The CPTPP and the UK's accession
The CPTPP is a mega trade deal signed in 2018 by Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Viet Nam. Collectively, the eleven CPTPP Parties represent a market of more than 500 million people, around 13 percent of the global GDP, and 15 percent of global trade.
In addition to existing parties, several other economies have applied to join the CPTPP or signalled interest in doing so. The United Kingdom was the first country to apply to join the CPTPP in February 2021, followed by China and Chinese Taipei (September 2021), Ecuador (December 2021), Costa Rica (August 2022), and Uruguay (December 2022). The Republic of Korea, Thailand, Philippines, Indonesia, and Colombia have also expressed interest in joining the CPTPP but have not initiated the official procedure. On 31 March 2023, the UK announced the substantial conclusion of its accession negotiations to the CPTPP.
The benefits of UK's joining the CPTPP
Joining CPTPP will put the UK at the heart of the most dynamic group in the world economy. In 2022, the UK exported approximately USD 34.8 billion and imported more than USD 60 billion worth or goods with the CPTPP markets. Following the UK's accession, over 99% of tariffs by CPTPP members will be eliminated, thus improving market access for British businesses. Additionally, the UK consumers will also have access to a greater variety of goods. While the UK already has bilateral trade deals with most CPTPP members, the CPTPP will be the first free trade agreement that the UK has with Malaysia. This will give UK businesses much better access to an economy of 33.6 million people and a GDP of USD 373 billion. For example, tariffs will be eliminated on UK exports of whisky to Malaysia, currently at 80%, which will be phased out gradually in 15 years. The UK has secured access to various CPTPP tariff rate quotas (TRQs) for UK exporters, including dairy with Canada, Japan, and Mexico. Likewise, the UK also provides staging TRQs and limits on imports of sensitive agricultural produce, thus giving UK's domestic producers in sensitive sectors time to adjust.
The UK's interest however is more on trade in services, for which the country already exported around USD 40 billion to CPTPP members.1 The CPTPP, with its Cross-Border Trade in Services (CBTS), will provide certainty and transparency for UK service suppliers in key UK industries and sectors such as financial services and professional services. The CPTPP prohibits parties from requiring a service supplier of another Party to establish or maintain a representative office or any form of enterprise, or to be resident, in its territory as a condition for the cross-border supply of a service (the 'local presence' requirement). This would ease the cross-border supply of services for UK service providers. Furthermore, the CPTPP's Financial Services chapter ensure that UK's firms can provide new products and innovative services, including new fintech services, to CPTPP markets on a level playing field with domestic firms. The UK has also been able to secure better access and certainty for UK's business persons to provide services in the CPTPP market through mode 4 (movement of natural persons).
For UK investments, the CPTPP provides guarantees on the treatment that UK investors will receive when accessing and operating in CPTPP markets, including protections from unfair, arbitrary, or discriminatory treatment. UK investors can also access the agreement's Investor-State Dispute Settlement (ISDS) mechanism to ensure enforcement of the committed investment protection.2 It should be noted, however, that the UK, Australia, and New Zealand have opted for not applying the CPTPP ISDS mechanism among themselves.
In addition to the above-mentioned market access provisions, the CPTPP is also well-known for its progressive commitments on digital trade, labour, and environmental protections. The CPTPP's e-commerce provisions go beyond the traditional approach in UK's FTAs rolling over from the EU's FTAs, but is on par with the more recently signed agreements, such as the UK-Singapore Digital Economy Agreement (DEA).3 These provisions will support the cross-border data flows underpinning several services, while at the same time allowing the UK to maintain high-standard domestic legislation on personal data protection. The CPTPP's Labour and Environment chapters promote fair-trading environment through strongly binding provisions prohibiting derogation of labour and environmental protection standards to gain trade advantages.4 These provisions therefore contribute to level the playing field for the UK and other CPTPP members' business, while at the same time promoting sustainable development outcomes.
The importance of the UK's accession
As the UK is the first country to join the CPTPP via the accession route, the UK's CPTPP Accession Protocol is a much-expected instrument as it will set the precedent for other applicants to the CPTPP. Additionally, the CPTPP has been designed as a living agreement, there has been discussion about the possible changes that the UK can contribute to the evolution of the agreement. However, for any official contribution, the UK will first need to complete the accession process.
For the UK to become an official members of the trade bloc, a Protocol of Accession covering the negotiation outcomes will need to be signed by the Parties. Following the signature, CPTPP Parties will need to complete their own domestic ratification procedures to approve the UK's accession. Entry into force will take place once both the UK and CPTPP Parties have finished their legislative processes. Despite the many benefits arising from accession the UK Government's own estimates of the benefits are quite small. A mere 0.08% of GDP would be raised as a result of the full implementation of CPTPP. However, that estimate could have not taken into account the long term impacts from ease of trade and other facilitating measures. Furthermore, additional measures, outside of the agreement itself will be needed to boost trade and investment between the UK and CPTPP partners.
Footnotes
2. See our introduction to the ISDS under the CPTPP here https://www.tradeeconomics.com/vietnam-investor-state-dispute-settlement-isds-under-vietnams-ftas/
3. See our analysis of the CPTPP E-Commerce chapter and its implications for the UK at https://committees.parliament.uk/writtenevidence/110995/pdf/
4. See our analysis of the CPTPP Environment chapter and its implications for the UK at https://committees.parliament.uk/writtenevidence/111179/pdf/
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
