Last month, it was reported online that the UK was ‘closing in’ on CPTPP membership. The Department of Trade announced that we had moved into the ‘second and final phase’ of the application, and the UK could be a member ‘by the end of the year’.
Many of our clients will know that the CPTPP is a trade bloc. But who are the other members? And what would membership mean for the UK?
CPTPP stands for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The 11 member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The agreement evolved from the Trans-Pacific Partnership (TPP) which had been agreed in 2016, and which included the USA. Donald Trump withdrew the US from the agreement when he became President, and the CPTPP in its present form was officially signed in Santiago in March 2018.
It is immediately apparent that all the countries involved have some link with the Pacific. Brunei may not be the largest economy in the world – it accounts for around 0.01% of global GDP – but it is demonstrably closer to the Pacific than the UK.
Why then does the UK want to join? And what benefits would being a member bring?
Simply put, the CPTPP is a huge trading bloc. The 11 member countries account for 13.4% of global GDP at approximately $13.5tn (£10.26tn) making it one of the world’s largest free trade areas. For comparison, China, which is not a member of the CPTPP, accounts for around 15.1% of global GDP.
If the UK were to become a member of the bloc – and that now looks very likely – it means that the vast majority of our exports to the member countries would become tariff-free, giving a significant boost to British business. Anne-Marie Trevelyan, who has taken over from Liz Truss as Secretary of State for International Trade, said: “CPTPP is one of the largest and most exciting free-trading clubs in the world. Today’s announcement … means the finishing line is in sight.”
Joining the CPTPP would have a number of advantages. It would mean lower tariffs on key exports such as cars and whisky, and should also benefit the UK’s farmers, with CPTPP members expected to account for 25% of the global demand for meat by the end of the decade. The CPTPP countries are also advanced in both the digital and services sector – which should play to the UK’s strength as the world’s second-largest services exporter.
Two-thirds of the world’s middle classes are expected to be in Asia by the year 2030, by which time UK exports to the member countries are expected to have grown 65% to £37bn a year. This would be an unquestioned boost to jobs, which could well increase over time, with South Korea, Taiwan, the Philippines and Thailand all thought to be keen on joining.
The Government will be working hard to make an announcement by the end of the year – by which time, of course, we are likely to be only 18 months off another General Election.