On March 31 2023, the UK reached an agreement to join the Comprehensive and Progressive Trans Pacific Partnership Agreement (CPTPP) and is expected to ratify the agreement later this year. The CPTPP is a group of 12 (including the UK) countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam. This is the first expansion the group has had since the agreement came into effect in 2018.

During negotiations, CPTPP members did not concede to the UK’s requests for exceptions to the agreement's commitments and high standards. This was mainly to ensure consistency across the agreement,  but also to guarantee any future accession processes were governed with the same rigour. Setting such a strong precedent will be important for future  accessions.

General trade benefits

The economic benefits for the UK’s accession are small, standing at 0.08% of GDP according to the government's estimates [1]. This is primarily because the UK already has an FTA with most of the 11 members, except Malaysia and Brunei and so this assessment accounts for increased trade opportunities between the current members. If the five nations who have applied to join—China, Taiwan, Ecuador, Costa Rica, and Uruguay—all do so, the economic benefit would be far greater. 

As the UK already has FTAs with most members, the tariff benefits are minimal. However, a significant benefit comes from the rules of origin, which allows diagonal cumulation between members. This means that a product sourced in any member country counts toward “locally produced” content, providing greater benefits for industries such as electric vehicles. With Australia and Chile being major producers of the minerals needed for batteries, this is significant. 

As with all trade agreements, there will mostly be economic gains for governments, business and individual consumers. But, there will undoubtedly be losers from the agreement, for example, in the UK, farmers and the semi-processed food industry [2][3]. Governments need to ensure that there is support, through retraining or upskilling, for businesses, or individuals who will not benefit from the trade agreement. A good example of this was the US Trade Adjustment Assistance provision in the Trade Act of 1974, which was terminated in 2022.   

Supply chain benefits

The UK’s accession to the trade bloc also brings significant supply chain benefits for all members. Currently, businesses are having to deal with government policy shifts that are incentivising businesses to reshore production back to their home market or to “friendlier” markets. This is also a trend in businesses that are looking to “de-risk” their supply chains; Nike moved their production out of China and into Vietnam and Mexico, both members of the CPTPP [4]. 

Consistent rules of origin, simplified customs and trade facilitation measures and standardised regulations as part of the CPTPP agreement will all help supply chains—both from a sourcing and efficiency angle. 

The CPTPP is unlikely to result in a wholesale shift in businesses moving out of China as they have invested billions of dollars to become the world's dominant manufacturing hub, increasing their skills and expertise in this area. However, the CPTPP does offer countries a supply chain alternative, and one with greater long-term security as it is governed by new trade rules. 

Geopolitical benefits

As the world’s sixth largest economy, the UK's accession to the trade bloc provides it with a lot more weight to shape the future direction of trade, particularly with the broad mix of members, both economically and culturally. Businesses need consistency across the globe, so it is possible to use this as a basis for future trade agreements because of its high standards. 

The 11 founding-member countries would also welcome the UK’s accession as it provides them with a bigger buffer against China’s global influence by increasing the economic weight of the bloc.

The UK is also still closely aligned with EU trade policy, providing a basis for closer integration of trade rules and standards between the CPTPP and the European Union. This would help to  increase the “Western” alliance throughout the world. However, there is currently, divergence between the trade bloc and the EU , but this could align more closely in the coming years with revisions to the rules. 

Conclusion

As an agreement has been reached for the UK’s accession to the CPTPP, members need to address the application of five more countries looking to join the trade bloc. Up until now, they have been able to largely ignore this by only allowing one accession process at one time. However, how they deal with the next is to be determined. 

China is one  of the five countries wanting to accede, but after its failure to align with many global trade rules and standards in the WTO, there is scepticism. Rejecting Chinese accession may be a wise choice until the United States applies to join—providing a counterbalance to ensure fairness. It could also help provide a precedent for trade rules and regulations for multilateral organisations due to its diverse representation. 

The US’ accession is possible as they negotiated the first iteration of the agreement, before President Trump pulled them out of it. Therefore, the current trading rules align with the US trading precedent. Furthermore, many see the Indo-Pacific Economic Framework as a stepping stone to the US joining CPTPP. The biggest blocker is politics on both sides of the House in the US; a difficult challenge, but not an insurmountable one.

[1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1027860/dit-cptpp-uk-accession-strategic-approach.pdf
[2] https://www.politico.eu/article/uk-farmers-food-makers-cptpp-rishi-sunak-uk/
[3] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1027860/dit-cptpp-uk-accession-strategic-approach.pdf
[4] https://en.luathongduc.com/more-companies-moving-production-from-china-to-vietnam