Why does the UK want to join a Pacific trade pact? 10 key CPTPP questions answered

Fri 14 May 2021
Posted by: William Barns-Graham
Trade News

Within a month of completing its split from the EU at the beginning of the year, the UK had submitted a bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

This week business leaders were asked by the International Agreements Committee about the potential opportunities membership would provide the UK.

The Royal Institute of British Architects, the Advertising Association and techUK all highlighted the economic boost accession to the CPTPP could provide, reports the Express.

But what is the CPTPP and why is the UK looking to move from one trade bloc (the EU) to another?

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

1: How did it start?

Negotiations for what was originally the Trans-Pacific Partnership (TPP) began in March 2010 and concluded on 5 October 2015.

The US was party to those talks, but the election of President Trump in 2016 led to its withdrawal.

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

2: What does it do?

The trade agreement between 11 Pacific Rim nations accounts for 500 million people and 13% of global GDP, according to the BBC.

The signatories have pledged to eliminate or reduce 95% of import charges or tariffs.

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

  • Rules covering, for example, new food safety regulations and the transfer of data to other CPTPP members. These rules are now the same for all CPTPP members.
  • Market access: each member has its own schedules of commitments on issues such as tariff cuts, opening services markets and liberalising visas. In some cases, the commitments are offered to all other members, while in others they are restricted.

Tariffs are retained in only a few sensitive areas. For instance, Japan keeps tariffs on rice and Canada’s dairy industry is 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 treatment.

3: Who are the 11 members?

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

4: Who else wants to join?

China, South Korea, Taiwan and Thailand have expressed an interest in joining the CPTPP. President Joe Biden has also hinted that the US could sign up.

5: Why would the UK join? Isn’t it for Pacific nations?

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

The government has not conducted an assessment of the economic impact of joining CPTPP.

It has, though, already rolled over previous EU trade terms with several of its members and is on course to conclude new trade agreements with two of the others this year: Australia and New Zealand.

6: What does the UK stand to gain?

According to the BBC, the immediate gains may be marginal.

In total, CPTPP nations account for around 9% of UK exports. UK trade with the group was worth £111 billion in 2019, growing by 8% a year since 2016.

However, joining the CPTPP would send a message that the UK was serious about its “ambition to do business on the best terms with our friends and partners all over the world and be an enthusiastic champion of global free trade,” said Boris Johnson.

Concrete benefits listed by the government include:

  • Digital trade rules that allow data to flow freely between members, remove unnecessary barriers, and protect commercial source code and encryption
  • Eliminating tariffs quicker on UK exports including whisky (down from 165% to 0% in Malaysia) and cars (reducing to 0% in Canada by 2022, two years earlier than through the UK-Canada trade deal)
  • CPTPP rules of origin could mean that cars made in the UK could use more Pacific nation car parts, such as Japanese batteries
  • Easier travel for business people

7: Will existing members allow the UK to join?

All 11 member nations would have to agree to the UK joining.

The Royal United Services Institute says CPTPP members may want to establish a precedent for future applicants with the UK offered a ‘take it or leave it’ deal. This would limit the prospects for a heavyweight newcomer to shape the deal in its image.

If the UK joined, it would be the second biggest economy in the CPTPP after Japan.

According to The Interpreter the main question for existing members is how the UK would add value, as it’s outside the region and not currently a major trade partner. 

8: How have the current members benefitted?

Members including Australia, Canada and Singapore have spoken of the benefits of CPTPP including new market access due to tariff liberalisation, an agreement for services suppliers, and stronger bilateral trade and investment links.

9: What’s next?

The UK submitted its bid to join on 1 February this year.

A CPTPP working group will be formed and the UK would have to explain to the working group how it was going to comply with the CPTPP rules.

10: Will there be protracted negotiations?

The process outlined in the last question would include the UK laying out its market access offers – including tariff cuts, any service sectors from which it proposed to exclude CPTPP members and parts of government procurement that would not be open to CPTPP members.

There would then be a process of negotiation. Once all the existing members are satisfied, it would formally invite the UK to become a member.

In April, International Trade Secretary Liz Truss said she hoped the UK would join in the next 12 months, according to City AM.