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The UK To Join New Trading Partnership

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The UK To Join New Trading PartnershipThe UK has formally requested to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). This article examines the CPTPP agreement and the implications for the UK of membership.

What is the CPTPP?

 

The CPTPP is an 11-party multilateral free trade agreement (FTA) that includes numerous Asia-Pacific countries. It is in force in 7 of the 11 signatory countries — in Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Vietnam — while Brunei, Chile, Malaysia, and Peru are yet to ratify the agreement.

The CPTPP was signed in March 2018, having been negotiated in 2016, after the United States withdrew from the Trans-Pacific Partnership (TPP), the CPTPP's forerunner. When fully implemented, the CPTPP will form a trading bloc covering 500 million consumers, representing around 13% of global GDP.

As with other free trade agreements, the CPTPP reduces tariff and non-tariff barriers to trade.
Under the agreement, 90% of tariffs on goods traded between the countries will be eliminated immediately, with most of the remaining tariffs phased out over 10 years. Only tariffs on select sensitive goods will remain, such as on Japanese rice and Canadian dairy products.

CPTPP members have also committed to: cooperate in the area of regulations and standards, liberalise market access for services, expedite customs procedures, and relax visa conditions to provide increased opportunities for business travellers. The agreement also includes a chapter on facilitating digital trade and e-commerce.
A notable feature of the CPTPP is its rules of origin requirements. In most FTAs, only goods originating (or substantially originating) in one party qualify for preferential treatment in the other. Therefore, products manufactured using components imported from third-party countries may not meet the rules of the origin test. But the CPTPP allows for "accumulation", meaning that finished goods can consist of components and parts sourced from within the bloc and still qualify for preferential treatment.

What will be the benefits for UK businesses?

 

The UK Government says that joining the CPTPP will open up new opportunities for exporters in strategically important sectors and help diversify trading links and supply chains. However, it is thought that the benefits for the UK economy may be limited overall. The UK has continued (or "rolled over") seven trade agreements it had with CPTPP members as a member of the EU, and these already reduce barriers to entering these markets. The UK is also negotiating separate bilateral deals with Australia and New Zealand. So, Brunei and Malaysia are the only CPTPP members that the UK does not have free trade deals with.

Further, trade flows between the UK and the CPTPP bloc are relatively small, with the bloc receiving only around 8% of UK exports in 2019. By comparison, that year, the EU received 43% of UK exports. Also, demand for UK services, which form the bulk of UK exports, across the CPTPP bloc is comparatively weak.

What's the timetable for UK entry?

 

There is often much uncertainty with trade negotiations. The UK Government formally requested to join the bloc on February 1, 2021, and negotiations are expected to commence in the spring of 2021. But it is difficult to predict how the talks will play out, and such negotiations often hit obstacles. The UK's entry is also conditional on the agreement of all CPTPP countries. The UK's negotiating capacity is also spread thin as it attempts to conclude multiple FTAs simultaneously, which could slow negotiations further.


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