Flying the flag for Global Britain How valuable is CPTPP for the UK really?
The UK has acceded to the second and final phase of accession to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
This is a free trading bloc of 11 countries in the Indo-Pacific region: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The UK first expressed interest in CPTPP in 2020, and membership of the group has been an important part of the government’s post-Brexit reorientation vision.
The Indo-Pacific is hailed as an area of dynamic emerging economies, where exponential growth will occur over the next decade, and where 65% of the world’s middle-class consumers are expected to live by 2030. This environment will be very attractive to UK businesses. But how beneficial would CPTPP be to our country, or is the move just another notch in our belt?
What the data says
CPTPP member countries have a combined population of 500 million and GDP of £9 trillion. For reference, although the EU is a similar size, with a GDP of £11 trillion, the value of our total trade to the EU is much higher, at £557 billion.1 CPTPP as an area makes up 7.8% of the UK’s total trade. In 2019, UK service suppliers exported £28.8 billion worth of services to CPTPP members, and average annual growth in trade between 2016-2019 with members was 8%. We already have bilateral Free Trade Agreements (FTAs) with seven of the eleven countries, and digital economy agreements with Singapore and Japan.
The Department for International Trade’s (DIT) economic modelling of our relationship with CPTPP cannot fully quantify the long-term gains, since the economies of the member states are so dynamic and primed for huge real time growth. But DIT projections suggest UK exports to CPTPP will increase to 65% by 2030, equating to a rise of £37 billion, and demand for UK imports is expected to rise by two thirds by 2030, to just under £4.5 trillion. As a result, accession to CPTPP could lead to an increase of £1.8 billion in UK GDP long term, and if the bloc continues to expand, it could cover over 19% of global GDP.
The benefits of CPTPP
Accession to CPTPP is a real opportunity to secure and strengthen relationships with markets set for huge expansion over the next few decades. The area will likely become very competitive, with many countries looking to form connections in the area, where there are growing numbers of consumers accumulating wealth. For example, according to PwC’s ‘The World in 2050’ report, Vietnam will experience the biggest growth in terms of GDP out of any other country in the world. The report also predicts that six of the top ten economies in 2050 will be today’s emerging markets, and six will be in the Indo-Pacific region.
CPTPP is an area committed to innovation, with modern rules on services trade. The provisions remove unnecessary barriers to service trade by opening financial markets and easing frictions to cross-border investment; facilitating the free flow of data while protecting GDPR; simplifying business mobility, and ensuring regulatory transparency. This will bolster the government’s mission to shape the UK into a global tech and services hub.
CPTPP is also committed to standards on free and fair trade. For example it has rules against giving unreasonable advantages to State-Owned Enterprises, discriminating against foreign investors and unduly forcing companies to hand over private information. It prevents the restriction of imports for protectionist reasons, and upholds high environmental and labour standards. Members have a right to regulate to fit their own national interest rather than forcing harmonisation across the bloc. Consent by members for the UK to join is therefore a seal of approval of our own status as a high standards trading nation.
However, CPTPP has expressed the UK should fully accept and commit to complying to the existing rules of the agreement. Therefore, since the government cannot negotiate terms, the question is what will the UK have to sacrifice in order to qualify?
For example, there have been concerns raised that joining CPTPP will lead to the lowering of food standards. Central to this is that if we continue alignment with the EU on Sanitary and Phytosanitary measures, there would be a discrepancy in SPS measures between the UK and CPTPP members. UK farms have emphasised the impact that signing trade deals with countries who are big exporters of agriculture would have on UK industry.
Another significant concern surrounds Intellectual Property (IP), and the need to protect our standards. IP contributes significantly to UK innovation and productivity. Currently, the UK is a member of the European Patent Convention (EPC), which supports particularly creative industries, but also research, tech, and innovation businesses. There are inconsistencies between CPTPP rules on IP and the EPC, which, if the UK had to cede membership to the EPC, would impact growth of British businesses.
The post-Brexit perspective
Since we left the EU, the government has been focusing on their trade reorientation strategy. As a competitive trading nation, it is vital the UK signs trade deals to restore our international reputation since Brexit. Agreements we have signed already have been concluded in quick succession, and do not necessarily have a significant impact on our economy. Our deal with New Zealand for example is estimated to have negligible impact on UK GDP.
So while flying the flag for ‘Global Britain’ is good for our post-Brexit standing, complete reorientation is not going to solve the very real problem that businesses currently face, namely that they have many more trade related challenges than they did six years ago. From our surveys, directors have told us that the EU-UK relationship is a priority issue the government needs to address in order to support business.
UK companies still rely on the long established links they have with EU markets, which are directly on our doorstep and with whom they have closer historical ties. The Indo-Pacific strategy will open up important opportunities for UK businesses, but the government must not forfeit the significance of our relationship with the EU in order to do so.
The World in 2050 Report, PwC:
UK Accession to CPTPP: The UK’s Strategic Approach:
Announcement of UK move to second phase