Trade Tuesday: The new Pacific Trade Pact – FAQs

Those of us who have been watching the government’s trade agenda for some time now are familiar with CPTPP or TPP11 as it’s most recently been called. But what does the average business, let alone average person, know about this new trading bloc and what the UK may gain from it?

See below our Trade Team’s FAQ guide to what you need to know now that Business and Trade Secretary Kemi Badenoch has signed the treaty to accede to the CPTPP trade group.

1.      What is CPTPP?

CPTPP stands for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a trading bloc consisting of eleven members (hence TPP11) around the Pacific Rim: Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and Japan.

2.      Why is it in the news?

CPTPP was formed in 2015. Once Brexit had been largely implemented, the UK submitted its formal application to join CPTPP on 1 February 2021. Negotiations have been going on since then and finalised on Sunday (16 July), when Business and Trade Secretary Kemi Badenoch formally signed the treaty.

The government will now need to ratify the agreement to bring it into force, which will mean parliamentary scrutiny in the UK, while CPTPP countries each go through their own legislative processes to ‘onboard’ the UK.

3.      Why should I care?

Well ‘why’ indeed? Critics and headlines have led with the line that accession will only boost UK GDP by £1.8bn over ten years, a small share considering the bloc’s overall global share of GDP being around 13%.

The government has countered this by publishing a large number of documents showing the impact of the treaty, which according to government includes:

• Membership is to spark further investment in the UK by CPTPP countries, already worth £182 billion in 2021, by guaranteeing protections for investors.
• 99% of UK goods exported to CPTPP member countries will be eligible for zero tariffs
• Where other FTAs have focussed on goods, services accounted for 43% of the UK’s trade with CPTPP members last year. Joining the agreement can reduce regulation for UK companies which may wish to compete with local firms for business. The release also stresses that remotely delivered services from the UK to CPTPP were worth £23 billion in 2021, providing further ease of market access.

4.      What will this mean for me?

That depends on your sector and the government has published documents on construction; digital and data; food and drink; life sciences; services and investment; manufacturing. But broadly speaking, it means the option to explore selling UK goods and services into TPP member markets.

• The big winners will include companies providing services. The government assessment expects membership to increase exports by £55 million.
• Transport and infrastructure (construction and manufacturing) companies will have options to increase work via fair access to procurement processes in member markets – including specific new access to Brunei and Malaysia (two countries the UK does not have standalone FTAs with).
• The food and drink products that have made headlines, CPTPP membership will eventually allow access to Mexico’s beef, pork and poultry markets, and access to Canada’s poultry market. Tariffs will also be eliminated on UK exports of chocolate and sugar confectionary to Mexico.
• Tariff changes will also mean potential increases in exports for pharmaceuticals and medical products.

If you care about the climate you may be interested in the work CPTPP does jointly – including through its Environment Committee – to make progress towards the COP27 commitments; another recent statement was made on this by some members, too. The treaty actually has an Environment Chapter, which you can read here, but in short tries to promote high levels of environmental protection and effective enforcement of environmental laws. Using trade to enhance the capacities of the Parties to address trade-related environmental issues, including through cooperation is increasingly becoming a hygiene factor and so campaigners will be carefully studying how membership allows the UK to exert pressure onto members to raise climate actions up the agenda.

5.      Will this open up other markets?

It could, depending on whether the CPTPP grows further. Five applications to join CPTPP are in; these include Costa Rica, Ecuador, Uruguay, China and Taiwan. The accession of the first three countries expected soon.

China and Taiwan are a bigger challenge given opposition from some members, such as Singapore, while others such as Australia are strongly opposed. Taiwan is considered a good fit, allowing Taiwan in without mainland China joining raises tensions with some members, making the joining of either in the near future quite unlikely. China has opposed Taiwan’s application, which is to be reviewed after Beijing’s in any case. Given pressures to better access critical minerals and tech assets such as microchips and semiconductors some hope CPTPP will be an easy route to access these markets as opposed to through a standalone FTA.

In the longer term, Thailand, the Philippines, and South Korea have also expressed an interest in joining but have not submitted a formal application yet.

The next CPTPP Commission meeting which will consider bids further will take place in Canada in 2024. Also worth saying that despite entry into force not being until second half of next year, the UK will be involved in discussions on future accession processes.

6.      What happens now?

Entry into force is expected to be completed in the second half of 2024.

To enable this, the UK will now undergo its domestic scrutiny process – as they had done with other trade agreements – and ensure all relevant bodies can feed in to inform this process. For example Badenoch has asked the Food Standards Authority and its Scottish equivalent to give their advice on accession.

She has also asked the Trade and Agriculture Commission to give their advice. This includes environmental protections – see above for more climate perspective info. An associated call for evidence has gone out which you can respond to until 15 August.

The UK has a 12-month period from the point of signature in which to accept the terms of the Protocol of Accession (Protocol), the treaty that sets out the terms and conditions of accession of the UK to the CPTPP, by depositing an instrument of accession.

To be able to enable legal entry into force in the UK primary legislation (particularly for the parts on Technical Barriers to Trade; Government Procurement ; Intellectual Property). As with the Australia and New Zealand Trade deals this will mean there will need to be a Bill passed through Parliament which we can expect to see in draft following the scrutiny from the advisory bodies, Parliamentary Select Committees and other stakeholders perhaps as early as later this year. With a King’s Speech expected in November, this Bill will likely be announced then.

Statutory instruments will be required for the parts on customs tariffs, eligibility criteria through which a performer can qualify for rights in performances and other related provisions, such as on immigration rules for business people etc.