UK joins CPTPP- Apr 2023
Post Brexit, Britain finally has something to show for it in joining the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). Primarily, the CPTPP generates 13% of the world’s income, with the UK being the first non-founding member, increasing the trading bloc value to 11 trillion pounds. In doing so, the aim is for a 95% reduction in import charges or tariffs (i.e food, drink and cars). Thus, by providing access to 500m people for British exporters, the UK government expects to “seize opportunities for new jobs, growth and innovation”, which is very much needed considering their current economic condition.
In joining the CPTPP, restrictions surrounding services and digital trade will be loosened, hence providing increased export opportunities for the UK’s future. Moreover, this agreement will see an increase in both inbound and outbound investment (In 2017, CPTPP nations accounted for 1/12 pounds of foreign investment in the UK, and vise versa, supporting businesses and jobs). Additionally, it is expected to lower red tape costs for UK producers of machinery and medicines, thus providing further opportunities for supply chain expansions with member nations. However, perhaps the biggest opportunity for gain for the UK is potential for increased free trade between the UK and USA (i.e if the Biden administration joins CPTPP after Trump’s withdrawal). Hence, this would provide massive export growth for the UK given America already buys double the amount of UK exports than current CPTPP members combined. As such, the CPTPP is expected to generate a modest 1.8bn pounds of extra income, within 10 years of operation (about 0.08% of UK GDP).
However, leaving the EU has cost the UK far more (about 4% of GDP), with further concerns that in joining the CPTPP, the UK’s ability to rejoin the EU in the future will be stifled. Moreover, the UK’s membership will not be as effective given they already have bilateral trade deals with the majority of CPTPP nations, with the only new opportunities being Brunei and Malaysia. Additionally, unions have condemned clauses allowing large companies to sue the UK government if they expect profits to suffer (i.e introduction of foreign competition threatening UK’s import competing industries as citizens can now access cheaper imported goods). Hence, although this legal action aims to secure short term revenue and profits for these companies, it drastically hinders long term efficiency gains for the UK through increased investment and innovation. Moreover, given differing regulations across the world, concerns have risen over the UK’s ability to meet environmental and animal welfare standards, as well as human rights, as there are critiques that the deal essentially sanctions the exploitation of Vietnamese and Brunei workers. Moreover, given existing protections (i.e Japanese rice farm industry), the UK providing Canadian farmers greater access to UK markets and conceding to lower tariffs on imports of Malaysian palm oil, export growth may not fully reach its potential, whilst imports will likely increase.
Finally, with much speculation surrounding the matter, China has also expressed its interest in joining the CPTPP. However, as member nations are condemning China’s lax compliance with existing international trade rules and with the UK in particular trying to ban Chinese made surveillance equipment from UK public networks, there is much concern over the geopolitical tensions that may arise, for example, if the UK were to veto China’s application. Nonetheless, in joining the CPTPP, the UK is moving in the right direction post Brexit.