How can the UK leverage the CPTPP for economic and strategic effect?
The Big Ask | No. 25.2024
On 15th December, the United Kingdom (UK) joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement between 11 member nations including Australia, Japan, Mexico, Vietnam and Chile. This move signals His Majesty’s (HM) Government commitment to and interest in the Indo-Pacific and other markets across the world. While the focus of the CPTPP is economic, joining the agreement will also provide opportunities for Britain to enhance its geopolitical position. So, in this week’s Big Ask, we asked eight experts: How can the UK leverage the CPTPP for economic and strategic effect?
Deputy Director, Progressive Britain
So, the UK has joined the CPTPP, not that many parliament watchers will have noticed. A scan of Hansard since the election returns four mentions of the accession in the Commons, two from Conservatives and two from Labour. Why the muted response? Tribal Labour’s disinterest in a Conservative initiative which, in adding only two countries with which Britain did not already have trade deals, is understandable.
But more importantly for HM Government which is worried about growth and delivery, the economic benefits might seem too small and too distant. Official government estimates suggest why, saying that the deal is ‘potentially boosting the UK economy by £2 billion a year in the long run’. And this at a time when Labour’s foreign policy interests are focused on Russia’s war against Ukraine and the conflict in the Middle East, neither of which seems particularly relevant to the CPTPP.
There may be geopolitical benefits to joining which eclipse the paltry economic ones, not least if it helps either manage or collaborate with the People’s Republic of China (PRC). But if this accession is not just an inheritance from the ancien regime and part of a foreign policy strategy, then few, certainly few Labour MPs, have noticed.
Patrick Horgan OBE
Independent Adviser on strategy and geopolitics
In a world where multilateral trade liberalisation has stalled, the UK’s accession to CPTPP is a Good Thing. The growth opportunities that the CPTPP enables are incremental, but welcome. An estimated contribution to Gross Domestic Product (GDP) of 0.08% over ten years is unlikely to quicken the pulse of businesses across the nation. Nevertheless, there will be benefits for some exporting companies, some advantages for supply chain activities within the CPTPP bloc, and the addition of Malaysia and Brunei to the list of countries with which the UK now has a trade agreement (bilateral agreements already existed with the other CPTPP members).
Membership of the CPTPP is not transformational, nor is it a substitute for the UK’s relations with other partners and allies. Taking Britain into CPTPP thickens the relationship with some close partners (Australia, New Zealand, Canada, Japan) and creates a new strand in the relationship with countries where the UK has less extensive ties (Mexico, Chile, Peru, Vietnam). Securing economic and strategic gains will need targeted support for companies, particularly Small and Medium Enterprises (SMEs), guided by greater clarity on trade strategy and on what the UK aims to achieve through trade diplomacy.
A core objective for the UK in joining the CPTPP was to:
Send a powerful signal to the rest of the world that the UK as an independent trading nation will continue to champion free and fair trade, fight protectionism, and remove barriers to trade at every opportunity.
The immediate challenge will be to determine how best to pursue that objective, and the principles which underpin it, when the next leader of Britain’s key ally and the world’s largest economy professes that ‘The most beautiful word in the dictionary is tariff, it’s my favourite word.’
Minako Morita-Jaeger
Senior research fellow in International Trade, University of Sussex
The CPTPP is a Free Trade Agreement (FTA) negotiated by the United States (US) when it was still supporting the neo-liberal order – where governments promote a free market economy with minimal government intervention. Today, the world economic order is shifting towards post-neoliberalism, where governments look at economic interdependence as a source of risks, not purely as a source of economic prosperity, and take a more managed approach to trade. On top of that, ‘America first’ protectionism under the incoming Trump administration is likely to destabilise the world economy by using high tariffs as threats and denouncing the rules-based world trade order.
Throughout the upcoming Trump 2.0 years and beyond, the core value of the CPTPP will become the ‘middle power’ coalition, which supports the free and open trading system. This is because America’s protectionism and disengagement to the multilateral trading system will further accelerate the multipolar world order. The UK could strategically shape the CPTPP from the inside as a key player and create dynamism to attract like-minded countries.
From the economic perspective, the CPTPP’s policy value is limited given that the UK already has bilateral FTAs with nine out of 11 members, except for Malaysia and Brunei. The PRC’s accession will create a big economic opportunity for the UK only if Beijing can fulfil all requirements for acceding to the CPTPP. Achieving its strategic and economic ambitions would require a balancing act.
Member of the Advisory Board of the China Observatory, Council on Geostrategy
The UK’s accession to the CPTPP is the most significant trade agreement the country has joined since leaving the European Union (EU). Yet, the economic case for membership isn’t persuasive. Britain ships slightly less than 9% of goods and services exports to and takes about 7% of imports from CPTPP counties, but the bulk of this trade is with the nine member countries with which the UK already has bilateral FTAs.
If there is a case, it derives from the CPTPP’s high standards, rules to open markets, and scope, which includes service and digital industries – all relevant to UK interests. Moreover, the timing of British membership is fortuitous in that the new recalibration of supply chains away from the PRC involves Vietnam and Mexico, and possibly other applicants in the future.
Political presence in the Pacific Rim for the UK outweighs the economics. In joining the CPTPP, Britain will preside with others over the applications of both the PRC and Taiwan, among others. Beijing’s application is by far the most sensitive, especially as HM Government finds itself now embroiled in and having to recognise an interference and influence campaign by the Chinese Government in the UK, at a time when it says it wants to engage and interact more with Beijing.
