Understanding the CPTPP and what it could do for UK construction – Planning, BIM & Construction Today

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The UK recently signed to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP, but what does it mean for the construction sector?

Existing members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, have approved the UK’s application to join the Indo-Pacific region trade agreement.

Formal ratification will follow later in the year to gain full access to the trade agreement.

What is the CPTPP?

The CPTPP is a trade agreement between eleven current member states, with a combined population of over 500m people.

The pact eases trade and tariffs between the nations on goods such as food, drink and cars.

First established in 2018, current members are Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and Canada. The UK is the first new nation to join the group. Other nations seeking membership include China, Taiwan, Ecuador, Costa Rica and Uruguay.

The USA was a signatory of a previous agreement, but withdrew in 2017.

The combined economies of the member states plus the UK is estimated to total around £11 trillion. By comparison, in 2022 the EU was worth roughly £13.3 trillion.

Concerns about long term impacts on trade and sustainability have been raised

The government claimed that the deal would generate £1.8bn of extra income, or 0.08% of the UK’s annual gross national product (GDP), after a decade.

The UK already had trade agreements with most of the CPTPP’s members, and in 2019 the body only accounted for 8% of UK exports- less than what was sold to Germany in the same year.

Significant concerns have also been raised about the UK’s concession on palm oil tariffs, which environmental groups have warned could lead to increased deforestation, seemingly counterintuitive to the UK’s previously stated sustainability targets.

Worker exploitation is also of concern, as TUC’s general secretary, Paul Nowak, pointed out: “This deal allows multinational corporations to sue the UK government in secret courts for introducing policies which threaten their profits – this could include an increase in the minimum wage or bringing energy companies back into public ownership.”

Nowak also warned that the deal would sanction the exploitation of workers and forced labourers in countries such as Vietnam and Malaysia.

How can the UK construction sector benefit from joining the CPTPP?

Oliver Chapman, CEO of supply chain specialist OCI, considered the benefits and challenges associated with U.K. plans to join CPTPP.

“There is a potential long-term gain from the U.K. in joining CPTPP, but for various reasons, the U.K.’s physical distance from the Pacific reduces the benefits. However, a potentially highly significant advantage exists in one often overlooked respect.

“At face value, news that the U.K. has agreed on a deal to join CPTPP is good news for the U.K. and supportive of supply chains that include U.K. organisations. When and if the U.K. finally joins the huge trading block, U.K. organisations can participate in tariff-free trade when trading directly with other block members.”

The CPTPP’s most valuable asset may be yet to come

“Maybe of greater significance is the possibility, or indeed probability, that CPTPP is likely to expand further still. Potential new members include fast-growing ASEAN countries Indonesia, Thailand and the Philippines, the world’s tenth largest economy South Korea, Taiwan, several South American countries and possibly even China.

“So, whilst the U.K.’s membership of CPTPP may not introduce significant benefits at the outset, they are likely to improve significantly over time.

“There are two more important considerations, one favourable, the other less favourable.

“Firstly, membership of CPTPP does not only provide free trade in goods but in services too, and since services are an important part of the U.K. economy and are often missing from free trade agreements, this is an important benefit. However, laws on digital taxation vary across the world introducing complexity to the digital supply chain, even within CPTPP.”

The UK’s physical distance may prove detrimental to percieved benefits

“On the other hand, we see a greater emphasis on supply chain covering smaller geographical areas,” Oliver continued.

“Firstly, high fuel costs mean long-distance transportation costs have increased significantly.

“Secondly, the pressure of climate change, net zero and ESG mean many organisations prioritise shorter distances within the supply chain.

“Thirdly, when supply chains encompass a large geographical area, final products and the components and materials that make them up spend more time in transit. As a result, cash flow can be massively impaired, significantly increasing the time it takes to scale up a new product.

“The CPTPP member closest to the U.K. is Mexico, other members are literally on the side of the planet, so the above three factors significantly reduce the benefits to the U.K. in joining the trading block.

“On the other hand, supply chains in services and digital supply chains are not so adversely affected by physical distances, and so the above disadvantages are less significant for non-physical supply chains, although complex variation in tax laws is a mitigating factor.”

Harriet Clough


Twitter: @Harriet_PBC