The United Kingdom (UK) will join the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership known as the CPTPP.
What is the CPTPP?
The CPTPP is a free trade agreement between 11 countries spanning the Indo-Pacific, which was established by the founding members in March 2018. The 11 current members of the CPTPP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The CPTPP trading bloc is home to more than 500 million people and will account for 15% of global GDP once the UK joins (increasing from 13%).
The CPTPP is neither a single market nor a customs union. So countries are not required to have identical regulations and standards. Countries can strike their own trade deals with others.
The UK will be the first European country and first non-founding member to join the CPTPP. Joining the CPTPP will cut tariffs for UK industries exporting goods such as food, drink and cars to countries who have signed up to the agreement.
The UK currently has bilateral trade deals in place with 9 of the 11 founding members of the CPTPP. The UK currently does not have bilateral trade deals with Brunei and Malaysia.
What are the benefits of joining the CPTPP?
Joining the CPTPP should see 99.9% of UK exports being eligible for tariff-free trade with CPTPP members and secure lower tariffs for exports such as whisky and cars, which are in high demand in the Pacific region.
Being a member of the CPTPP will have additional benefits to the bilateral trade deals with the founding members. Rules of origin that allow inputs from any member country within CPTPP to count as ‘originating’. This could give British exporters additional access to reduced tariffs in some sectors and also encourage the future development of supply chains across CPTPP members.
Membership means investors from CPTPP countries get the same treatment as domestic firms when they put money into projects taking place in other member states, which could benefit UK firms.
Service sector businesses should benefit as it will make travel easier for business people moving between CPTPP countries. Opening up more financial and professional services markets.
The gains from the joining the CPTPP are expected to be fairly small in monetary terms according to the government's best stab at an estimate. 0.08% in UK GDP over 10 years. By contrast, leaving the EU, the government's independent forecasters reckon, will cost the UK 4% of UK GDP.
Future benefits of being a member of the CPTPP
The partnership's future potential is important. A number of different countries are exploring the possibility of joining the CPTPP, including China, South Korea, Philippines, Thailand and Taiwan.
President Trump decided that the USA would not join as a founding member of the CPTPP. Should America join this would be significant to the UK economy, as exports to America are double the amount of UK exports to all CPTPP nations combined.
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