Understanding the CPTPP
The CPTPP is a multi-lateral agreement between 11 nations. The UK is looking to join the trading bloc which currently consists of countries located across the American continents, Asia and Australasia. However... What actually is the CPTPP?
The place for GROWTH...
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65% - Regardless of whether the UK joins the CPTPP, DIT projections suggest the potential for UK exports to CPTPP countries to increase by 65% from 2019 to 2030 (from £57 billion to £94 billion)
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13% - In 2020, the CPTPP countries collectively represented 13% of global gross domestic product (GDP).
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£1.8bn - DIT modelling suggests that there could be an increase in UK GDP of £1.8 billion in the long run. This increase would be added growth above and beyond future trends.
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$13.3tn - By 2050, the current CPTPP countries are expected to account for $13.3 trillion of the global imports. That equates to 13% share of global imports and a monetary rise of $3.5 trillion from 2019.
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65% - It is predicted that by 2030, 65% of the world's 5.4 billion middle class consumers are expected to be in Asia.
The Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a multi-lateral agreement between 11 nations. These countries are based across North America, Central America, South America, Asia and Australasia. The CPTPP documentation was signed on 8th March 2018 in Santiago, Chile. As such, it is a relatively young agreement and due to Covid, it is fair to say the full benefits are yet to be felt.
However, on 1 February 2021, the UK formally requested accession to the CPTPP and on 2nd June 2021, the Commission formally commenced accession negotiations with the UK. These talks are still ongoing but, it's clear that the CPTPP now makes up a large part of the UK's international trade plans.
But what is the CPTPP and what will it do for UK businesses?
The CPTPP unquestionably has market access benefits (for goods and services) but, it isn't all about trade, it takes a strong stance of other key areas as well including:
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Strong rules against unfair trade practices such as giving unreasonable advantages to state-owned enterprises and restricting imports on a protectionist basis.
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Members commit to a minimum wage and allow the freedom of association.
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Rules which commit members to the protection of marine environment
In terms of claiming a preferential tariff rate, the CPTPP allows for inputs from any member country to count as 'originating'.
This could significantly change, improve and widen the supply chain for UK based manufacturers and importers.
It is not only the UK who is looking to join the CPTPP, and the 11 member countries all have the shared vision that the CPTPP is open to others to join (as long as they are able to meet the required standards). For example, economies including the Philippines, Thailand, Taiwan, China and Republic of Korea have all expressed an interest in joining the CPTPP.
Once the UK has joined the CPTPP, they will be in a prime position to ensure that they are at the heart of a growing and expanding community. Also, ensuring that any prospective countries share and meet the standards outlined within the CPTPP.
As an immediate, visual and clear benefit, with accession the UK could see 99.9% of UK exports being eligible for tariff-free trade with other CPTPP members.
Once the Australian and New Zealand trade agreements have passed Parliamentary scrutiny, the UK will have bi-lateral trade agreements with nine of the eleven CPTPP countries.
Which begs the questions...what added bonus is there to the CPTPP?
Well, in terms of goods claiming the preferential tariff rate, it will provide two separate rules of origin which a business could satisfy. With the additional choice comes additional flexibility for a business.
It's not just all about goods though. The services sector will also benefit from the CPTPP. The CPTPP will make travel easier for business people to move between CPTPP countries, it includes advanced provisions to facilitate digital trade and, modern rules on data. Also, it will reduce barriers to investment and open up financial services markets. Overall, the UK exported £28.8bn worth of services to CPTPP members in 2019 and this is only set to grow.
As the chart below shows, in many areas the CPTPP goes beyond the bi-lateral trade agreements which we currently have in place. Though bear in mind, this table was provided by Government prior to the Australian, New Zealand and Singapore Digital agreements.
Fig 1: Within the Government's "UK Accession to CPTPP: The UK's Strategic Approach" the below table is provided to illustrate which areas the CPTPP goes beyond any current agreements with each individual country.
Strategically, accession to the CPTPP will put the UK at the heart of a dynamic area as the world economy increasingly shifts towards the Pacific region.
In 2019, CPTPP countries accounted for six of the world's top 30 import markets.
However, by 2050, seven of the eleven CPTPP countries will appear in the top 30 import markets. Malaysia being the additional country but, there is also a significant jump up the table by Vietnam. In 2019, Vietnam were placed 24th with a 1.1% share. By 2050, they are expected to rise to tenth with a 2.1% share of global import market.
This growth will align with a growth in the middle-class within the region. In-turn there will be an increased demand for higher quality products and services (which is an area that the UK excels in).
