Japanese Prime Minister Shinzo Abe’s invitation to Britain to join the Comprehensive and Progressive Trans Pacific Partnership (CPTPP), in his Financial Times interview of 8 October, has been welcomed by Brexit supporters as demonstrating the potential for a ‘Global Britain’ trade policy after the UK has left the EU next year. And Abe’s encouraging the UK along these lines reflects the British government’s insistence on Britain’s ‘global potential’.
Britain would, he says, be ‘welcomed with open arms’.
How realistic or desirable a prospect is this? British and Japanese politicians have invested much effort over decades in building a close political and economic partnership between the two countries.
And however much the referendum result dismayed the Japanese corporate sector, as well as Japan’s politicians and opinion-formers, the bilateral political dialogue has intensified, with closer cooperation on defence and security matters as well as regular ministerial consultations.
The CPTPP is, however, an area where British and Japanese objectives are not precisely aligned.
It makes complete sense for Japan to seek to expand the CPTPP. The Japanese government has worked hard and skilfully to maintain the agreement since President Trump announced US withdrawal from it in November 2016, even before he assumed the presidency.
As Trump has blown hot and cold on the issue – suggesting that he might welcome renegotiation in January 2018, then rubbishing it again as inferior to bilateral deals in April – Abe has sought to keep the flame of Asian trade multilateralism alive, and looked for future opportunities to expand the framework.
And why would Britain not be a high priority for Japan in that area, as the country moves towards Brexit and the possibility – depending on the terms of any eventual deal – of forging its own bilateral trade arrangements rather than having to participate in those negotiated by the EU?
Japan has a very realistic sense of Britain’s leverage in those circumstances: a country of economic strength and political influence to help the CPTPP become a counterweight against US bilateralism; but likely also to be eager enough to find improved market access around the world to not prove too difficult or destabilizing an associate.
Is it in Britain’s interests to go down this road? Abe himself acknowledges in the FT article that the direct impact of Brexit would be for Britain to lose its status as a ‘gateway to Europe’. CPTPP membership would only be feasible if Britain left the EU customs union.
But this arrangement is a crucial element of the frictionless trade regime the UK enjoys with the rest of the EU and which has been a powerful incentive for foreign direct investment (FDI) – not least from over 1,000 companies from Japan – into the UK over the last 40 years.
Finding a way to maintain this must be a central objective of the British negotiators. Failure to do so would jeopardize a level of FDI that has made a major contribution to the British economy.
And the balance of advantage is obvious on trade as well. Around 8% of British exports go to the 11 countries of the CPTPP; over 40% to the 27 countries of the EU. The traditional arguments about trade – that geography and gravity matter more than politics – suggest that these proportions are unlikely to change radically in the short to medium term. Moreover, the EU has or is negotiating free trade deals with nine of the 11 countries in the CPTPP already.
It’s hard to escape the conclusion that the idea that CPTPP membership might in some way compensate for a looser trade association with the EU is illusory.