What does the UK joining CPTPP mean for British businesses?

Fri 31 Mar 2023
Posted by: William Barns-Graham
Trade News
Global Britain with trade flows shown heading to different countries

Joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has been a priority for the UK ever since it left the EU.

Within a month of its departure from the EU, the UK submitted its bid to join the Pacific pact and the government has repeatedly said this is part of its broader strategic tilt towards the Indo-Pacific region.

But what is the CPTPP and why has the UK moved so quickly from one trade bloc (the EU) to another?

Here, the IOE&IT Daily Update answers some of the most pressing questions…

1: How did CPTPP come about?

The CPTPP began its life as the Trans-Pacific Partnership (TPP) and the US was originally intended to be a member.

Negotiations began in March 2010 and concluded on 5 October 2015, but following the election of Donald Trump as president in 2016, the US withdrew from the deal.

The remaining 11 members amended the agreement to produce the CPTPP. It was signed in March 2018 and came into force in December that year.

2: What does it do?

According to the BBC, the pact between the remaining 11 Pacific Rim nations accounts for 500 million people and 13% of global GDP.

In joining the pact, the member nations pledged to remove or reduce 95% of import charges and tariffs.

According to the Institute for Government, rights and obligations fall into two categories:

  • Shared rules – for example, regulations on food standards and the transfer of data between CPTPP members
  • Market access – with each country setting its own schedules of commitments on issues such as tariff cuts, opening services markets and liberalising visas. These commitments are offered to all other members in some, but not all, situations

Tariffs are retained in only a few sensitive areas. For instance, Japan continues to impose duties on rice and Canada’s dairy industry is also protected.

A single set of rules of origin allows content from all CPTPP countries to be ‘cumulated’ so that it can come from any combination of CPTPP countries to receive preferential tariff treatment.

3: Who’s already in CPTPP?

The founding members are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The UK will become its 12th nation once the deal is formally signed.

4: Who are the other countries wanting to join CPTPP?

China, Indonesia, Philippines, South Korea, Taiwan and Thailand have all expressed an interest in joining CPTPP.

5: Why is the UK joining a Pacific pact?

Speaking to members of the Chamber of Commerce of member nation Canada in 2021, then international trade minister Ranil Jayawardena said Britain was eager to join the CPTPP because of its “values-driven” trade vision.

When setting out its negotiating strategy for joining CPTPP in June 2021, the government said:

“Joining CPTPP puts Britain at the heart of a dynamic group of countries, as the world economy increasingly centres on the Pacific region. And as these economies grow, it is even more important that the UK is in a free trade agreement with them, so that we benefit from this growth.

It added that CPTPP members had “high environmental, labour and other standards” which aligned with the UK’s.

“CPTPP also affirms members’ rights to regulate in their national self-interest, rather than forcing harmonisation on its members. This fits perfectly with Britain’s strong rule of law and our need to set our own standards and regulations.”

6: What will the UK gain from joining CPTPP?

According to a BBC report in 2021, the immediate gains may be marginal, but the government has predicted that UK exports to current CPTPP countries are already set to increase by 65% by 2030, equating to £37bn.

The government has said that accession will build on this growth and increase the options available for UK businesses looking to enter CPTPP markets.

7: How have the current members benefitted?

Multiple members have spoken of the benefits of CPTPP including new market access due to tariff liberalisationan agreement for services suppliers, and stronger bilateral trade and investment links.

8: What happens next?

According to Politico, the deal will be formally signed at a later date and will need to be “legally verified and translated into various languages – including French in Canada”.

A diplomat told Politico that this “takes time”.

The Institute of Export & International Trade (IOE&IT) understands that the agreement to join CPTPP could require a process of parliamentary ratification, as is usually the case with trade deals of various kinds.

9: What does the IOE&IT think?

IOE&IT director general Marco Forgione has welcomed the news, saying: “this agreement not only reduces trade tariffs for goods, but also sets new rules in areas such as services, investment, intellectual property, digital trade and advanced manufacturing.”

You can read his full response here.

Henriette Gjaerde, a trade and customs stakeholder relationship specialist at the IOE&IT, who leads the organisation’s work on trade deal utilisation, said:

“The UK stands to gain access to fast-growing markets and major economies, as well as reduced trade barriers, increased foreign investment, improved regulatory cooperation, and stronger geopolitical ties by joining the CPTPP. This move could provide significant economic benefits to the UK, while also diversifying its trade relationships beyond Europe.”

10: How are others responding?

Government ministers have welcomed the news with prime minister Rishi Sunak saying:

“This deal demonstrates the real economic benefits of our post-Brexit freedoms. As part of CPTPP, the UK is now in a prime position in the global economy to seize opportunities for new jobs, growth and innovation.”

Trade and business secretary Kemi Badenoch said:

“This is an important moment for the UK. Our accession to CPTPP sends a powerful signal that the UK is open for business and using our post-Brexit freedoms to reach out to new markets around the world and grow our economy.”

Chancellor Jeremy Hunt said that the news represented a "massive opportunity" for British exporters.

Conservative MP Anthony Mangnall, a member of the soon-to-be-disbanded International Trade Committee, tweeted that joining CPTPP is “good news for UK producers, businesses and services as well as enhancing our defence and diplomatic networks!”

Labour’s shadow foreign secretary David Lammy has questioned the Indo-Pacific tilt, saying to Politico that it’s “more rhetoric than substance” and that it “cannot come at the cost of our security commitments in Europe or mean that we can safely ignore our own neighbourhood.”

David Henig, the director of the UK Trade Policy Project, tweeted that joining CPTPP will be billed as “Global Britain in action” but warned that the UK “is increasingly obviously going to be Europe first. Because geography, because Northern Ireland, and because that's what our wider allies want.”

Henig has added that joining CPTPP could also bolster the UK’s EU relations, tweeting:

“Quite fascinating too how the UK's allies started to see our CPTPP accession as the way to mend our ties with the EU. This is not a story you're going to read too much, as nobody particularly wants to brief it too strongly, but it has been quite fascinating to watch closely.”