Joining the CPTPP will not deliver any real economic gains – Yorkshire Bylines

Credit: Original article can be found here

We are about to learn that Britain has reached broad agreement with a group of Pacific-rim countries and will soon join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This is according to a recent report in the FT (Britain’s bumpy ride to the Asia-Pacific).

Its impact is likely to be somewhere between zero and inconsequential for most of us. The FT’s trade correspondent likens it in decibel terms to “a cat sneezing three rooms away” – and that may well be an exaggeration.

The final deal could be announced as soon as next month when CPTPP officials meet in Auckland but others suggest it may not be until July.

What is the CPTPP?

A parliamentary research briefing explains that the CPTPP is a free trade agreement between 11 Pacific-facing countries that emerged from negotiations for a Trans-Pacific Partnership (TPP), originally including the USA as well.

What the briefing doesn’t say is that Donald Trump, as one of his first acts in office, withdrew from the talks calling the TPP a “disaster” and a “rape” of the American people. He claimed that the agreement would “not only undermine our economy, but it will undermine our independence”.

The move was not a partisan issue. Bernie Sanders, the left-wing democratic presidential candidate was fully behind it, following intense lobbying by groups like Coalition for a Prosperous America (CPA) claiming the deal’s 5,500 pages “erodes sovereignty” and delves “deeply into the domestic laws of the US”.

One signatory is New Zealand, but not everyone there is behind it. Opponents of the CPTPP claim NZ is now “ruled by a TPP Federal Government” and say the treaty is “binding” on member nations, “overriding the domestic laws and constitutions of the individual countries”.

What Sir Bill Cash and his band of sovereignty-worshippers will make of it is not known.

Will the UK’s sovereignty be eroded?

In the trade and cooperation agreement (TCA) with the EU, the UK has already agreed to level playing field and non-regression measures limiting its ability to dramatically change employment protection and environmental laws. The CPTPP agreement does the same.

The 30 chapters in total cover government procurement, regulatory coherence, sanitary and phytosanitary measures, employment and environmental issues, financial services, competition policy, intellectual property, dispute settlement and so on.

The chapter on labour laws for example, “prohibits TPP parties from weakening the protections afforded to workers under their labour laws, or from failing to enforce them”. And on environmental matters, a party to the CPTPP “shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from, its environmental laws in a manner that weakens or reduces the protection afforded in those laws in order to encourage trade or investment between the Parties”.

This will have important implications for the retained EU law bill currently going through parliament; not only will the 27 members of the EU take a dim view of any watering down of our current regulations, the 11 CPTPP members will be equally peeved.

How much is the deal worth?

The UK already has trade agreements with nine CPTPP members: Australia, Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore, and Vietnam. The only new ones are Brunei and Malaysia.

So, in monetary terms accession does not even rise to the level of small beer. The government’s document from April 2021 setting out its strategic approach to accession, puts the increase in exports to current CPTPP members at £1.7bn in the ‘long run’, taken as 15 years from accession. Total UK exports would see an increase of £2bn.

Table: summary of UK macroeconomic impacts, long run change on baseline, from static modelling

Britain’s GDP would see an increase of £1.8bn over the same period. These are all at 2019 values when UK GDP was £2,238bn. In other words, in a decade and a half’s time we are likely to see an increase in our wealth of 0.08%. This is not even a rounding error in the national accounts. To return to the decibel analogy, it is more like listening for a small woodland animal breaking wind at the side of a busy motorway.

On the other side of the balance sheet, the loss of GDP due to exiting the EU single market is put conservatively by the independent Office of Budget Responsibility (OBR) at 4% of GDP by 2030, at least 50 times greater.

The FT points to credible evidence that the actual Brexit-related hit to GDP is likely to be much higher and has already reached 5.5%. It is the equivalent of being mugged of £700 and then offered a tenner as consolation by the mugger – better than nothing but not much.

Why do it?

Well, it isn’t for the money. Minako Morita-Jaeger, a trade policy consultant and fellow of the UK Trade Policy Observatory at the University of Sussex, says “any economic gains from joining CPTPP seem to be slim” and the objective is to “use economic diplomacy to play a more proactive role in the region”.

Having given up on playing a leading role on our continent, Britain seeks to become a bit-player in four others: Asia, North and South America, and Oceania.

David Dodwell, a director of the Hong Kong-APEC Trade Policy Study Group, a trade policy think tank, puts it more succinctly: “Britain, having bludgeoned its way out of the European Union in 2020 after a brutal Brexit debate that divided the country… is in desperate need of new friends and trading partners.”

But don’t mistake the accession talks as any sort of real negotiation. As the first acceding country Britain will not be allowed to derogate from any CPTPP obligations. Japan has emphasised the need for the UK’s compliance with all of the existing rules in the CPTPP ‘without exception’ as a condition of its becoming a member.

The final phase of talks is about access to the UK market by the other members and already some of our ‘friends’ are playing hardball.

Malaysia is demanding zero tariffs on palm oil immediately on accession, something UK environmentalists will be unhappy about since it involves a lot of deforestation in southeast Asia. And Canada is holding out for more beef quotas than permitted under the existing FTA, which British farmers might find irksome, to say the least.

Will the CPTPP expose Britain’s woeful productivity?

Brexiters have frequently shown themselves oblivious of Britain’s weaknesses, especially its chronic lack of investment in both public and business sectors which fell from a long-term average of 4.5% of GDP between 1949 and 1979 to around 1.5% after 1979.

Yorkshire Bylines has published several articles about the UK’s woeful record in industrial robots where we have about a tenth of the number Germany has and South Korea (a potential future CPTPP member) in 2016 had a density of robots per 10,000 workers more than 12 times higher (411 to 33) than Britain.

The unsurprising result is that our productivity (output per hour) is poor, making the UK a soft market for CPTPP exporters.

“For the impatient Sunak government”, Dodwell says, “my only advice is that they would be wise to beware what they wish for membership of this dynamic Asian grouping might expose Global Britain to some competitive forces that have not been anticipated, and may not be welcome”.

In January this year Britain’s goods trade showed that we are close to importing twice as much as we export (£30bn exports to £54bn imports) with a deficit of £24.5bn in one month.

Joining the CPTPP may only add to the deficit.