The CPTPP, therefore, offers the UK some limited trade opportunities, but a political platform in the Pacific Rim that joins existing commitments to other institutional arrangements including AUKUS with Australia and the US, and the Five Eyes security alliance, with Australia, Canada, New Zealand, the US, and possibly Japan in the future.
Expert Associate, National Security College, Australian National University
The UK’s accession to the CPTPP has been years in the making and signals a more globally focused Britain. While the economic benefits of Britain becoming the 12th member of the CPTPP remain contested, the strategic advantages are clear. This move provides opportunities for HM Government to strengthen relationships in Southeast Asia, influence the direction of the CPTPP and play an influential role in assessing the PRC’s application to join.
Southeast Asian countries already account for 30% of the existing CPTPP membership, and this figure is likely to grow, with Indonesia having applied to join and the Philippines and Thailand expressing interest. These countries clearly view trade and economic development as closely linked to strategic relationships, including defence and security partnerships. Britain should leverage its accession to the CPTPP as a platform to advance its foreign policy objectives in Southeast Asia by renewing and strengthening both economic and security relationships.
The UK’s accession to the CPTPP also provides an opportunity to shape the future direction of this economic bloc, including regulations in areas such as e-commerce. Through its standard-setting role, Britain can also use its position as the 12th CPTPP member to influence Beijing’s behaviour. While it is widely acknowledged that the PRC will struggle to meet the bloc’s high standards – such as a demonstrated history of complying with trade regulations – Beijing continues to lobby countries such as Australia in its bid to join. In this context, the UK’s membership in the bloc grants it significant influence over any future discussions regarding the PRC’s potential accession to the CPTPP.
Minister of the Indo-Pacific (2022-2024) and Secretary of State for International Trade (2021-2022)
Brexit provided the UK with the opportunity to make its own trade deals with the world, with the CPTPP the largest such deal that HM Government has struck since 2020. For British business, this is a new £12 trillion marketplace, and will add at least £2 billion each year to the country’s economy. But the improvement to HM Treasury coffers is only one part of the UK’s strategic opportunity to build alliances and deepen longstanding relationships. These important economies and societies across a vital and competitive region have a challenge that coercive actions may limit many nations’ agency to speak their minds.
The UK’s role as a trusted partner in the region – from the world leading green economy agreement with Singapore to the longstanding Five Power Defence Arrangements (FPDA) – has been further enhanced through trade deals with Australia and New Zealand and a new, deep defence partnership with Japan. All of which are hugely valuable to the UK.
So it is vital that the new Labour government, in its rush to reset relations with the European Union (EU), does not tell the world that countries beyond the EU are less important.
HM Government keeps telling us it wants growth – well that cannot be achieved by limiting the UK’s trade relations to the stagnant EU market. The rest of the world is where the growth is, the young workforces and growing middle class who want the Best of British goods and services. HM Government should help British businesses access and grow into these exciting markets, something that the CPTPP is well positioned to do.
Senior Research Fellow in Science, Technology, and Economics, Council on Geostrategy
The UK already has bilateral trade agreements with nine of the 11 other CPTPP countries – Malaysia and Brunei being the exceptions. This means that the economic benefits of accession, at present, are likely to be minimal. But the real benefit of joining the CPTPP is not economic, it is geostrategic. Britain can help shape the future development of the partnership – and it will help deepen the UK’s ties with important allies such as Japan, who have long championed Britain’s accession to the bloc.
The CPTPP aims to reduce trade barriers for digital businesses and promote the flow of data across borders. The CPTPP requires parties to ‘allow the cross border transfer of information by electronic means, including personal information’, and data localisation measures are prohibited.
This has led to concerns that membership of the CPTPP could lower UK standards on data privacy and the protection of intellectual property, as CPTPP rules on these have already been negotiated and agreed by the original members.
The CPTPP’s e-commerce chapter formed one of three key global templates for data governance alongside European and Chinese approaches. But in the time since those rules were designed, the digital economy has evolved and the CPTPP’s approach now lags behind.
By joining, the UK can help shape its vision for digital trade policy. Especially as the CPTPP review process will allow Britain to play a pivotal role in these discussions.
Marie-Curie Fellow, Aberystwyth University
The UK’s accession to CPTPP is an important step to advance HM Government’s engagement in the Indo-Pacific. The CPTPP offers an opportunity to boost trade and economic engagement with other CPTPP members while strengthening Britain’s presence in the region. This is a welcome development for the UK’s broader commitment for a free and open international order in the region, as outlined in the Integrated Review (IR21).
Nevertheless, the UK also needs to be realistic with CPTPP. The heightened geoeconomic competition between the US and the PRC can affect the economic cooperation in the Indo-Pacific, especially under Trump’s second presidency. While Britain’s accession to the CPTPP is an important step, the UK still needs to mitigate any effects from increased protectionism and new trade wars between Washington, DC and Beijing, which could affect CPTPP progress and benefits.
Britain can leverage the CPTPP to strengthen its economic and strategic presence in the Indo-Pacific in two ways. First, HM Government can use the CPTPP to boost partnership with key emerging economies in Asia, such as Singapore, Vietnam, Malaysia, and Indonesia (which have submitted applications to join the CPTPP this year). These countries are predicted to lead the Indo-Pacific economy in the coming decades; they also have close economic relationships with the PRC. Therefore, HM Government can use the CPTPP to boost economic engagement with these countries and balance Beijing’s economic influence in the region.
Second, the UK can use the CPTPP to mitigate any effects from US-PRC competition. Britain can also engage with its established partners in the CPTPP, such as Japan, Canada, Australia, and New Zealand, in order to preserve free and open international economic order amid this period of heightened competition and increased protectionism.
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