Sunak finds new allies, scores rare win for the UK – wknd.

Credit: Original article can be found here

The agreement can also be seen as part of a broader UK pivot to the Indo-Pacific region in not only trade but also diplomacy and politic

By Jon Van Housen and Mariella Radaelli

Published: Tue 4 Apr 2023, 10:40 PM

Following Britain’s perplexing and controversial withdrawal from the European Union, stories on business in the island nation seemed a litany of bad news: Companies leaving for other European capitals, outflows of investment, glacial economic growth.

Of course a global pandemic, open armed conflict in Europe and skyrocketing inflation isn’t helping ease the pain.

But some observers say the UK has just scored a rare victory by joining a trade bloc with the unwieldly name of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). An Obama-era conception, the free trade organization for the Asia-Pacific – abandoned by the US under former president Trump – already includes Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and Canada.

But after a bit of reflection, one core aspect of Britain and the CPTPP seems curious: The UK is a great distance away from the Pacific region. Following Brexit, it seems to have swapped membership in a huge, well-established free trade zone among a wealthy group of nations right on its doorstep – the EU – for a distant, nascent agglomeration, some members of which have a per capita disposable income that is a fraction of the European bloc. The common thread that binds the new organization is trade across an ocean that the UK doesn’t touch.

Signatory countries in the CPTPP are home to 500 million people, a similar number to the EU’s estimated population, but the impact for Britain will likely be limited. Official estimates suggest membership, which will cut tariffs on exports of food, beverages and cars, will add about $2 billion a year to the UK economy after 10 years, or less than 1 percent. The hit from Brexit is estimated at a loss of 4 percent in the UK’s GDP.

Yet Prime Minister Rishi Sunak hailed the CPTPP agreement, saying it “demonstrates the real economic benefits of our post-Brexit freedoms”. He also pointed to Britain’s long history as a nation engaged in oceanic trade and said the agreement puts the UK with a “dynamic and growing group of Pacific economies”.

“We are at our heart an open and free-trading nation,” he added.

Joining CPTPP has been a key aim of the “Global Britain” initiative pushed by successive trade chiefs since Brexit including the current one, Kemi Badenoch. The British economic staff say about half of the 2.3 billion members of the global middle class will be in the Indo-Pacific region by 2050.

The new trade engagement includes former British colonies, harkening back a bit to its days of global glory, but today the UK is just one of many potential hubs courting more import-export activity. Could legacy connections from its days as an empire give it a step ahead on the competition?

Perhaps, if it is professional services that the other CPTPP members need, because that is Britain’s strong point. Its export of goods – cheese, cars, chocolate, machinery, gin and whisky – is small in comparison. Though Downing Street says the new agreement will cut red tape in providing services, Britain already has cooperative agreements with most other CPTPP members.

Proponents say the CPTPP is particularly advantageous in digital and services trade, which plays to Britain’s strengths as the world’s second-largest services exporter.

London’s status as one of the world’s most important stock exchanges long benefitted from its position in the middle of the global time zone. As the inventor of the naval clocks so crucial to exploration and empire, England literally wrote the book on time zones, setting the center at the Royal Observatory in Greenwich, London. That established the ubiquitous term Greenwich Mean Time, or GMT. The London Stock Exchange can do deals simultaneously in New York’s morning and Tokyo’s afternoon.

In sealing membership in the CPTPP, Trade Secretary Badenoch met with counterparts over a Zoom video conference at 1 am GMT. For Britain’s prime time, she shared screengrabs of the video meeting. Clearly Britain is no longer the fulcrum when setting the time to make a deal.

For the current UK government, the CPTPP is likely more a strategic and symbolic win than a breakthrough that will bring substantial benefits in the short term. The trade secretary characterized it as “getting in early” like with a start-up business that will go onto great things.

The agreement can also be seen as part of a broader UK pivot to the Indo-Pacific region in not only trade but also diplomacy and politics.

Britain’s membership in the CPTPP is also a measure of a more assertive Japan, a founding member of the organization that stayed the course even after Trump pulled the US out. Japan worked hard to get the UK to accept all existing CPTPP rules without exception.

Among those are low duties on palm oil, a product seen by green campaigners as particularly damaging to the environment due to swaths of forests cleared for its cultivation and production.

It’s an ironic concession given that the UK pulled out of the EU in large part because the British voting public did not like to conform to rules made by other nations.

Still, it could be a step in the right direction as the UK seeks to staunch the pain from Brexit, probably the worst own-goal by a major nation in the history of international trade.

Jon Van Housen and Mariella Radaelli are international veteran journalists based in Italy