On 16 July 2023, the UK signed a treaty to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade pact that covers 11 countries in Asia and the Pacific, including Japan, Australia, Canada, Singapore and Vietnam. The UK is the first non-founding country to join the CPTPP, and the first European country to gain entry to the bloc. The CPTPP is expected to boost UK trade with the Asia Pacific by reducing tariffs, increasing market access and enhancing cooperation on regulatory issues.
British Secretary of State for Business and Trade Kemi Badenoch commented "This is the fastest growing region. The Asia Pacific is going to be responsible for at least 50% of global growth that we're expecting between now and 2035."
What is the CPTPP?
The CPTPP is a trade agreement that aims to promote economic integration and cooperation among its members. It was originally negotiated as the Trans-Pacific Partnership (TPP) by 12 countries, but after the US withdrew from the deal in 2017, the remaining 11 countries signed a revised version in March 2018, renaming it as the CPTPP. The CPTPP entered into force in December 2018 for seven of its members, and in January 2019 for Vietnam. The other three members (Brunei, Malaysia and Peru) ratified the agreement within the last three years.
What areas does the CPTPP cover?
The CPTPP covers a wide range of areas, such as goods, services, investment, intellectual property, labour, environment, e-commerce, government procurement and state-owned enterprises. It aims to eliminate or reduce 95% of tariffs on trade among its members, as well as to facilitate trade by harmonising rules and standards, removing non-tariff barriers and enhancing transparency.
The CPTPP is one of the largest free trade agreements in the world, covering 13% of global GDP and 500 million consumers.
What are the benefits of the CPTPP for UK trade with Asia Pacific?
The UK has been seeking to diversify its trade partners and expand its presence in the fast-growing markets of Asia and the Pacific since leaving the EU. The UK already has bilateral trade deals with seven of the CPTPP members (Australia, Canada, Chile, Japan, Mexico, New Zealand and Singapore), which were either rolled over from existing EU agreements or newly negotiated after Brexit. The UK also has ongoing negotiations with two other members (Malaysia and Vietnam).
According to the UK government's impact assessment, joining the CPTPP could increase UK GDP by £18 billion over 10 years. The UK's exports to CPTPP countries could increase by £3.3 billion per year, while imports could increase by £4 billion per year. The sectors that could benefit most from increased imports are agriculture, textiles and machinery. Whilst sectors that could benefit most from increased exports are machinery and equipment, business services and chemicals.
What are the key benefits of joining the CPTPP?
- Tariff reduction: The UK will be able to benefit from lower or zero tariffs on its imports from CPTPP countries, which could lower production costs and consumer prices. It will also be able to enjoy lower or zero tariffs on its exports to CPTPP countries that it does not have a bilateral deal with (Brunei, Malaysia and Peru), as well as improved market access for some products that are subject to tariff-rate quotas (TRQs) or safeguards under existing bilateral deals (such as dairy products to Canada or rice to Japan).
- Rules of origin: The UK will be able to use more inputs from any CPTPP country to qualify for ‘rules of origin’ preferential tariffs when exporting to another CPTPP country. This could reduce administrative burdens and increase flexibility for UK producers who source components from multiple countries.
- Services and investment: The UK will be able to access more opportunities for its services and investment sectors in CPTPP countries, as the agreement provides for a high level of market access and national treatment for cross-border trade and establishment. The UK will also be able to benefit from enhanced cooperation and transparency on regulatory issues.
- Intellectual property: The UK will be able to protect and enforce its intellectual property rights more effectively in CPTPP countries, as the agreement sets high standards for the protection of patents, trademarks, copyrights, geographical indications and trade secrets.
- Government procurement: The UK will be able to access more opportunities for its businesses to bid for public contracts in CPTPP countries, as the agreement provides for a high level of market access and non-discrimination for government procurement.
Is joining the CPTPP an important move for the UK and APAC trade?
Joining the CPTPP is a significant step for the UK's post-Brexit economy. The UK's accession to the CPTPP will have significant benefits for both the UK and Asia Pacific businesses.
For Asia Pacific businesses, the UK's accession to the CPTPP will create new opportunities for trade and investment with a major European economy. The UK is already a significant partner for many Asia Pacific countries, especially in sectors such as financial services, education, technology and creative industries. The CPTPP will further reduce tariffs and non-tariff barriers, facilitate cross-border data flows and e-commerce, protect intellectual property rights and ensure fair competition. It will also enable greater cooperation and dialogue between the UK and the Asia Pacific on common challenges and interests, such as climate change, digital transformation and global health.
How 3CS can help
For further information on the CPTPP or help with any corporate or commercial legal matter, please get in touch with your usual 3CS contact.