CPTPP – Is the Government delivering on its ‘Global Britain’ agenda?
By Sarah Hodes, Junior Consultant
52 minutes after midnight on Friday 31st March, Business and Trade Secretary Kemi Badenoch confirmed the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Joining the £9 trillion trade bloc marks the biggest trade deal for the UK since Brexit. The CPTPP hosts 11 members – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The deal will cut tariffs on exports of cars, food and drink and grant access to what will be worth 15% of global GDP with the UK joining, and about 500 million people. Downing Street boasts of a £1.8 billion boost to the economy in the long term and that it will increase wages by £800 million compared to 2019 levels. However, the effect on GDP is expected to be just 0.08 per cent. The deal also aims to solidify supply chains for future tech, including semiconductors and critical materials used to make electric vehicles and wind turbines.
The CPTPP came about from what was originally the TPP, started by the Obama administration in 2015, but the US pulled out on Trump’s first day in office after he called the pact “a rape of our country.” America’s northern neighbour created the CPTPP as a replacement.
It was first announced in June 2021 that the CPTPP Commission had agreed to formally start UK accession negotiation under the steer of then-Trade Secretary Liz Truss. Now, 21 months later, Rishi Sunak has delivered on negotiations and Brexit, pleasing his toughest critics. Badenoch compared joining the CPTPP to buying a start-up, stating, “This is not a deal about tomorrow. It’s a deal about the future.” The deal has also been lauded by Pernod Ricard, as well as the Confederation of British Industries and Standard Chartered bank.
While the economic benefits will remain to be seen, there are two key wins from the deal:
- The Conservatives seeming to deliver on its aim of “Global Britain” since the UK left the EU. Euroskeptics are pleased with the largest trade deal since Brexit, with some arguing that joining the CPTPP will stop any hope of rejoining the EU due to the required alignment with the bloc’s rules and standards. The deal will also allow British businesses to provide services in other countries within the bloc without being required to set up local offices or be residents. Services made up 43% of overall UK trade with CPTPP members last year. On the agreement, Rishi Sunak said, “As part of CPTPP, the UK is now in a prime position in the global economy to seize opportunities for new jobs, growth and innovation.”
- The second benefit is countering China’s influence in the Indo-Pacific, with the UK’s policy on China analysed in our recent Integrated Review blog.
From across the bench, Leader of the Opposition Keir Starmer welcomed the deal, caveating however that he would look to seek closer ties with the European Union under a Labour government, and Shadow Economic Secretary to the Treasury Pat McFadden gave it a “cautious welcome”. Unions are usurpingly concerned with workers’ rights in CPTPP member states; In Vietnam and Brunei, independent unions are banned and in Malaysia, migrant workers are subject to forced labour. It’s also said that unions were left out of negotiations despite promises.
British farmers are also far from celebrating the deal as this could be a major hit to their industry. While it opens the market to exports, British exporters will need a great deal of support to now compete with the 12-country market. Additionally, it’s been reported that animal welfare could also suffer due to the use of production methods by other members that would be illegal in the UK, such as sow stalls, battery eggs, antibiotic use, hormone treatment and pesticides.
Many are noting the possible adverse effect the deal could have on climate change. While Greenpeace called the deal “outrageous”, Badenoch argued that the UK will have increased influence on sustainability as part of the bloc, and went on to praise palm oil, a known driver of deforestation. The deal will eliminate the current 12% tariff on Malaysian palm oil which could increase imports. One campaigner for Greenpeace UK said: “The UK has no safeguards in place to ensure it is not importing or financing palm oil operations that damage critical forests, peatlands, indigenous lands and habitats for threatened species including orangutans. Cutting palm oil tariffs will only incentivise further destruction and runs completely counter to the government’s promise to embed the environment at the very heart of trade. It is beyond outrageous.”
In response to such concerns, a spokesperson from the Department of Business and Trade told The Guardian that “The UK is committed to tackling illegal deforestation within our supply chains, and our agreement to join CPTPP does not change that.” They also stated that the UK accounted for only around 1% of Malaysia’s palm oil exports.
Arguably, the most significant aspect of the UK joining the bloc is the geopolitical aspect in countering China’s influence in the region. While the rhetoric of the Government regarding China has been deemed weak by some, this showcases Sunak’s pragmatic approach on the issue, fighting China while not hindering trade as the UK battles inflation and looks for economic recovery and stability. Not only does it increase British influence in the region, but also allows the UK to vote on the joining of applicants, namely China who has started its bid.
Liz Truss called the deal “an important counterweight to those who seek to undermine our values. In particular, the CPTPP is a vital economic bulwark against China and in due course I would like to see other like-minded free trading nations making their own applications to join.”
Former leader of the Conservative Party Iain Duncan Smith agreed with his fellow China hawk stating that, "Now we are in CPTPP we should do our utmost to work with the others to veto China joining”, adding “we should persuade the U.S. to join as well.”
While the CPTPP may not offer the economic benefits one might hope for, it appears a welcomed deal by most with economic potential and a step forward for the UK’s China strategy and strengthening British ties in the Indo-Pacific. But should the trade payoffs not be as great as the Government hopes, what does this mean for a post-Brexit Britain and its legacy?