18 April 2023
3 min read
The UK has joined the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), a free trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The UK formally applied to join in February 2021. Agreement to join was finally reached on March 31, 2023, following an extended period of negotiations over trade rules, regulations and the Northern Ireland protocol. In a press release on March 31, the government said that the UK and CPTPP members would take the final legal and administrative steps required for the UK to formally sign in 2023. The UK is the first economy to accede to CPTPP and is also the first member from outside of the Pacific region.
What does it do?
CPTPP reduces most barriers to trade and tariffs on exports to member countries, although tariffs remain on some products to some countries. It is expected that more than 99% of current UK goods exports to CPTPP members will be eligible for tariff-free trade after joining. CPTPP member countries work together on regulations and standards with the aim of facilitating trade and customs procedures. CPTPP provides a single set of rules of origin, to make it easier for exporters to make a claim for preferential tariff treatment, and members can count content from all CPTPP countries in goods toward qualifying for preferential tariffs.
Potential benefits of joining the CPTPP
The World Economic Forum noted that the UK already has bilateral trade agreements with nine CPTPP members and the expected gains from joining the CPTPP may not compensate for the impact of the UK deciding to leave the EU.
In their 31 May press release, the UK government stated that total UK exports to CPTPP countries were worth £60.5 billion in the 12 months to the end of September 2022 and were expected to grow because of the UK formally joining the trade bloc. Removing or reducing tariffs makes it easier and less expensive to trade physical products between members. This will benefit some UK exporters of goods to CPTPP members. However, according to the UK Office of National Statistics, the estimated percentage increase in GDP, related to the UK joining the CPTPP is 0.08%. This is significantly less than the loss in GDP attributed to the UK leaving the European Union. According to the Office of Budget Responsibility, the post-Brexit trading relationship between the UK and EU will reduce long-run productivity by 4 per cent relative to remaining in the EU.
In a report published in November 2021, by the International Agreements Committee, a select committee of the UK House of Lords in the UK parliament, it was reported that larger gains would be available if CPTPP membership subsequently expanded to include Thailand and South Korea. The committee agreed that membership was not expected to bring “large-scale” economic benefits in the short term. However, it stated that most of its witnesses supported the Government’s aspiration to join CPTPP, in part because membership would allow the UK to influence its future development.
At Oceanbridge Management, we view the UK joining the CPTPP as a broadly positive development for UK trade in the Asia-Pacific region. Particularly amid the geopolitical concern arisen in the region, strengthening the relationship with CPTPP membership countries is vital for the UK. However, we should be aware that the economic benefits from joining the CPTPP is limited and cannot replace the UK’s trade with the EU. There is also a risk where, in the long term, CPTPP membership could force the UK to change its regulations in a way that would not be compatible with it re-joining the EU, should the UK decide to do so in the future.
Contains public sector information licensed under the Open Government Licence v3.0.