Will the UK's shift to Asia for trade pay off with CPTPP membership?

Industry News | | MIC Customs Solutions |

How could the UK's application to join CPTPP benefit the country's trade and the wider bloc?

The UK's exit from the EU in 2020 marked the biggest change for the country's trade policy in over 50 years. With the country facing a difficult environment, Westminster has been keen to shore up bilateral trade deals with nations around the world to replace those lost as a result of Brexit.

With trade to and from the EU facing new headwinds caused by additional paperwork, the UK is looking further afield in its efforts, with the Asia-Pacific region a key target. The nation has already signed bilateral trade deals with countries such as Japan, Australia and New Zealand, but the government has made it clear that its key ambition for the eastward turn is membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

Why is the UK looking east?

Tensions with the UK's traditional trade partners in the EU remain high, mainly due to the continuing disagreement over the implementation of the Northern Ireland protocol, which is intended to avoid a hard border on the island of Ireland.

Trade volumes with the EU have also dropped sharply since Brexit came into full effect. According to figures from Eurostat, UK exports to the EU dropped by nearly 14 percent in 2021, with European Commission vice-president and Brexit negotiator Maroš Šefčovič blaming the increase in red tape for this.

Meanwhile, hopes for a swift free trade agreement (FTA) with the US appear to have been dashed. In September, then prime minister Liz Truss said there was no expectation of talks starting in either the short or medium-term.

As a result, the UK is being forced to turn elsewhere for trade growth, and Asia represents a promising opportunity. The country's government estimates that exports to CPTPP members - which also include American nations Canada, Mexico, Peru and Chile - are set to increase by 65 percent by 2030, representing an additional £37 billion.

Membership of the bloc would therefore help cut tariffs on key goods such as Scotch whisky, cars and agricultural products. According to projections from the Department of International Trade, accession to the CPTPP could lead to an increase of £1.8 billion in UK GDP in the long-term, as well as giving better access to a market that may potentially be worth 19 percent of global GDP if it continues to expand.

The progress made on CPTPP membership

This explains why the CPTPP has become a priority for the UK, with it making a formal application to join the bloc in 2021. But while the UK has already passed the initial stages of the process and secured the backing of key nations such as Japan and Australia, there is still a long road ahead.

Canadian minister of international trade Mary Ng noted members are keen to make sure any agreement is not rushed. She told Bloomberg: "We're taking our time to make sure we do get it right with our first accession."

However some CPTPP members have been optimistic about the rate of progress and how it may impact the future of the deal. For instance, Japan's economic minister, Daishiro Yamagiwa suggested at a conference in Singapore in October that a basic agreement for the UK to join the 11-member bloc could be in place by the end of the year.

He added that the application process will set a "good precedent" for future enlargement of the group, which will require high standards for trade rules and transparency. Singapore trade and industry minister Gan Kim Yong also said talks with the UK will act as a "pathfinder" for future accession, with applications from nations such as China and Taiwan also set to be considered in the future.

What could the future hold for UK CPTPP trade?

Although all parties are keen to see a deal done, some experts have warned that the benefits to the UK of joining the group will be more political than commercial. As the country already has bilateral agreements with nine of the 11 CPTPP members, actual trade effects may be limited, while the UK may have to make concessions on issues such as digital trade, investment and food standards.

L Alan Winters, professor of economics at the University of Sussex, noted in a piece for Asia Times that CPTPP membership will therefore not be a "panacea" for the country's trading policy and will be no substitute for the development of a stronger trade relationship with China.

He also noted that the post-Brexit FTA signed with Japan, which was largely copied from its pre-existing agreement as part of the EU, has been disappointing so far, with UK trade to the country amounting to £11.5 billion in 2021, or 1.8 percent of total exports.

Similar criticisms have been leveled at FTAs with Australia and New Zealand, which analysts have suggested will have a minimal impact on the UK's GDP, so it remains to be seen if wider access to Asia-Pacific markets as part of the CPTPP will have the desired effect.