U.K. has officially joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), becoming the 12th member of a strong trade bloc in the Asia-Pacific region. This trade deal is the country’s largest post-Brexit trade deal and makes it the first European nation to join the CPTPP since it came into force in 2018.
What are the benefits?
The CPTPP comprises fellow G7 members Canada and Japan, plus the U.K.’s long-standing allies Australia and New Zealand, alongside Brunei, Chile, Malaysia, Mexico, Peru, Singapore and Vietnam. It provides the U.K. with access to a region with a total GDP of £11 trillion ($13.6 trillion).
Natalie Black, the U.K.’s trade commissioner for Asia Pacific, called it a “progressive deal” for Britain. She emphasizes that “This is the part of the world that is going to drive economic growth, and also drive the rules of the road of trade going forward. We want to be part of those discussions.”
Additionally, Kemi Badenoch, the trade secretary, echoes the sentiment, stating that the deal sends a “powerful signal” that Britain is using its “post-Brexit freedoms to reach out to new markets around the world and grow our economy.” This underscores the government’s commitment to seizing opportunities on the global stage.
Furthermore, the U.K. government highlights the benefits of this trade deal. It will cut tariffs on exports of food, drink and cars, and open up opportunities for trade to a market of more than 500 million people and access to the wider region. Britain estimates joining the CPTPP will boost its economy by £1.8 billion in the long term and lift wages by £800 million compared with 2019 levels.
While the CPTPP membership opens doors for British businesses, it also comes with some controversial clauses. Unions condemned clauses in the deal that will allow large companies to sue the U.K. government behind closed doors if they believe their profits have suffered from changes to laws or regulations. This provision has drawn criticism from unions and advocacy groups.
Allowing secret courts to govern trade disputes between CPTPP members and the U.K. has the potential to spark protests similar to those that helped scupper trade talks between the EU and Washington in 2016.
Brussels was forced to abandon the Transatlantic Trade and Investment Partnership (TTIP) trade talks after the European Parliament refused to ratify any deals that included the investor-state dispute settlement mechanism, which provides foreign investors with the right to access an international tribunal to resolve privately.
Economic growth prospects
Despite the optimism surrounding the CPTPP membership, how much the deal actually benefits Britain’s growth prospects remains to be seen. According to the government’s own estimates, the deal will raise long-term domestic GDP by just 0.08%. This little impact may do little to offset the trade losses that the U.K. has experienced with the European Union as a result of Brexit.
Deborah Elms, the executive director of the Asian Trade Centre, said it’s very hard to calculate these trade figures, especially based on existing trade flows. “If you are a U.K. company, you probably have limited existing trade flows to many of the CPTPP countries like Australia, New Zealand, Japan and Singapore… simply, because the distance is far and because you used to be very tightly enmeshed with the European Union.” (CNBC)
Furthermore, some trade experts argue that joining the CPTPP bloc could potentially harm the U.K.’s ability to rejoin the EU at a later date. Harmonizing trade rules with CPTPP countries might create a divergence between the U.K. and the EU. However, others contend that the regulatory approaches of the EU and CPTPP are compatible.
The accession of the United Kingdom to the CPTPP represents a significant milestone in its post-Brexit international trade strategy. While it opens doors to vast markets and economic opportunities, it also comes with its share of challenges and controversies. As the U.K. is moving towards a new chapter for an independent trade policy, the coming years will definitely reveal both the opportunities and challenges that lie ahead. How the United Kingdom responds to these circumstances will undoubtedly have a far-reaching impact on its stand in the global trade arena.