivity by 4%.

What changes with the UK's participation? 

The primary benefit of the trade bloc is greater overall access to one another’s markets, and a pledge to eliminate or reduce import charges or tariffs by 95%. Tariffs remain on certain countries’ particularly sensitive areas, like Japan’s rice industry. 

Manufacturers that receive components from many different locations may qualify for preferential treatment: they can tick the “rules of origins” box as long as 70% of components come from participating CPTPP countries. This may help UK producers of goods like machinery and medicines reduce costs and expand their supply chains across participating nations. 

In addition to trade benefits, investors from CPTPP nations are treated the same as domestic firms when investing capital into projects taking place in other member states. These provisions could ultimately benefit UK firms.

Unlike the EU, the CPTPP is neither a single market nor a customs union, so participating nations aren’t required to have identical regulations and standards. Critics recently voiced concerns that joining the trade bloc may threaten the UK’s food safety, farming, and environmental standards for imports, as many of the other CPTPP countries’ requirements are far less stringent.

The UK government maintains that their presence in the pact will be mutually beneficial to all parties involved, with the UK benefiting from “reduced red tape and greater access to growing Pacific markets.” 

What can we expect going forward?

The UK’s participation in the CPTPP gives UK businesses more potential for international partnerships. The agreement can loosen restrictions on services and digital trade, which aligns with the UK’s goals, and places it among the ranks of fast-growing Indo-Pacific nations. 

There’s also the possibility of more growth if other nations join the trade bloc, as both China and Taiwan have expressed interest in membership. It’s unclear whether the UK would veto China’s membership or use their participation to shape China’s access and goals.

Expected to officially come into effect later in 2023, this trade deal represents a symbolic victory for the UK in the post-Brexit era — one which could yield positive results for Britain.

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