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 for UK?

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. The agreement gives the United Kingdom access to a massive economic bloc, encompassing itself and the other countries involved, with a total GDP of £11 trillion ($13.6 trillion).

The UK government has emphasized the numerous benefits that this trade deal offers. Notably, it will lead to the reduction of tariffs on British exports of essential goods such as cheese, cars, chocolate, machinery, gin and whisky. Moreover, the agreement opens up vast opportunities for trade with a market encompassing over 500 million people across the member nations, providing potential gateways to the broader region. According to Britain’s estimates, joining the CPTPP will bolster the nation’s economy by £1.8 billion ($2.2 billion) in the long run.

Natalie Black, the U.K.’s trade commissioner for Asia Pacific, told CNBC that this is 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.

Controversial clauses

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.

The Guardian reported that Paul Nowak, general secretary of the Trades Union Congress (TUC), warned that the clauses allow multinational corporations to sue the UK government in private tribunals over policies that threaten profits, like raising the minimum wage or renationalizing energy companies. The TUC’s concerns highlight potential tensions between workers’ rights, public interest policies, and legal protections for corporations under trade agreements.

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 (EU) 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, the decision to join the CPTPP bloc has raised questions about its implications for the United Kingdom’s future relationship with the European Union. According to The Guardian, some trade experts argue that harmonizing trade rules with CPTPP countries could potentially harm the UK’s ability to rejoin the EU at a later date. They contend that aligning with the CPTPP’s regulatory framework might create a divergence between the UK’s and the EU’s respective trade regimes, making it more challenging to reconcile their approaches in the future.

Final thoughts

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.

Healy Consultants Group provides a wide range of corporate services across the world. Email or WhatsApp us now to find out more about our services.