After the divorce from our closest neighbours (the EU), the Government is focussing on its application to the Comprehensive and Progressive for Trans-Pacific Partnership (CPTPP), and trade deals with the USA and other developing – but resource rich – countries, argue Head of SEC Newgate UK’s Trade Team Tiffany Burrows and her Deputy, Sabine Tyldesley.
CPTPP binds 11 countries in the Asia-Pacific – Australia, New Zealand, Canada, Japan, Singapore, Vietnam, Mexico, Malaysia, Peru, Chile and Brunei – together to form one of the largest trading blocs in the World. Choosing to pursue membership of such a grouping is indicative of the UK’s ambition to look outside of Europe and to act as a “global hub”. It is no coincidence that a priority of the Department for International Trade (DIT) in 2021 is to join the CPTPP, thus anchoring itself in a partnership that spans the globe. The Financial Times reports that the UK’s formal application will be submitted this week.
In 2020, the UK secured a number of trade agreements with CPTPP members; all of them rollovers from the agreements that were in place when the UK was a member of the EU with the exception of Japan. The agreement with Japan was negotiated at pace, and the UK was able to secure concessions it had not been privy as a member of the EU. This is significant for the UK’s chances of joining the bloc, as Japan holds significant influence among the group. The UK is seeking to build on this momentum by securing bilateral free trade agreements (FTAs) with other CPTPP members, and is currently in negotiations with Australia and New Zealand. Trade Secretary Liz Truss confirmed these were “part of a much wider strategic investment for the UK”, taking the UK one step closer to joining CPTPP.
This is increasingly giving the impression the UK is undergoing its own ‘pivot to Asia’, mirroring a famous element of the Obama administration’s foreign policy, keeping its Commonwealth and other allies close, too. In the Sunday Telegraph, UK Foreign Secretary Dominic Raab confirmed this focus, writing that the UK is “pursuing trade deals from Australia to the US and around the world – particularly in the Indo-Pacific region, a huge growth market for the future.” The contribution of the Foreign Secretary highlights how the UK’s trade agenda needs to be considered through not only an economic lens, but a foreign policy one also. In recent months, there has been more attention paid to the tensions arising from an intersection of trade, international relations and business conduct – think of the ongoing tensions with China over Huawei, Hong Kong and human rights abuses.
Joining the CPTPP therefore would bring the UK closer to its allies in the Asia-Pacific, and also serve to put further pressure on China to cooperate economically as part of the rules-based system. Trade Secretary Liz Truss has been unequivocal about this, stating that UK membership to the group would “put us in a stronger position to reshape global trading rules alongside countries who share our values.”
Many signatories of the CPTPP have also signed the recent Regional Comprehensive Economic Partnership (RCEP) – which includes China – and is the world’s largest trading bloc, but it is not as comprehensive as the CPTPP (which aims for greater elimination of tariffs and high environmental and labour standards). One member of the RCEP which hasn’t signed up to the CPTPP yet is South Korea – yet.
Following some speculation last year, the South Korean government confirmed last week it would actively consider joining the CPTPP and improve systems to engage in the new global trading order evolving in the region. Finance Minister Hong Nam-ki said the Government will begin unofficial talks with member countries adding “this is a must-go path to advance the domestic trade system to meet international norms and to respond to the acceleration of the post-COVID-19 digital economy.”
Also looking to see China play by the rules is the US. The UK’s entrance could be seen by some members as a bridge for the US to re-enter the agreement, following President Trump’s withdrawal from negotiations. Similar to the tactics being deployed in bilateral discussions with CPTPP members alongside the formal ascension process, the UK could use its membership of the CPTPP (if successful) to leverage the US in relation to a UK-US comprehensive agreement.
Becoming part of the CPTPP is just one of plenty of opportunities for the UK to amplify its message that “Global Britain” is the order of the day. With the UK’s ambitious trade agenda, presiding over the G7 (and importantly for trade, the B7), and hosting (with Italy) the UN Climate Change Summit COP26 in Glasgow this year, the UK’s global role is being carved out in real time, and 2021 is its inaugural year. Businesses can, and should, be part of this, making sure “Global Britain” is more than just a slogan.