On the 31st March 2023, after nearly two years of negotiations, the Prime Minister announced that the UK will join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP is a vast free trade pact established in 2018 between 11 countries spanning the Indo-Pacific and its members include Australia, Canada, Japan and New Zealand.
The CPTPP covers a market of approximately 500 million people and a free trade area worth approximately £8.4 trillion, with membership allowing looser restrictions and reduced tariffs on trade between it’s members.
The UK has become the first European country to join this trade pact, with the Government hailing this new membership as demonstrative of the opportunities presented by post-Brexit trade freedoms and a powerful signal of the UK’s independent trading power.
What are the benefits?
The CPTPP is one of the largest free trade areas in the world, accounting for around 12% of global GDP in 2021, with this figure set to rise to 15% upon the UK’s accession. The government estimates this new membership will lead to a £1.8 billion boost to the UK economy through supporting jobs and economic growth across the country and strengthening existing trade relationships with member countries.
Joining the trade pact is expected to see 99% of UK goods exports to member countries become tariff-free, including key exports such as cheese, cars, machinery and alcohol. CPTPP membership will also boost the provision of services by allowing UK businesses to provide services in member countries without the need to establish a local office, allowing British companies to compete with domestic firms.
Additionally, while the UK already has bilateral trade agreements in place with a number of CPTPP member countries individually, joining the trade pact increases flexibility by allowing UK companies to trade freely across the bloc, creating further export opportunities and expanding current supply chains. The UK will also gain access to new markets, with this pact marking the first time Britain will have a Free Trade Agreement with Malaysia, for example. This offers UK businesses access to wider markets with ease, including the opportunity to expand their digital reach due to the CTPP’s modern digital trade rules.
Unlike the EU, the CPTPP is neither a single market nor a customs union, meaning that while the member countries are required to co-operate on regulations and meet certain standards, these are not required to be identical between each member. Member countries are also able to strike their own trade deals outside of the CPTPP, allowing Britain to continue trading with the EU.
Response from Critics
Critics of Britain’s move to join the CPTPP point out that the predicted £1.8 billion boost to the UK’s economy only represents around 0.08% of UK GDP. This would suggest that joining this trade pact will not offset the losses suffered from leaving the EU, with the Office for Budget Responsibility estimating that Brexit would reduce the UK’s potential economic growth by about 4%.
There has also been concern raised around environmental and animal welfare standards, as allowing each country to determine their own individual regulations may mean that other members’ standards are not consistent with the UK’s own. One example of this is the concession to lower tariffs on importation of Malaysian palm oil, a compromise that is unlikely to be popular with climate activists due to the industry’s association with deforestation and climate change. That said, the Government has been quick to point out that each member state is able to set their own levels of protection and, as such, there is no reason for the UK’s standards to be compromised.
Berry Smith Comment
While it is apparent that joining the CPTPP is not going to magically fix the economic toll of Brexit, the agreement provides the UK with new opportunities to create and strengthen global trade relationships with new markets. In fact, joining the CPTPP gives the UK access to some of the most dynamic economies in the world, such as Vietnam which is predicted to be one of the fastest growing economies in the decades to come.
In particular, UK businesses will benefit from smoother access to wider markets, and greater clarity around licensing and regulations in international trading. The modern rules on data trade paired with the trade bloc’s high data protection standards will also allow UK companies to confidently expand into CPTPP markets while protecting their data and intellectual property.
With this in mind, Berry Smith’s commercial team can assist in the drafting, negotiating and reviewing various types of Supply and Distribution Agreements, which are often necessary to businesses who wish to supply and export products to businesses located around the world, with such commercial contracts being vital to protecting your company’s interests.
Please contact us if you would like more information about the issues raised in this article or any other aspect of Commercial law at 029 2034 5511 or firstname.lastname@example.org