UK has agreed to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade pact based around the Pacific Rim, as it seeks to build ties around the world after leaving the European Union.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

• CPTPP is a free trade agreement (FTA) that was agreed in 2018 between 11 countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
• Britain will become the 12th member, and the first to join since the partnership since its inception.
• The agreement was originally proposed as the Trans-Pacific Partnership (TPP) in 2005, with the goal of creating a free trade area that would cover 12 countries, including the US.
• However, the US withdrew from the agreement in 2017, prompting the remaining 11 countries to renegotiate the deal and create the CPTPP.

Economic prospects

• CPTPP countries approximately has a combined GDP of 11 trillion pounds ($13.6 trillion) once Britain joins, or 15% of global GDP with UK membership.
• It does not have a single market for goods or services, and so regulatory harmonisation is not required, unlike the European Union, whose trading orbit Britain left at the end of 2020.

Key trade objectives of CPTPP

• The CPTPP is designed to reduce tariffs and promote economic integration among its members.
• It aims to eliminate tariffs on more than 95% of goods traded between member countries, and to provide greater market access for services and investment.
• The agreement also includes provisions on intellectual property, labor, and environmental standards.

How much does Britain trade with CPTPP?

• British exports to CPTPP countries were worth 60.5 billion pounds in the twelve months to end-Sept. 2022.
• Membership of the grouping will add another 1.8 billion pounds each year in the long run, and possibly more if other countries join.

Key benefits to be reaped by UK

• Exporters could benefit from CPTPP membership even when trading with countries where there is a bilateral FTA.
• To benefit from preferential tariffs, exporters must demonstrate a product as a sufficient proportion of “locally” sourced parts.
• Rules of origin under rolled-over post-Brexit free trade agreements with Japan, Mexico and Canada, for instance, allow exporters to count EU inputs as “local”.
• However, under CPTPP, inputs from CPTPP members can usually be considered local, giving exporters another option if it is beneficial.

Geopolitical considerations: China Factor

• While the long-term benefit for Britain’s economy is set to be modest, Britain has other reasons for joining the bloc.
• UK will get a veto on whether China joins the treaty. Beijing had applied to become a member of the bloc in September 2021.

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