Written by Minako Morita-Jaeger.
Image credit: Liz Truss CPTCC Heads of Mission Roundtable by Number 10/ Flickr, license: CC BY-NC-ND 2.0.
The UK government is currently in the process of the CPTPP accession negotiation with the expectation of joining the organisation by the end of 2022. The UK is expected to be the preferred candidate to become the first new member. UK’s accession would change the nature of the CPTPP from a current like-minded regional Free Trade Agreements (FTAs) that promotes a rules-based international trade system to a cross-regional mega-FTA. This would create dynamism in the CPTPP for further expansion within and beyond the Asia-Pacific.
On the surface, the UK’s accession to the CPTPP seems straightforward since the UK is a highly developed democratic country which promotes liberal trade. However, we cannot ignore the fact that the UK is the country which would join the CPTPP from outside the Asia-Pacific. The UK is a European country located geographically far from the Asia-Pacific, and its regulatory culture is very different from those in CPTPP countries.
Here we explain how the UK’s motivations for joining the CPTPP were shaped and examine potential economic and social implications. The UK’s basis for entering the CPTPP originated from ‘Global Britain’. The UK government has a strong expectation of monetary gains, but the economic value of joining the CPTPP is slim. On the other hand, its societal impacts cannot be ignored because there are regulatory constraints to joining the Club, reflecting the Asia-Pacific style approach.
UK’s Strategy for Joining the CPTPP
The UK’s joining the CPTPP was motivated by the ‘Global Britain’ agenda––which Prime Minister Theresa May introduced six months after the 2016 Brexit referendum. Theresa May’s government argued that leaving the EU was a great opportunity for the UK to become the ‘Global Britain’. The May government appealed to the public that by leaving the EU customs union and single market, the UK could enjoy an independent trade policy and expand trade with the rest of the world.
To start its independent trade policy agenda, the UK government listed the FTAs with Australia, New Zealand, and the US and the CPTPP as its priority. But the UK’s core ambition was to strike a trade deal with the US as a replacement for the EU. Although Then Foreign Minister Boris Johnson stated that “Britain was first in line” for a trade deal with the US, the Trump administration’s protectionism made it difficult for the UK to negotiate an FTA since the UK took the political rhetoric of promoting liberal world order. In addition, the UK government faced the British public’s strong concerns about lowering food standards and the impact of allowing American companies access to the National Health Service (NHS). Furthermore, the Biden administration’s America first approach and its rejection of engaging itself in FTAs forced the UK government to downgrade its ambition.
The UK’s political motive for joining the CPTPP grew stronger as prospects of an FTA with the US faded. In 2021, the UK government integrated the strategy of entering the CPTPP into a part of its post-Brexit security, defence, development, and foreign policy strategy that was revealed in “Integrated Review 2021”. The UK government underlined the strategic value of building deeper engagement in the Indo-Pacific region since the geopolitical and economic importance of the area will be growing in the coming decades. It claimed that joining the CPTPP will open an opportunity of accessing the dynamic Indo-Pacific market that generates 56% of global growth between 2019 and 2050.
Slim Economic Values
Although the Johnson administration appealed to the public that joining the CPTPP could create enormous economic opportunities, its potential economic gains look slim, as the UK government’s projection shows. Entering the Agreement could increase UK GDP by an extra £1.8 billion and boost trade by £3.3 billion, which is only about a 0.08% GDP increase in the long run.
The major economic reason the UK’s FTAs with the Indo-Pacific region is likely to make a little economic contribution is that geographic proximity matters for trade. According to some economic studies, the EU is overwhelmingly likely to remain the UK’s most important trade partner post-Brexit. Interestingly, UK’s services trade is strongly affected by distance. This means that the UK, a services economy accounting for 80 per cent of total economic output, would continue to export services to its neighbour -the EU. Also, we see that the distance effect still matters for Global Value Chains despite ICT developments.
