Vithanage Madhushani Jadetimes Staff
V.E.K. Madhushani is a Jadetimes news reporter covering Business.
UK Joins the CPTPP: Exploring Opportunities in Asia-Pacific Trade
The United Kingdom has officially joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a significant trade pact spanning Asia and the Pacific. The move marks the UK as the first non-founding member of the agreement, aligning it with 11 nations, including Japan, Australia, and Canada, in a trading bloc that represents over 500 million people and generates 13% of global income.
While the immediate economic impact may be modest, the pact holds potential for long-term growth in trade, investment, and international cooperation. Here's a closer look at what the CPTPP is and what it means for the UK.
What Is the CPTPP?
The CPTPP is a trade agreement among 11 nations:
- Asia-Pacific Nations: Japan, Malaysia, Vietnam, Brunei, and Singapore.
- Americas: Canada, Mexico, Chile, and Peru.
- Oceania: Australia and New Zealand.
Signed in March 2018, the CPTPP aims to promote economic integration through reduced tariffs, easier market access, and stronger investor protections. Its combined economies are valued at £11 trillion. With the UK now onboard, it becomes the pact’s second largest economy after Japan.
What Does the CPTPP Offer the UK?
1. Trade Access and Tariff Reductions
- The CPTPP eliminates or reduces 95% of tariffs between member states, allowing UK exporters to benefit from lower costs.
- This could particularly help industries such as machinery, medicines, and automotive manufacturing, where supply chains span multiple countries.
2. Economic Diversification
- The agreement connects the UK to some of the world’s fastest-growing economies, such as Vietnam and Malaysia, potentially opening new markets for goods and services.
- In 2019, CPTPP nations accounted for 8% of UK exports, representing a promising base for future growth.
3. Investor Opportunities
- CPTPP rules ensure equal treatment for foreign and domestic investors across member countries, creating new opportunities for UK businesses to invest in these markets.
4. Digital and Services Trade
- The agreement focuses on reducing restrictions in digital trade and services, aligning with the UK's strategic economic goals.
Challenges and Limitations
1. Short-Term Gains Are Marginal
- Many of the UK’s trade deals with CPTPP nations, such as Japan, Australia, and New Zealand, were already in place post-Brexit.
- Only Brunei and Malaysia represent entirely new trading partners, and their combined trade with the UK accounts for less than 0.5% of total UK trade.
2. Economic Impact
- The estimated boost to the UK’s GDP from joining the CPTPP is just 0.08% over a decade, a small figure compared to the 4% hit to income from leaving the EU.
3. Regulatory Concerns
- Critics question whether CPTPP membership could pressure the UK to lower environmental and animal welfare standards.
- For example, tariffs on Malaysian palm oil a product often linked to deforestation—will be significantly reduced.
4. Investor-State Dispute Mechanism (ISDS)
- Trade unions have expressed concerns that provisions allowing multinational companies to challenge government policies could undermine UK sovereignty.
What Changes for UK Businesses?
1. Rules of Origin
- UK manufacturers using components sourced from CPTPP countries can claim preferential treatment for their exports, allowing for smoother cross border trade.
2. Broader Investment Opportunities
- With CPTPP nations already accounting for £1 in every £12 of foreign investment in the UK, membership could strengthen these ties and support business growth.
3. Flexibility in Standards
- Unlike the EU’s single market, the CPTPP allows member nations to maintain their own regulatory standards, offering the UK more flexibility in trade policies.
What’s Next for the CPTPP?
1. Future Members
- The CPTPP is expected to expand, with nations like China and Taiwan expressing interest.
- If the UK chooses to influence these decisions, it could play a pivotal role in shaping the pact’s future direction, particularly concerning China’s membership.
2. US Involvement
- A major shift could occur if the United States reverses its 2017 decision to stay out of the pact. The inclusion of the US would significantly amplify the bloc’s economic influence.
3. Long-Term Potential
- While immediate economic gains are limited, the agreement’s focus on digital trade, services, and growing economies offers long-term benefits for the UK.
Final Thoughts: A Symbolic Win with Long-Term Promise
Joining the CPTPP is a symbolic step for the UK, signaling its post Brexit strategy to forge closer ties with global trade partners. Though the short term economic benefits are small, the agreement provides an opportunity for the UK to diversify its trade portfolio, tap into emerging markets, and enhance its role in shaping international trade standards.
As the CPTPP evolves, its full potential for the UK will likely depend on how effectively it leverages its membership to foster economic growth and collaboration across the Asia Pacific region.
Comentarios