Having its global cake and eating it: UK accession to the CPTPP

Tiffany Burrows has written a long read about the UK's accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

You may be forgiven for missing this tweet from International Trade Secretary Liz Truss on Friday afternoon about the UK’s first meeting with representatives of the 11 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (pithily named the CPTPP) to discuss the UK’s accession to this agreement.

You can also be forgiven for not knowing what the CPTPP is and why the UK is looking to become a member of a partnership based in the Asia Pacific region (although the UK does have an overseas territory in the Pacific Ocean – comprising the Pitcairn, Henderson, Ducie and Oeno Islands). Below, I explain what it is the UK is seeking to join, the reasons for doing so, and the considerations which need to be taken into account during the process given the limited bandwidth of and timescales the UK’s negotiating teams are up against.

It’s as simple as CPTPP

The CPTPP agreement was signed in March 2018, coming into force at the end of December the same year. It is the third largest free-trade area in the world after the United States, Mexico and Canada Agreement (USMCA) and (ironically) the European Single Market. The grouping constituted 13% of global Gross Domestic Product (GDP) in 2018, and if the UK were to join, this figure would increase to around 17% (comparable to the EU’s 16.28% of global GDP in 2018) and be the fifth G20 nation in the partnership.

CPTPP reduces tariffs on 95% of goods, with tariffs remaining where countries feel industries need protecting (rice in Japan and dairy in Canada for example). In practice, this means New Zealand kiwi fruit exports to Japan have zero tariffs, Canadian wood products which previously faced tariffs of up to 40% in Malaysia will be eliminated and no tariffs on Australian exports of cotton and new sugar access to Mexican, Canadian and Japanese markets for example. For the UK, this would see reductions in tariffs on goods, including its largest exports to the area (machinery, vehicles, pharmaceutical products and electrical machinery). The UK is also looking to access the liberalised trade area for its digital trade, data, financial, professional, and business services.

The Department for International Trade (DIT) outlines the UK’s reasons for wanting to join the CPTPP as:

1. Securing increased trade and investment opportunities
2. Diversifying trading links and supply chains in a bid to increase the UK’s economic security
3. Securing the UK’s place in the world and advancing its longer-term interests

Let’s take each of these in turn…

1. Securing increased trade and investment opportunities

The UK exported at least £1 billion worth of goods and did more than £110 billion worth of trade with the 11 members of the CPTPP in 2019. This should not be understated, as British businesses undoubtedly have a footprint in the region and would benefit from more liberalised trade. However, it is not as strategically important for the UK as concluding trade negotiations with its European neighbours – UK exports to the EU in the same year were worth £300 billion, with imports worth £372 billion. This is something that has not been lost on the Official Opposition. Last month, the Shadow International Trade Secretary Emily Thornberry asked her counterpart what the benefits of joining the partnership given that of the 11 members, the UK already had agreements with seven (Japan, Canada, Singapore, Mexico, Chile, Peru and Vietnam) as members of the EU. She added: “I am all for expanding the 0.3% of global trade that we share with Malaysia and Brunei, which is all the statement ultimately amounts to, but as the 47% of our trade that depends on Europe is hanging in the balance that is where the Government’s priorities should lie.”

1. Diversifying trading links and supply chains

The need for increasing import security has been made more urgent due to COVID-19 (see my colleague Sabine’s blog here), and this has certainly not gone unnoticed by the UK Government, or other signatories of the CPTPP. CPTPP member Singapore’s Trade Minister Chan Chun Sing said it makes “absolute sense for the UK to diversify their trade links” in different parts of the world, particularly to protect against rising isolationism.

1. Securing the UK’s place in the world

Commenting on the Asia-Pacific becoming one of the fastest growth areas in the coming decades, Chan Chun Sing also advised that “it would be remiss if the UK does not tap into this opportunity”.

The absence of the US in this grouping is notable, particularly as many had assumed that without US participation (following President Trump’s withdrawal from the Trans-Pacific Partnership discussions), the agreement would cease to exist. Former Canadian Prime Minister Stephen Harper recently noted that it was to the credit of Japanese and Australian efforts that the agreement survived, evolved, and came into being.

