On 1 February 2021, the UK government formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade pact between 11 countries: Japan, Australia, Canada, New Zealand, Vietnam, Singapore, Malaysia, Brunei, Mexico, Chile and Peru. This was a smart decision by the UK as it will set or renew its trade terms with 11 trading partners in just one negotiation.
What is the CPTPP?
The CPTPP is a big agreement. Its members account for 13 per cent of global GDP, 15 per cent of global trade, with a population of 500 million people located in the growing and increasingly rich Asia-Pacific region. It is also a high-level agreement that not only reduces trade tariffs for goods, but also sets new rules in areas such as services, investment, intellectual property, digital trade and state-owned enterprises. Totalling 30 chapters, it is based on commitments to very high levels of liberalization, inhibition of government interference and protection of business interests, making it a union well-suited for this century.
What’s in it for the UK?
The CPTPP would enable the UK to secure higher-level agreements with its members and, where deemed beneficial, would replace the existing terms of bilateral trade agreements between the UK and its partners. This includes the new Japan-UK Comprehensive Economic Agreement (CEPA) and the six continuity agreements that, post-Brexit, extend the UK’s pre-existing EU trade commitments with Canada, Vietnam, Singapore, Mexico, Chile and Peru.
As it is an accession process, it is expected that the existing rules of the CPTPP will be accepted in full by the UK, while market access will be negotiated bilaterally between the UK and the other member states. Japan, this year’s chair of the CPTPP Joint Commission, has welcomed the UK’s application and expressed its willingness to engage actively in the process.
Thanks to CPTPP markets’ high level of openness – particularly unusual for its developing country members – UK industries will be able to demonstrate their strengths in sectors such as services and digital trade. They will also be able to build efficient supply chain networks, taking advantage of the varied economic structures of the members, such as levels of development, wage structures and resource endowment.
Benefits for existing members
UK accession is also very attractive for existing CPTPP members as the inclusion of innovative British industries will accelerate efforts to modernize their domestic economies.
They also know that the UK is an excellent testing ground for global markets. Not only does UK accession mean greater opportunities for their goods and services in Britain itself but, thanks to the power of UK media, success stories can be instantly communicated to other markets, such as the EU, Russia, Middle East and the Americas.
Equally important, the UK’s credentials as an open, free market economy and a solid democracy would help strengthen the CPTPP as an institution and increase its credibility.
For Japan in particular, the accession would further strengthen the bilateral economic relations bolstered by the new Japan-UK CEPA, offering a far larger geographical scope within which to operate. The same is true for the countries with whom the UK has continuity agreements.
If successful, the UK will be the first non-founding member to join the CPTPP, clearly signalling that it is an outward-looking and free-trading nation. Not only that, by having the UK as a member, the CPTPP would go from being an Asia-Pacific-focused regional framework to one that is global in nature. Along with the increased institutional strength and credibility already mentioned, this would incentivise many more potential applicants, both inside and outside of the Asia-Pacific region. A larger and more global market would be a considerable boost for the CPTPP, given the lack of clarity from the new US administration on whether it will return to the Trans-Pacific Partnership (TPP).
A mission to defend global free trade
The significance of the UK’s accession goes beyond strict trade interests. At a time of creeping protectionist sentiments and looming threats to rule-based commerce, trade activities by CPTPP members help defend the principles of global free trade and rule-based commerce, something which has been the mission of the CPTPP ever since the inception of its predecessor, the TPP.