Lord Waverley: First In, Best Dressed — UK’s Bid to Join Key Regional Trade Agreement

UK’s Bid to Join Key Regional Trade AgreementThe United Kingdom has applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement between 11 countries stretching from Vietnam to Peru, including Japan.

Its members contain some of the fastest-growing economies in the world, with an expanding middle class. Asia has taken centre stage to become a key global export destination. Membership of the CPTPP is central to trade strategy and key to ensuring future prosperity and influence in the Indo-Pacific. This partnership is potentially the most important regional trade agreement that the UK will negotiate with wide-ranging repercussions, strengthening of ties with international allies, and signalling commitment to free trade.

Representing one of the largest trading blocs in the world, home to half the global population, the wider Indo-Pacific region is the planet’s growth engine. If just Thailand and South Korea were to join the agreement, it would almost treble the long-run economic benefit from £1.8bn to £5.5bn.

It should be noted, however, that this is an accession process, not a new negotiation. It is not feasible to seek significant change with the goal of joining a high-standard agreement. The first phase of negotiations covered the UK’s compliance against each of the CPTPP chapters. Evidence has been submitted, which members are currently reviewing, before giving the green light to progress to the second phase and negotiate market access.

There is clear value and opportunity in working with bloc members to shape economic issues and be at the forefront of digital and trade provision innovations. Membership will deliver new opportunities for British business across many sectors, enabling the manufacture of products for various markets without the need to change processes, parts, suppliers, or components. This would be a critical enabler of supply chains, allowing companies to import and export more easily, and making investments more competitive.

Membership benefits would include modern digital trade rules that allow data to flow freely and swiftly eliminate tariffs on exports. Examples such as whisky, down from 165 percent duties to 0 percent in Malaysia, and reducing car duty to 0 percent in Canada by 2022, illustrate the benefits. Expansion to like-minded market economies is a key reason for the existence of the CPTPP. Membership will encourage free and fair trade, fight protectionism, and remove barriers to trade.

“There is clear value and opportunity in working with bloc members to shape economic issues and be at the forefront of digital and trade provision innovations.”

Market access provides a single set of rules of origin, accumulating content from all member countries. If goods have at least 70 percent CPTPP content, they qualify for preferential tariffs. Questions regarding the protection of UK food standards, environment, IP, climate and data — and how this FTA will promote human rights, international development and union rights — are yet to be clarified.

There are differing approaches, across the CPTPP, to animal welfare, environmental protection, and the use of antibiotics and pesticides. Other questions that need to be resolved before accession is decided upon include rules of origin and the European Patent Convention, whose requirements jeopardise the UK’s membership of the European Patent Office.

An agreement would embody high standards in areas such as intellectual property, investment, procurement, rules on state-owned enterprises, and data flows. CPTPP has a dedicated chapter on financial services, which will open new opportunities. The provisions in that chapter include non-discrimination obligations and the liberalising of cross-border flows of financial information. There is also an annexe on professional services that encourages mutual recognition of professional qualifications.

No trade agreements should stand apart from human rights, workers’ rights, consumer rights, or gender issues. The content of negotiations also has important implications for consumers — the choices they make, the prices they pay, the standards they can expect and the rights they can rely upon. Consumers rightly expect the strengthening of four key priorities: maintaining health and safety standards of food and products, maintaining data security regulations that protect consumers’ digital rights, protecting the environment, and using trade to address inequalities.

More economies wish to sign up. Political sensitivities surround China and Taiwan, which both want to join. Thailand and South Korea do as well, with Ecuador being the latest country to indicate an interest. The sequencing of further applications is important with accession indicators suggesting that the UK will be dealt with before China and Taiwan. China will require significant work to meet CPTPP rules.

If they both succeed, the UK’s trade relations with those two countries will in future be regulated by the terms of the CPTPP and not, as now, by shared WTO status. The sequencing of these three bids for CPTPP membership, over which there is no control, could present challenges.

The least likely eventuality is that China, or Taiwan, or both, join ahead of the UK. In that case, they would have a say over the terms of accession. More likely is that two or three countries join simultaneously, in which case the UK will have no say over the terms under which the others join.

Should Britain join first, however, we will have an equal say with other CPTPP members over the terms of accession of China and Taiwan.

About the Author

Lord (JD) Waverley
Independent Member
House of Lords

Twitter: @LordWaverley

LinkedIn: linkedin.com/in/jdwaverley

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