Version: Nov 2023
The UK’s accession to the CPTPP, a high-standard trade agreement among 11 countries (soon to be 12 with the UK’s inclusion), represents a significant step in the country’s post-Brexit trade strategy and strengthens its ties with the Indo-Pacific region. The CPTPP provides the UK with tariff-free access to a market of over 500 million customers. However, the projected economic impact is modest, with UK trade with CPTPP members potentially increasing by £4.9 billion (3.9%) in the long run. There are also concerns related to the Investor-State Dispute Settlement mechanisms and environmental threats.
Benefits of the UK’s Accession to the CPTPP
Market Access
Joining the CPTPP provides UK businesses with tariff-free access to over 99% of goods exported to a market of over 500 million customers. This helps lower trade barriers to a dynamic region, which is expected to account for around 15% of global GDP.
Economic Growth Potential
The CPTPP offers the UK significant growth potential via financial services and digital trade. The agreement includes modern and ambitious digital and data provisions, which reduce barriers and support UK businesses of all sizes to seek new opportunities in CPTPP markets.
Access to the Indo-Pacific Market
The UK’s accession to the CPTPP strengthens its ties with the Indo-Pacific region. This strategic move allows the UK to tap into the world’s leading region of economic growth, offering significant opportunities for trade and expansion.
Strategic Implications
The UK’s accession to the CPTPP raises its international influence and role, making the CPTPP more attractive to other potential members. This allows the UK to help shape the global trade architecture and its evolution, while its membership in turn helps cement the CPTPP as a grouping of mid-sized powers committed to a free-market approach and rules-based international trade.
Concerns Regarding the UK’s Accession to the CPTPP
Modest Economic Impact
The estimated long-run increase in the UK’s GDP from joining the CPTPP is only 0.08%, according to the UK government’s own projections. Critics argue that the economic benefits of joining the CPTPP are underwhelming compared to the economic costs of Brexit.
Investor-State Dispute Settlement Mechanisms
Some groups have raised concerns over the Investor-State Dispute Settlement (ISDS) mechanisms in the CPTPP, which allow foreign investors to sue host governments for alleged discriminatory practices. Critics argue that this could potentially limit the ability of governments to regulate in the public interest, as they might fear being sued by foreign investors.
However, proponents of ISDS argue that it provides certainty for investors by protecting their investments from actions of other governments that are grossly unfair or unjust, including expropriation of assets without compensation or discrimination based on nationality.
Environmental Threats
There were concerns about the environmental threats such as palm oil production in Malaysia and Brunei, two CPTPP members with which the UK did not previously have free trade agreements. Critics argue that by agreeing to eliminate tariffs on palm oil, the UK government has made this commodity more attractive to businesses, which could accelerate deforestation in Malaysia and Brunei due to an increase in imports to the UK.
In response to these concerns, the UK and Malaysia have published a joint statement on sustainable agricultural commodity trade and cooperation for forest conservation. However, environmental groups argue that the CPTPP’s environmental safeguards are too lax to prevent deforestation in the palm oil industry.