The UK’s entrance could be seen by some members as a bridge for the US to re-enter the agreement, particularly if the incumbent President leaves the White House in January next year. This would see the CPTPP overtake the Single Market and USMCA to be the world’s largest trading bloc (30% of global GDP) thus giving it significant weight and ability to influence trade rules (read constraining China, which was one of the US’ objectives at the outset). Former EU Trade Commissioner Lord Peter Mandelson has said that if the US does seek to re-join the partnership, “being inside this package” will make for a “simpler route to tariff eliminations in the US” without the focus on tricky regulatory and food standards questions. He describes this strategy as being “more politically savvy” than the current approach to an FTA with the US (but that’s a blog for another day).

The UK as a “global hub”

The UK objectives published describe CPTPP membership as “an important part of our strategy to place the UK at the centre of a modern, progressive network of free trade agreements with dynamic economies”. Former Australian Prime Minister Tony Abbott certainly agrees, arguing that the UK joining the arrangement would be the “best possible sign” that the UK really does want to be a global country again. Japan also supports the UK’s entry to the CPTPP, pledging to “spare no efforts” in supporting it to do so and former Canadian Prime Minister Stephen Harper has said that the UK joining would “offer some significant advantages, this would go from being a purely regional pact to now being the beginning of an alternative global order”.

The agreement commits signatories to:

“contribute to maintaining open markets, increasing world trade and creating new economic opportunities for people of all incomes and economic backgrounds; promote further regional economic integration and cooperation between them; enhance opportunities for the acceleration of regional trade liberalisation and investment; reaffirm the importance of promoting corporate social responsibility, cultural identity and diversity, environmental protection and conservation, gender equality, indigenous rights, labour rights, inclusive trade, sustainable development and traditional knowledge, as well as the importance of preserving their right to regulate in the public interest.”

It is the above that puts the progressive into CPTPP, and what Liz Truss attributes to why the UK wants to be a part of it. She outlined the importance to the UK to work with like-minded nations who play by the rules and with high standards and to force those who don’t to “up their game”.

UK accession

The UK is already negotiating free trade agreements with three CPTPP members – Japan, Australia, and New Zealand. Whilst discussions and bilateral meetings are taking place with the other members – Singapore, Brunei, Chile, Malaysia, Mexico, Peru, and Vietnam – the current negotiations should help with the UK’s accession to the grouping by saving time, gaining advocates, building momentum and garnering wider support. However it is worth noting that the UK, as with negotiations with the EU, is not the sole focus of CPTPP members. In particular, there are nations in the region (South Korea and Thailand) for example that are not yet members which could be ahead of the UK in the CPTPP queue.

Trade expert Dr Anna Jerzewska is less convinced that the geopolitical benefits are as great as DIT would like us to believe, and makes the valid point (and one that has been made by existing signatories of the CPTPP) that the UK will not just walk into the CPTPP but will have to negotiate its entry, which inevitably comes with concessions. Former Canadian Prime Minister Stephen Harper concurs, and warned the UK that members will have a “take it or leave it approach” otherwise negotiations will be “extraordinarily slow”. Lord Mandelson agrees that the UK’s accession to the CPTPP will take time, and should be seen as a medium term priority rather than a quick win. Further to this, Politico reported that there is speculation that accession may not take place until after the next UK General Election in 2024.

For most people in the UK, these negotiations and the possibility of accession, will go unnoticed due to lengthy, complex and private nature of such negotiations. For businesses interested in investing or operating in the region, a close eye should be trained on what’s going on. This includes keeping a watching brief on how the UK Government is preparing the ground at home for the implementation of this agreement, and the others in the pipeline. Truss has made clear that the agreement must share wealth across the UK as part of the UK’s levelling up agenda.

Leaning on experience, Singaporean Trade Minister iterated that businesses and workers need help from the Government to adapt to global agreements as without their support, FTAs are likely to fail. This is sage advice for a UK Government whose approach to FTAs at the moment could be described as wanting to have its global cake and eat it. Achieving accession to the CPTPP seems strategically sensible in the UK’s pursuit to be a “global hub” but could it put at risk other strategic priorities such as securing free trade (and therefore minimal customs disruptions) with the EU? The progress and ultimately success of the UK’s ambitious international trade strategy therefore relies on three factors: time, determination, and bandwidth.