Is the UK’s Future in the Far East?
In April it was announced that the UK and Australia had agreed the “vast majority” of a trade deal. Although talks between International Trade Secretary Liz Truss and her Australian counterpart broke up without a deal, both countries were “confident that the remaining issues will be resolved.” The final deal is expected to be completed by mid-summer
The numbers involved in the deal with Australia are relatively small – it is estimated that it will add perhaps £500m to UK GDP over the long term – but perhaps the geographical significance of the deal is more important than the numbers.
It was widely reported that the deal with Australia could pave the way for the UK to join the CPTPP, a trading agreement between 11 Pacific Rim countries signed in 2018.
The initials stand for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The 11 countries involved are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Notably, it does not include China, but between them the 11 countries have a population of 500m and – according to an article on the BBC – generate 13% of the world’s income. (In comparison the population of the European Union is currently put at a little under 450m.)
The CPTPP gives member countries greater access to each other’s markets, with a pledge to eliminate or reduce 95% of import charges and tariffs. Manufacturers who source products from member countries can also qualify for preferential treatment.
In return countries are obliged to cooperate on regulations such as food standards, but unlike the EU the CPTPP is not a single market or a customs union, so countries are not required to have identical regulations and standards.
Clients who know their Geography will very quickly realise that the UK is nowhere near the Pacific Rim. So will we be allowed to join? And why should we want to join?
The answer to the first question is almost certainly “yes.” Speaking in April Liz Truss said she hoped the UK would be a member “by this time next year.”
Why would the UK want to join? The Eurozone economy contracted by 0.6% in the first three months of this year, officially putting it back in recession. By contrast the Pacific Rim is one of the fastest-growing parts of the world economy. “We need more access to these markets,” said Liz Truss. “That’s where the future lies for British business, whether it is the whisky industry, the car industry, financial services or digital industries.”
The Government is currently setting up a new unit to explore Brexit opportunities, with the emphasis on “shedding EU regulations.” Whether you are in favour of this will probably depend on your political viewpoint, but it would certainly sit comfortably with the UK being a member of the CPTPP. The initials may be unfamiliar now: they are unlikely to remain that way especially if – as he has hinted – President Biden also commits the US to joining.