UK's Bid to Join the CPTPP
On February 1, 2021, a year after formally leaving the European Union, the UK applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). CPTPP is a free-trade agreement between 11 countries in the Pacific region: Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam, and Japan. Originally, the US was part of the deal, named at the time as Trans-Pacific Partnership (TPP). But former-US President Trump, in January 2017, withdrew from the pact, arguing that it was detrimental for US manufacturing jobs and trade deficit.
Following Trump’s reversal, the remaining 11 participants continued talks, saved and the renamed deal. The CPTPP was signed in March 2018 and came into effect in December 2018. The deal accounts for around 13 percent of world GDP. Including the UK, CPTPP would account for 16 percent of global GDP. It provides for vast trade liberalisation, with overall tariff reduction at 98 percent once fully implemented. There are extensive provisions for services liberalisation and easing of visa conditions for business travellers. CPTPP contains many new rules to open member economies for inward investment and provide a variety of protections to foreign investors. It also includes comprehensive rules on digital commerce, intellectual property protections, and high labor and environmental standards. Moreover, it establishes a single set of rules of origin. For the first time in a trade agreement, the CPTPP contains anti-corruption measures.
According to the British government, joining the CPTPP will create massive opportunities for UK businesses in some of the fastest growing markets worldwide. Yet, UK trade with CPTPP countries is a relatively small proportion of UK trade. UK export to CPTPP countries in 2019 accounted for about 8.4 percent of overall UK exports. The same figure for import is about 7.3 percent. These numbers are tiny compared with the proportion of UK trade with the EU: in 2019 exports and imports with the EU were 43 percent and 52 percent of the total, respectively. Furthermore, the UKalready has Free Trade Agreements (FTAs) with all the CPTPP countries apart from four: Malaysia, Brunei, Australia, and New Zealand -- with the latter two currently in negotiations for bilateral FTAs. As a result, the benefits of joining the free-trading group are limited for London.
Nonetheless, in the long run, the advantages could improve. Since 2009, trade between the UK and CPTPP countries has grown on average by 6 percent a year. During this time, the share of UK trade with the EU declined. Moreover, it is likely that CPTPP countries will enjoy faster GDP growth than the EU in the coming years, affecting trade flows as a result. Looking at estimates, CPTPP countries have a trend rate of GDP growth at 2 percent per year, compared to around 1 percent in the EU. Notwithstanding the fact that the UK already has FTAs with seven out of eleven countrymembers, and is negotiating with two others, there are some economic gains to join the single free-trade area. The deal is more ambitious than current UK’s FTAs on certain issues such as digital services and data flows. British companies would be allowed to operate under a single set of rules.
CPTPP should be a policy focus in anticipation of future membership. South Korea, Indonesia, the Philippines, Thailand, and Taiwan have expressed an interest in joining the agreement. The admission of these five countries would boost the UK’s share of trade with the CPTPP. With the entrance of those countries, the partnership would account for around 10 percent of UK exports and 9 percent of UK imports. Yet, the figures could greatly improve if the US should decide to re-enter the agreement. President Biden, during the electoral campaign, expressed the slim possibility of a US return to the negotiating table with CPTPP. In case the US joined the CPTPP, UK-CPTPP trade would account for a higher share of total UK trade than it does currently -- around 26 percent for exports and 18 percent for imports. If the US joined a larger CPPTPP with 16 members, then the figures would rise to 28 percent and 20 percent, respectively.
Beyond economic considerations, geopolitical factors are also at play. The UK is expected to publish a review of its foreign policy soon, with a significant tilt toward the Indo-Pacific region. In 2021, London will strengthen its military presence in the area, deploying the Royal Navy’s biggest warship group in a generation, including the aircraft-carrier HMS Queen Elizabeth. Having FTAs with some of the most important countries in the zone would bolster the UK'spresence in a region in which London has growing interest and already strategic links, such as the Five Eyes pact.
Welcoming the UK into the partnership would be a great boost for CPTPP members. Since the US withdrawal from the pact, they are eager to attract new participants to increase their economic benefits. Yet, with Great Britain’s entrance, the free trade area influence on the global stage would rise, along with its ability to shape global standards.Joining the CPTPP could give credibility to the ‘Global Britain’ concept that London has been championing since Brexit, forging economic links with dynamic economies in the Asia-Pacific region and increasing the UK's geopolitical heft in a strategic area.