In addition to the above, there are institutional reasons. The UK already has the bilateral FTAs with nine countries (Canada, Chile, Japan, Mexico, Peru, Singapore, Vietnam, Australia (signed) and New Zealand (signed)) out of eleven. In comparison, the remaining countries, Brunei, and Malaysia, have not yet ratified the Agreement. Among these, FTAs with Australia and New Zealand are high-standard new FTAs that go beyond the CPTPP in many areas. Although the FTA with Japan is almost the same as the EU-Japan FTA, its digital chapter goes beyond the CPTPP. The FTAs with Canada and Singapore are the replica of the EU’s ‘New Generation’ FTAs that promote regulatory cooperation in many areas. The CPTPP, negotiated in 2010, is no longer a novel FTA. Thus, the Agreement does not seem to bring added values to the UK.
It is noteworthy that the UK’s major trade partners among CPTPP member countries are the ones with which the UK has a bilateral FTA. For example, goods exports accounted for 7.92 of the UK’s total exports, among which 5.99% are going to countries with which the UK already has an FTA. In the case of services, 9.05% of the UK’s total exports went to the CPTPP, among which 6.20% were to the countries with the FTA relation. As for goods imports, 5.66% out of 7.03% are from the CPTPP countries with the FTA relations. As for services imports, 6.31% out of 7.91%.
Dilemmas Over the UK’s Domestic Policy Constraints
While the economic value of joining the CPTPP looks slim, there seem to be potential regulatory constraints and societal impacts. British stakeholders have strong concerns about sacrificing its high regulatory standards for food safety, environment, consumer protection and human rights. Since the UK takes the EU-style regulatory approach that esteems public policy objectives, the CPTPP, which strongly reflects the US’s market-driven regulatory approach, may create domestic policy constraints. Digital trade, food standards, and safety are the major areas where we see possible regulatory conflicts. In the case of digital trade, ensuring free cross-border data flow with some CPTPP countries with lower data privacy protection regimes is causing concerns about how British citizens’ private data is protected under the CPTPP rules. It may also risk the EU’s adequacy decision on data privacy for the UK since the UK might walk away from the current UK General Data Protection Regulation (GDPR) towards more relaxed rules to adjust itself to the CPTPP rules. As for food standards, the CPTPP’s narrow scope of using precautionary principles under the WTO may lower UK’s food standards in the future.
There are also other potential areas of conflict with the CPTPP. These include Investor-State Dispute Settlement (ISDS), patent rights (a direct conflict with the UK’s participation in the European Patent Office (EP) and European Patent Convention (EPC)), and NHS (a potential conflict with costs of generic medicines).
Implications to Other CPTPP Applicants, Including Taiwan
How could the UK and the CPTPP members solve these issues? For example, can CPTPP countries allow the UK to use side letters so that the UK can derogate from some CPTPP legal requirements? Or do CPTPP members retain strict to the UK not to allow any exceptions from the CPTPP rules to avoid watering down the CPTPP rules? Moreover, since the UK’s accession will become an important benchmark for future accession negotiations, namely China as a state economy applicant that seems difficult to comply with the CPTPP rules, this is surely the area of a dilemma for the UK and CPTPP countries.
There is little thing which Taiwan can learn from the UK’s accession in terms of substance. Taiwan’s case is very different from the UK’s case since Taiwan is economically well-integrated in the Asia-Pacific trade mainly due to its geographic location, while it does not have any bilateral FTA relations with CPTPP members. But, once the UK is in, Taiwan may need a strong political endorsement from the UK to become a CPTPP member. Thus, enhancing a good bilateral relation would be important.
Minako Morita-Jaeger is a Senior research fellow in International Trade at the University of Sussex Business School and a Policy Research Fellow of the UK Trade Policy Observatory (UKTPO). She is an international trade policy expert who has been working for international trade policy across the globe. Before her research work at the University of Sussex and the LSE, she was intensively engaged in trade policy in practice as an Economic Affairs Officer at the UNCTAD in Geneva, a WTO services trade negotiator at the Japanese delegation in Geneva, and a Principal Trade Policy Analyst at the Japan Business Federation (Keidanren) in Tokyo. She studied international political economy, economics and international economic law and applied an inter-disciplinary approach for her research to elaborate on multi-dimensional factors that shape today’s world trade. Her research areas include FTAs, WTO, regulatory cooperation, services trade, and UK trade policy.
This article was published as part of a special issue on “Comprehensive and Progressive Agreement for Trans-Pacific Partnership.”