UK Joins CPTPP: A Step Towards a Post-Brexit Trading Future
Recently, the UK government announced its intention to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Conservatives have considered this move since 2018, with many Brexiteers seeing it as a potential post-Brexit replacement for the EU single market.
In this article, we’ll explore the CPTPP, the UK’s reasons for joining, and the potential impacts of this decision.
The CPTPP: An Overview
The CPTPP is a colossal free trade agreement involving Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and now the UK. Initially proposed by former US President Barack Obama in 2009, it aimed to create a trade bloc large enough to attract China and use negotiations to address intellectual property theft and state-owned enterprises’ issues.
However, the US withdrew from the agreement under President Trump, who believed free trade agreements harmed American industries. Despite this setback, Japan led the remaining countries forward, forming one of the largest free trade agreements globally, covering around 17% of global GDP.
Key Features of the CPTPP
The CPTPP primarily facilitates trade between member countries by harmonizing regulations and reducing tariffs. Most goods traded within the CPTPP are subject to zero tariffs, with a few exceptions for sensitive items like Japan’s rice and Canada’s dairy industries.
The agreement also offers a single set of rules of origin, allowing products to qualify for preferential tariffs as long as a specific percentage of the goods come from CPTPP member countries. For example, a Japanese car manufacturer can sell cars tariff-free within the CPTPP as long as at least 45% of the parts originate from CPTPP countries.
What sets the CPTPP apart from other FTAs is its scope, covering labor rights, environmental protections, and state-owned enterprises, with a robust enforcement mechanism.
UK’s Journey to Joining the CPTPP
The UK applied to join the CPTPP in February 2021, seeking to demonstrate its ability to capitalize on its post-Brexit independence. Accession negotiations began in June 2021, with the first phase concluding in February 2022.
Talks accelerated after the UK established the Windsor Framework with the EU, instilling confidence in the UK’s commitment to its international obligations.
However, two sticking points remained: Canada’s request for the UK to drop its ban on hormone-injected beef and Canada and Mexico’s demand for the same single market access on agriculture as granted in the UK’s recent trade deals with Australia and New Zealand. The UK was hesitant due to potential backlash from British farmers.
Despite these obstacles, the UK reached an agreement after trade minister Kemi Badenoch met with her Canadian counterpart in London.
Potential Impacts of Joining the CPTPP
Short-term Impact
In the short term, the UK’s accession to the CPTPP is unlikely to have a significant impact on the economy. The Department for International Trade’s 2021 modeling estimated that CPTPP membership would increase the UK’s annual GDP by just £1.8 billion, less than 0.1%. These forecasts also warned of potential negative impacts on certain sectors, particularly farming and processed foods, if more countries joined the bloc.
The minimal impact is partly due to the geographic distance between the UK and the other member countries and the fact that the UK already has free trade agreements with nine of the 11 countries in the bloc.
Long-term Prospects
While immediate gains may be limited, the UK’s trade with CPTPP members is growing rapidly, increasing by around 8% annually from 2016 until the pandemic struck.
Asia is projected to become the dominant consumer market, with an estimated 65% of the world’s 5.4 billion middle-class consumers residing there by 2030. CPTPP members’ import demands are also expected to rise by nearly 70%.
Countries such as the Philippines, Thailand, Taiwan, South Korea, and China have expressed interest in joining the CPTPP. If they do, the bloc will significantly expand, providing the UK with the opportunity to influence global trading rules and norms.
Unanimous consent from all current CPTPP members is required for new applicants, meaning the UK could use its membership to enforce stricter intellectual property rules or environmental regulations on countries like China.
A Potential Brexit Benefit?
While the CPTPP won’t immediately transform the UK’s economy, it presents opportunities for growth and influence in the long run. The expanding trade with CPTPP members and the potential influx of new member countries could lead to increased UK involvement in shaping global trading standards.
While it may not compensate entirely for the loss of EU membership, joining the CPTPP could emerge as one of the benefits of Brexit, depending on future developments. Overall, the UK’s decision to join the CPTPP can be seen as a strategic move towards establishing a new post-Brexit trading landscape.
