In March, the United Kingdom made it one step closer to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as the country’s CPTPP Act received royal assent.
After two years of negotiations, the U.K.’s planned entry later this year to the 11-country trade pact marks the first new member to join the CPTPP since the partnership’s formation. It also means that more than 99 per cent of current U.K. goods exports to CPTPP countries—including Scotch whisky and cars—will be eligible for zero tariffs.
Experts say ÎÚÑ»´«Ã½ businesses could greatly benefit from the expanded multilateral trade agreement, including those that want to grow existing business partnerships with member countries and those looking to invest in markets covered under the agreement.
“It makes the CPTPP bigger and more important; adding the U.K. economy to it is quite significant,” said Hugh Stephens, a distinguished fellow of the Asia Pacific Foundation of ÎÚÑ»´«Ã½ (APF ÎÚÑ»´«Ã½) and an executive fellow of the School of Public Policy at the University of Calgary.
The CPTPP was signed in 2018 and aims to facilitate economic cooperation between its signatories. Members primarily consist of countries in the Indo-Pacific, including ÎÚÑ»´«Ã½, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
An APF ÎÚÑ»´«Ã½ study in 2023 showed that the value of trade between ÎÚÑ»´«Ã½ and CPTPP members increased by 10 per cent three years after the agreement’s ratification.
The addition of the U.K. market will bolster the trade group’s combined GDP to £12 trillion or approximately $20.7 trillion—the equivalent of 15 per cent of the global economy, according to the U.K. government.
Carlo Dade, director of the trade and investment centre at the ÎÚÑ»´«Ã½ West Foundation, said the addition of the U.K. will further open up that market for ÎÚÑ»´«Ã½ businesses and will lower the costs of doing business for companies in both markets.
Additionally, once the U.K. becomes a member of the CPTPP, a ÎÚÑ»´«Ã½ company can collaborate with a U.K. firm to access other CPTPP markets together, as they will be covered by the same free-trade agreement.
“I think there is a severe underappreciation of the importance and potential significance for the CPTPP in ÎÚÑ»´«Ã½ and it harms us by not realizing the opportunity. The reason for that is we don’t really understand multilateral agreements,” said Dade.
“What the multilateral agreement does is it brings several countries together with one set of rules. You’re effectively creating one market from a group of countries. Because of that, you can use country A to make things or grid services to sell in country B.”
Dade said this is like playing “chess instead of checkers,” and the “chess” mindset also applies to other member markets, especially Mexico, which is part of both the CPTPP and the United States-Mexico-ÎÚÑ»´«Ã½ Agreement, which succeeded the North American Free Trade Agreement (NAFTA). The ÎÚÑ»´«Ã½ government has also defined Mexico as one of three new priority markets under its trade diversification strategy.
“Because Mexico qualifies for the NAFTA rules, you can make things in Mexico and then sell them in the U.S. and Mexico, and you can also use those investments to sell things in Vietnam, Singapore, Malaysia … and now the UK,” Dade said.
“So ÎÚÑ»´«Ã½ by focusing on Mexico now has the ability to help firms see the ability to double dip in the North American market and the [CPTPP] market at the same time.”
Six other countries apply to join the CPTPP
Dade said the U.K. joining the CPTPP has established a precedent and “set the stage” for other economies that wish to join. Taiwan, China, Ecuador, Costa Rica, Uruguay and Ukraine have also submitted applications.
China, Taiwan and Costa Rica could be the most advantageous members for ÎÚÑ»´«Ã½, according to Stephens. But he said the gap between Chinese policies and CPTPP standards is large, especially in areas such as labour and state-owned enterprises, and there are questions of whether China would be willing to abide by all of the agreement’s rules.
“The two countries that are the best qualified at the moment with the most open economies, which probably would have the least amount of difficulty in meeting a standard, would be Taiwan and Costa Rica,” said Stephens.
Angel Liu, director general of the Taipei Economic and Cultural Office in Vancouver, said in a BIV interview in May that Taiwan encourages CPTPP members—including ÎÚÑ»´«Ã½—to start informal discussions and negotiations with Taiwan and to consider its application “based on merit,” and not on politics.
“Taiwan has the least number of [bilateral] agreements [with CPTPP members] so there’s going to be a lot of work to do. ÎÚÑ»´«Ã½ can urge the countries to continue with the process … but this decision is not going to be made this year or next year,” said Dade.
In addition to processing new applications, there is a lot of work ÎÚÑ»´«Ã½—chair of the CPTPP committee this year—needs to do to advance the agreement with its existing members to ensure it is up to date, according to Stephens. And Dade said the government should prioritize examining and implementing measures highlighted in the three-year review that was completed last August.
“It was negotiated almost 10 years ago now so there have been some changes, for example, in the digital area.... Also, there’s a lot of talk today about supply chains and sustainable trade, fuel subsidies, should there be discipline on products that are environmentally polluting?” said Stephens.
Dade said the CPTPP has the potential to be the world’s next leading trade group, after the World Trade Organization, when it comes to establishing rules-based free trade globally. And as the third-largest economy among CPTPP members—including the U.K.—ÎÚÑ»´«Ã½ has an important role to play, he said.
Anastasia Ufimtseva, program manager of international trade and investment at APF ÎÚÑ»´«Ã½, said more work needs to be done to help small and medium-sized businesses in ÎÚÑ»´«Ã½ and ÎÚÑ»´«Ã½ understand the benefits of “big trade agreements.”
“They need much more support to figure out how those tariffs apply to them and how to take advantage of them. [CPTPP] is providing the framework and now we need to make sure that specific groups benefit,” she said.
