#TradeTuesday: Joining the CPTPP provides Britain the opportunity for long-term trading leverage

Last week’s announcement that the UK has joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPPTP) was either seen as a significant landmark moment for pro-Brexit supporters, or a laughable alternative to the EU for Remain supporters. 

The Conservative Party, under Rishi Sunak as well as his predecessors, has long-championed UK accession to the CPTPP as a move that would elevate “Global Britain” post-Brexit. Following the UK’s withdrawal from the European single market, the party saw acceptance into the CPTPP’s trade area — an area roughly on par with the European Union in terms of GDP — as a way to mitigate Brexit losses and guarantee long-term economic growth in new growing geographic markets, as well as adding momentum to Britain’s “Indo-Pacific tilt” in conjunction with Australia and the United States.

Many critics have scoffed at an agreement that will only grow British GDP by 0.08 per cent over the next 15 years according to the government’s own figures, as the UK already has bilateral Free Trade Agreements with nine CPTPP members out of eleven. Additionally, the regulatory divergences between CPTPP and the EU move the UK further away from trade alignment with the EU and make potential membership of the EU Customs Union under any future Labour government less likely.

Nevertheless, despite the lack of short-term growth, it can be argued that the UK is the first Western state to break free and pursue a prescient plan that allows them to join a fast-grown trading bloc that will create new supply chains, boost British business exports and improve access to import opportunities.

According to the UK Department for Business and Trade, joining the CPTPP will give businesses eligibility for tariff-free access to over 99 per cent of goods exported to a market of over 500 million customers.  With current CPTPP economies accounting for 15 per cent of global trade and 13 per cent of global GDP, tariff-free access to such a vast market provides important new trading opportunities for the UK – a country still wrestling with finding a solution to solving economic growth. For example, for British farms, such as Jeremy Clarkson’s £1 profit farm, it provides ripe opportunities for the UK to compete with the dominant regional exporters Australia and New Zealand in the distribution of goods such as pork, poultry and dairy. It also increases trade in fields like the automotive industry, capitalising on closer trading relations with major car export destinations such as Japan, Mexico, Canada and Australia. According to UK Government modelling, this could add overall UK GDP by up to £2 billion.

Furthermore, the British Foreign Policy Group said ease of exporting can also play a key role in helping UK businesses build new trusted supply chains, amid the fallout from supply chain shortfalls highlighted during the COVID-19 crisis. The agreement offers the potential to strengthen supply chain links between member countries and provides particularly significant benefits to highly taxed industries such as financial services or spirits, where tariffs will either be significantly reduced or eliminated. Take tariffs on Scotch Whisky in Malaysia, for example, which could drop from 165% to 0%, opening up new trading opportunities for this key UK export and soft power asset.

CPTPP nations are also among some of the fastest growing in the world, and a key cornerstone of the Indo-Pacific market that is expected to generate 56 per cent of all global growth from 2019 to 2050. If this potential growth is indeed realised, the UK has gained a leading foothold in an increasingly important market supporting a fast-growing middle-class population.

Britain’s accession to CPTPP also injects some energy into the trade bloc to ensure it keeps innovating. Britain can help to springboard momentum and persuade parties to upgrade the agreement to better address emerging issues in digital trade, sustainability, and inclusivity—all priorities of New Zealand’s 2023 chairmanship.

Finally, as the first European member to join, this trans-Pacific agreement has essentially become a trans-Atlantic group, suggesting the further expansion of this trade bloc beyond the geographic confines of the Pacific Rim and enabling the UK to enhance and influence its strategic ties with like-minded countries to protect a free and open trade within the Indo-Pacific region. With China being one of the most recent countries to apply, the UK can help influence the US to ensure the CPTPP is back on America’s radar as part of a battle of ideologies in the region.

The benefits may be limited and laughable now but the UK’s leverage from joining the CPTPP over the long term could be long lasting.