Opinion

By Ben Hart,

UK looks likely to join Trans Pacific Partnership

Now formally known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP – the change in name following the US’s departure under a controversial presidential memorandum, signed despite heavy opposition by former President Donald Trump – the 11-nation trading bloc eliminates the majority of tariffs between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. In its original form, as negotiated by President Barack Obama and signed in Auckland, New Zealand in February 2016, it was the largest trading bloc in the world and covered almost 40% of the global economy. Joining the bloc, even without the participation of the US – who may end up rejoining the bloc under the new Biden administration, subject to opposition from both sides of the US house and senate, or eventually sign a bilateral trade deal with the UK anyway – will be a huge boost to the UK economy post Brexit, and something that would have been impossible prior to the UK exit from the EU.

The UK will begin its formal application process this week – the week starting Monday 1 February – while negotiations will start later this year according to the government. Britain has been open about its ambitions to join the CPTPP since its departure from the EU, and now that it is becoming a reality, the PM has naturally been jubilant, with Boris Johnson saying in a statement;

“One year after our departure for the EU we are forging new partnerships that will bring enormous economic benefits for the people of Britain.

“Applying to be the first new country to join the CPTPP demonstrates our ambition to do business on the best terms with our friends and partners all over the world and be an enthusiastic champion of global free trade.”

Speaking to Times Radio, international trade secretary Liz Truss reported;

“On Monday I will be putting in a letter of intent,” adding that she expected formal negotiations to start in Spring. Truss has so far signed 57 trade deals over the last year with nations including Switzerland, Norway, Iceland and Kenya, although none that would come close to the CPTPP with its estimated collective GDP of £9 trillion. Speaking to the Sunday Express, Truss said that;

“Now we are no longer held back by the EU, we have the freedom to go further and faster to support our job creators. That is why we are seizing opportunities available to us only as an independent trading nation.

CPTPP includes some of the most dynamic nations in the world, covering £9 trillion of global GDP and 13% of total household spending.

Joining will create unheralded opportunities for UK businesses that simply weren’t there as part of the EU and deepen our ties with some of the fastest-growing markets on earth.

It will mean lower tariffs for car manufacturers and whisky producers, and better access for our brilliant services providers, delivering quality jobs and greater prosperity for people here at home.”

Upon becoming a member of the trading bloc, one of the largest on earth, the UK would emerge as the second largest economy in the CPTPP after Japan, although there is a possibility that the US could to rejoin under President Biden, although currently that looks unlikely, with partner at Control Risks and former US diplomat Dane Chamorro, telling CNBC that, while there is most likely a desire among the new Biden administration to rejoin the trading bloc, “you have to think that politically, on both sides of the aisle, the idea right now of more trade liberalization is really not very popular.”

Among current CPTPP members, there has been vocal support of the UK’s prospective membership, with former Japanese Prime Minister saying back in 2018 that he would welcome the UK joining the partnership post-Brexit, while Simon Birmingham, David Parker, and Chan Chun Sing, the respective trade ministers of powerful and influential CPTPP members Australia, New Zealand, and Singapore have also expressed support for the UK’s accession to the agreement. While the UK proper is geographically about as far as it gets from the Pacific, it does hold sovereignty over the Pitcairn Islands, the sole British Overseas Territory in the Pacific Ocean, giving the UK a somewhat legitimate link to the Pacific region.

The news of the UK’s application was met with delight by Brexiter Tory MPs who have described the move as being proof of the future success of the so-called ‘Global Britain’ as being rooted outside Europe, with the UK formally leaving the EU at the end of last year. MP for North West Leicestershire Andrew Bridgen saying:

“We don’t need the EU anymore. This just confirms the massive opportunities Brexit is already bringing to this country.

The EU were afraid Brexit would turn Britain into a major competitor and now their worst fears are being realised.”

Some of the benefits of the UK joining the trade agreement include near tariff free access to all of its members – amidst economic heavyweights like Japan, Australia, New Zealand, Mexico and Malaysia – including the removal of tariffs on food and drink, and cars, while providing a tremendous boost to our already successful technology and services sectors.

Unlike the EU, with its mantra of ‘ever closer union,’ joining the CPTPP doesn’t compel the UK to grease its leaders’ palms with over £10 billion a year, allow any free movement of people from nations within the bloc, thereby denying members control over their own immigration, nor adopt laws from a foreign organisation with its own interests and agendas.

Joining the trading bloc will help secure new trade and foreign investment, needed more than ever as we seek to bounce back from the government’s coronavirus pandemic responses and the enormous hole they have been leaving in the UK’s finances, opening up new opportunities for UK exporters, potentially providing the prospect of an industrial revival for the UK. The agreement would also help to diversify our trading links and supply chains, providing us with greater security at this time of disruption and uncertainty, as certain western nations and corporations are discovering just how risky the ‘just in time’ economic model is.

We already do a vast amount of trade with the CPTPP bloc, with the UK having done more than £110 billion worth of trade with CPTPP nations in 2019, while in 2018 UK companies had £98 billion worth of investments in the bloc’s member nations.

Tech companies were particularly pleased with the decision to join the free-trade organisation, with leaders pointing out how this modern trade policy will help create new opportunities for the UK tech sector, with tariff free access to both technologically pioneering nations like Japan, to aspiring, ambitious nations looking to break new ground in their own tech industries.

The Federation of Small Businesses (FSB) Chair, Mark Cherry said that;

“Membership of the CPTPP would be a hugely welcome development to all small businesses looking to either expand or begin their trading journeys.

Crucially, at the very heart of this agreement is an SME chapter, something that we have lobbied for the inclusion of in every FTA, ensuring that no business is left behind.

This is truly a world-leading agreement and one that will genuinely help small firms to thrive and succeed more than ever.”

Map showing current members of the bloc in shades of green (depending on signatory status), with the UK – the first non-founding nation to apply to join the bloc – in orange, while the countries South Korea, Taiwan and Thailand have also expressed an interest, the UK is firmly at the front of the queue. Photo attributed to L. Tak

The inclusion of an SME chapter is fantastic news to small to medium-sized enterprises across the UK, opening up new, post-Brexit, post-coronavirus opportunities. At Optimal Compliance our founders have over three decades’ experience in building small companies from the ground up, and offer consultancy services and products fit for small and medium-sized businesses in the 21st century. Check out our website here.

Ben Hart

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