Franco Gentile gives an economic and geopolitical overview of the UK’s ascension to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade bloc.
On 31 March 2023, UK Prime Minister Rishi Sunak announced that negotiations on the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) had concluded. The CPTPP is a free trade agreement (FTA) based in the Indo-Pacific with 11 members: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The combined GDP of CPTPP members was approximately $13.5 trillion in 2021. CPTPP members are also among some of the fastest growing countries in the world and represent an important market share of the Indo-Pacific, which is expected to generate 54% of global growth between 2019 to 2050. This would suggest that the UK has gained a foothold in an increasingly significant market and access to a rapidly expanding middle-class population.
CPTPP membership will also facilitate digital trade for UK companies due to the trade bloc’s agreement not to impose data localisation requirements. The agreement allows firms based in countries with CPTPP membership to send and store consumer data in another member’s country, bypassing the need to build data storage centres or use local computing facilities. This is a perk that is not widely available given the sensitivity of international data transfers. The agreement will help the UK economy gain a comparative advantage in services trade, providing better access to consumer data and thus enabling companies to tailor their products and services in a more efficient manner. Additionally, UK businesses will be able to provide services from the UK in key sectors without having to establish a local presence, such as an office, in a CPTPP member country.
The CPTPP has a lot of potential, but success will be neither guaranteed nor immediate. In fact, accession to the trade bloc will only increase the UK’s GDP by 0.08% over the next 15 years. This begs the question of whether the UK’s membership of CPTPP is only a consolation prize for no longer being part of the European Union (EU). For example, in the first 15 years of being inside the EU, the UK’s GDP increased from $192.54 billion to $910.12 billion. This represents an increase of 372.69%, dwarfing the 15-year forecast regarding UK GDP growth resulting from CPTPP membership. Additionally, the EU market was worth $17.18 trillion in 2021, representing $3.68 trillion more than the market to which the CPTPP provides access. Not to mention that the geographical proximity between the EU an the UK allows for more reliable and consistent flows of international trade.
From an economic standpoint, one could argue that EU membership is much more fruitful than CPTPP membership, but this disregards other political and geopolitical benefits that the CPTPP brings. For example, the UK will have a vote on whether China should be granted accession to a trade bloc based in the Indo-Pacific. This is unique for a country that is not geographically located in the region, and offers the UK significant leverage. CPTPP membership would benefit China’s economy given that the agreement commits members to removing 99% of tariffs on all goods when trading with one another. This would be a notable benefit given that other trade agreements in the Indo-Pacific, like the Regional Comprehensive Economic Partnership (RCEP), are comparatively shallow in terms of trade liberalisation. For example, RCEP specifically excludes most services, as well as agriculture, from the agreement.
The UK will now have a vote on whether China should be granted accession to a trade bloc based in the Indo-Pacific. This is unique for a country that is not geographically located in the region, and offers the UK significant leverage.
CPTPP membership will also give the UK the opportunity to recover its reputation as a country that abides by and promotes free trade, as well as a rules-based international order. This is important for the UK because it tarnished its reputation when it proposed to renege on commitments made as part of the Northern Ireland Protocol when it tabled the, now withdrawn, Northern Ireland Protocol Bill. The Bill would have unilaterally changed the terms of the EU and UK Trade and Cooperation Agreement, which would have been a breach of international law. Strikingly, the UK government even let the Bill pass through the House of Commons and reach the report stage in the House of Lords.
Given that the UK is about to become the second largest economy in one of the deepest free trade agreements in the Indo-Pacific, it will have the opportunity to steer the trade order and regulatory standards in the bloc, just as it once did inside the Single Market. This was the original intention of former US President Barack Obama when he decided to create the CPTPP (TTP at the time). Consequently, the UK will acquire unique geopolitical power and a level of influence that is uncommon among other mid-power countries.
It is evident that the CPTPP will not bring the UK the economic benefits that EU membership once did. Nevertheless, it will enhance the UK’s political relevance and influence in an important region. Ultimately, it is up to the British electorate to determine whether the UK’s trade policy should focus more on economic returns or global influence. Whatever they decide will shape the face of ‘Global Britain’ in the years to come.
Franco Gentile is a graduate of the MSc European Politics and Policy at UCL. He now works as an International Trade Policy Manager at a UK trade association that represents the views of over 300 members.
Image by Venti Views on Unsplash.
Note: The views expressed in this post are those of the author, and not of the UCL European Institute, nor of UCL.
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