What use is the CPTPP trade deal to Britain?

Rishi Sunak has hailed Britain’s acceptance as a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), claiming it puts Britain in a “prime position” in the global economy. “We are at our heart an open and free-trading nation, and this deal demonstrates the real economic benefits of our post-Brexit freedoms,” he said. “Joining puts the UK at the centre of a dynamic and growing group of Pacific economies, as the first new nation and first European country to join.”

What is the CPTPP?

It is a kind of economic club – more than just a free-trade zone such as the United States-Mexico-Canada Agreement, but less than a nascent political federation such as the European Union. It comprises Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It used to include the US, which withdrew during the Trump presidency.

The list includes the fourth- and seventh-largest economies in the world (Japan and Indonesia) as well as some of the fastest-growing. Altogether it represents about 13 per cent of world GDP, a little less than the EU. Adding Britain’s 3.3 per cent of global GDP makes it the largest trading entity on the planet.

Why is Britain joining?

To reap the benefits of Brexit, according to its backers, and hitch the British economy to one of the more dynamic regions of the world. It is designed to be a pivot from the supposedly sclerotic markets of the EU to the faster-expanding ones of the Indo-Pacific. Indeed, with the Trade and Cooperation Agreement with the EU in place, the CPTPP means that the British can almost have their cake and eat it. Economically, it’s a possibly positive move – much turns on the exact terms – but in the short term, it’s irrelevant. Politically, it’s more about show, suggesting progress and giving some hope to increasingly disenchanted Leave voters.

When can we expect to feel the effects?

Not for a while. Like all new members, Britain is required to subscribe to the 30 articles of the legally-binding  CPTPP treaty, unless there are agreed carve-outs. It will be interesting to see if the UK manages to protect the NHS from hikes in the cost of drugs implied in the CPTPP treaty clauses relating to pharmaceutical patents; if not, the deal will turn politically toxic.

Once the rules are agreed, individual trade talks can ensue with each of the 11 states. Britain already has deals already with many of them, either freshly-minted (Australia) or more or less rolled over from old EU deals (Japan). These could be revisited. New deals are in the offing with Malaysia and others.

What is the benefit for the UK?

Modest. The government’s own calculations put the net additional annual boost to GDP after 15 years at 0.08 per cent, or say £2.7bn a year – about the equivalent value of the town of Bury to the UK economy. Business and trade secretary Kemi Badenoch likens it, a little fancifully, to investing in a start-up, and suggests the returns will be more substantial in 30 or 50 years. Sectors more likely to expect an uplift include premium alcoholic drinks (eg whisky and gin), cars and cheese.

Are there downsides?

Plenty. The official departmental briefing states: “The government has been clear the NHS and the price it pays for drugs is not for sale in any trade negotiations – including CPTPP – and that it will not sign trade deals that compromise the UK’s high environmental protections, animal welfare and food standards.”

However, the potential – already seen in the trade pacts with Australia and New Zealand – is for British producers, especially farmers, to be undercut by more efficient or cheaper produce from CPTPP members.

Canadians have conceded that their beef will have to meet UK food standards, such as those on GM feed and growth hormones, so relatively little of it will end up with British consumers.

In the case of Malaysia, the UK admits that there will now be a zero tariff on Malaysian palm oil, down from 12 per cent. Conservationists say this will further encourage the destruction of rainforests and the habitats of endangered species such as the orangutan. Badenoch argues that “you have to make trade-offs” and that the resulting increase in Malaysian palm oil exports to the UK “is not what is going to cause deforestation”. Greenpeace calls it outrageous.

There might also be complaints from the EU that environmentally unsustainable Malaysian palm oil is used, for example, to make biscuits for export to the EU; the UK already has agreed to maintain high standards in its Brexit treaty.

Is there more potential in the CPTPP?

Yes. The accession of Thailand, and in particular of emerging industrial power South Korea, could make the CPTPP a larger player. If China joined it would be transformative, but that would also create new difficulties for countries such as the UK who fret about national security. Chinese accession seems remote; but a free trade deal with the world’s largest economy was not so long ago regarded as one of the great Brexit prizes.

What are the politics of the deal?

It allows ministers to “prove” that one of the primary benefits of Brexit – the ability to negotiate genuinely new bespoke free trade deals – are being realised. For Badenoch, a Brexiteer and ambitious minister who had a strong showing in the last Conservative leadership contest, it’s a rare example of a concrete policy success. Boris Johnson fans are giving him credit for getting the CPTPP talks going in 2021, but that point, just like the former premier himself, feels less relevant these days.

Labour and the opposition parties will tend to point out the prospective downsides of the deal, particularly for consumer and environmental safeguards, animal welfare and for rural communities, not least hill farmers rearing livestock in Scotland, Wales and the north of England.

Britain’s existing trade deals with Australia and New Zealand have already been criticised by then agriculture secretary George Eustice as hurriedly-negotiated and driven by Liz Truss for presentational purposes, with correspondingly poor outcomes.

In diplomatic terms, the CPTPP nations are all currently friendly, and a majority (Singapore, Canada, Brunei, Malaysia, Australia and New Zealand) are fellow members of the Commonwealth. Things might get vastly more complicated if China or Taiwan ever became members; China would dwarf the economies of most CPTPP countries, while recognition of Taiwan as a sovereign state would be perceived as an insult in Beijing. With the Aukus (Australia-UK-US) defence treaty and the web of territorial disputes between most CPTPP nations and China, the organisation is likely seen in Beijing as a challenge to Chinese economic and political supremacy in east Asia.