Image Source: CTV News
The UK will probably sign a trade deal with Japan, Australia, and other Asian and Pacific countries.
CPTPP is a hard name to say, but it is a new group of 500 million people that the UK can join.
So what does that mean for businesses and people’s money?
What does CPTPP stand for?
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a trade deal between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
These countries signed the Pacific trade pact in March 2018.
The people in the club earn 13% of the world’s income as a group.
The UK is the first country to join that still needs to be a member. But, after Japan, it will have the second-largest economy. It brings the total value of the new grouping to £11 trillion.
What does the CPTPP matter to the UK?
The short-term gains are small.
When the UK was in the EU, most countries got along well. This connection has stayed the same.
Since Brexit, trade deals have been made between the UK, Australia, and New Zealand.
Brunei and Malaysia were the only countries the UK did not have a deal with. Together, these two countries account for less than 0.5 percent of all trade with the UK.
Even if there are some changes to the trade agreements with other countries, the government thinks that the gains from the expanded agreement will be small, about 0.08 percent of GDP over ten years.
On the other hand, independent government forecasters think leaving the EU will cost the UK much more, maybe 4% of our income.
In 2019, the CPTPP got 8% of all UK exports, less than we sold to Germany.
How is it different?
The main benefit is that both countries will have easier access to each other’s markets and agree to eliminate or lower 95% of import taxes and tariffs.
Some, like Japan’s rice-growing industry, are kept to protect sensitive domestic areas.
Also, companies that make products with parts from different places can argue that they should get special treatment.
That means they can check the “rules of origin” box if 70% of the parts come from any of the participating countries.
The rules could help UK companies that make machinery and medicines, which are some of our most valuable exports to these countries, by lowering their costs and letting them expand their supply chains across all constituent countries.
Aside from trade, being a member means that investors from CPTPP countries get the same treatment as domestic firms when they put money into projects in other member states, which could help UK firms.
In 2017, about £1 out of every £12 of foreign investment in the UK came from CPTPP countries, and the same was true in the other direction. Again, this was good for companies and jobs.
In exchange, countries must work together to make rules like food standards.
But the CPTPP is not like the European Union in that it is neither a single market nor a customs union.
So different countries can have different laws.
And countries can trade with each other as the UK does with the EU. But if the UK wanted to rejoin the EU, it wouldn’t make sense for it to join the CPTPP.
Why should we be concerned?
In short, what did the UK have to agree to in order to become a member?
Some people, like House of Lords Committee members, want to know how the UK plans to meet standards, such as those for animal welfare and the environment.
The government has said that CPTPP lets its members decide how much protection they want, so it would keep UK standards the same.
As part of the deal, the UK may have to let more foreign farmers sell their goods in the UK, but hormone-treated meat will still be illegal.
Malaysian palm oil is blamed for helping to destroy forests, so the UK might have to agree to lower tariffs on it.
What matters most is how well the partnership could work.
The agreement will make it easier to trade services and digital goods, which is in line with the UK’s goals and connects it to some of the countries that are growing the most quickly.
But if more people joined the club, that could bring the most benefits and challenges.
Some of the groups that want to join our China and Taiwan.
If China wanted to join, could the UK stop them? Or use its membership to influence how China gets access and what China wants to do?
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The real prize would be for President Trump to change his mind and agree to let the US join.
The United States buys about twice as much from the United Kingdom as it does from the other countries in the CPTPP, but President Biden plans to leave the group.
Right now, Britain’s membership in the CPTPP is mostly a symbolic win after Brexit.
But it might pay off in a big way in the end.
