The United Kingdom is set to join the trans-Pacific free trade pact … – Hellenic Shipping News Worldwide

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Three years after leaving the European Union, the United Kingdom has negotiated a trade pact with a band of Indo-Pacific countries.

The UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) means it joins a club of 11 other countries which together generate 14% of the world’s income.

Prime Minister Rishi Sunak says the agreement puts the UK in “prime position” to grow the country’s economy. But the deal has been met with mixed reviews, and the trading bloc has not had a smooth path to get to this point after the US withdrew under President Donald Trump.

So what is the CPTPP? And why was the UK keen to join?

What is the CPTPP?

The CPTPP is a free trade agreement between Japan, Malaysia, Vietnam, Australia, Singapore, Brunei, New Zealand, Canada, Mexico, Peru and Chile. It is one of the biggest trading blocs in the world, worth 15% of global GDP once the UK joins.

The UK is the first European country to join the agreement, and the largest economy after Japan.

The CPTPP started life as the Trans-Pacific Partnership, with the US negotiating to join under President Obama. This would have made the club the world’s largest free trade deal.

But in 2017, Trump withdrew from the deal on his first day in office. The remaining countries continued talks, eventually signing the CPTPP in March 2018.

What does the CPTPP do?

The CPTPP gives signatory countries greater access to one another’s markets and reduced tariffs on trade on the vast majority of items. Tariffs remain on some particularly sensitive areas to some countries – for example, Japan’s rice industry. In return, countries cooperate on regulations and standards.

In the year to September 2022, UK exports to CPTPP countries totalled £60.5 billion. Key UK exports to these countries include services, dairy, whisky and cars.

For example, tariffs on UK exports of whisky to Malaysia will be reduced from 80% to 0%, while car exports tariffs of 30% will be gradually removed. By making it easier and less expensive to trade, the UK government hopes to expand its exports to the growing economies in the trading bloc.

Why does the UK want to join the deal?

The UK applied to join the group in 2021 as part of its drive to strengthen trading links around the world after Brexit.

Alongside this, prospects for economic growth in the current market are pretty bleak. In fact, two thirds of respondents to the World Economic Forum’s Chief Economist’s Outlook 2023 predicted a global recession in 2023.

The UK already had bilateral trade agreements with all countries in the CPTPP bar Brunei and Malaysia, some of which had been carried over from its EU membership. The UK government’s own estimate says the reduced red tape and improved market access will boost GDP by £1.8 billion – 0.8% – over 10 years.

However, this may not offset the impact of deciding to leave the EU. The Office for Budget Responsibility estimates the post-Brexit trading relationship between the UK and EU will reduce long-run productivity by 4% relative to remaining in the EU.

Together with concerns that the UK will come under pressure to reduce standards on food and the environment to compete with CPTPP countries, this means the deal has drawn some criticism from unions and others.

However, if additional countries were to join the CPTPP, this could be beneficial. Costa Rica and Ecuador have also applied to join its Pacific rim counterparts, while Uruguay, Thailand, the Philippines and South Korea have also expressed an interest. China launched a bid to join in 2021, but it does not currently appear the US is reconsidering its stance.
Source: World Economic Forum