The UK government announced on 31 March 2023 that it had ‘substantially concluded negotiations on the UK’s accession’ to the CPTPP trade agreement.
What is the CPTPP?
The CPTPP is a free-trade agreement (FTA) between 11 countries around the Pacific Rim: Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and Japan.
When was the CPTPP negotiated?
Negotiations for what was then simply the Trans-Pacific Partnership (TPP) began in March 2010 and concluded on 5 October 2015.
The US was party to those talks, but the election of President Trump in 2016 led to its withdrawal from the agreement before ratification. The remaining 11 participants scrambled to amend the text of the agreement, and the newly renamed Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed in March 2018. It came into force in December the same year.
What does the CPTPP do?
The rights and obligations under the CPTPP fall into two categories:
- Rules: for example, on how countries should make new food safety regulations or whether they can ban the transfer of data to other CPTPP members. These are the same for all CPTPP parties (including any new members that may join).
- Market access: how far each CPTPP member will cut its tariffs, open up its services markets, liberalise visa conditions for business travellers, and so on. Each member has its own schedules of commitments. In some cases the commitments are offered to all other members, while in others they are restricted to specific negotiating partners.
The CPTPP provides for almost complete liberalisation of tariffs among the participants. Tariffs are retained in only a few highly sensitive areas – for example, Japan keeps tariffs on rice, while Canada’s dairy industry is also protected. It provides a single set of rules of origin, and allows content from all CPTPP countries to be ‘cumulated’. If a good has to have at least 70% ‘CPTPP content’ to qualify for preferential tariffs, for instance, that 70% can come from any combination of CPTPP countries.
How far has the UK’s accession advanced?
The UK submitted its formal application to join CPTPP on 1 February 2021. The CPTPP members agreed to start negotiations with the UK on 2 June 2021. Following late negotiations with Canada over access to the UK for Canadian beef, the UK government announced that it had ‘substantially concluded negotiations’ on 31 March 2023.
It is likely that it will still be some time before the UK can make use of its CPTPP membership. The UK’s Protocol of Accession (the treaty by which the UK becomes a member of the CPTPP) will need to be translated into the languages of all of the member countries and ‘legally scrubbed’ (checked for errors). It is possible that there may still be some technical issues to resolve: even after the UK reached an ‘agreement in principle’ with Australia in June 2021, negotiations continued on some small issues and the final agreement was not signed until December 2021. It is expected that the UK will sign the agreement acceding to the CPTPP at a meeting of CPTPP trade ministers in New Zealand in July.
Once that process is complete, the UK and each existing member state will need to ratify the agreement in accordance with their domestic law. For the UK, this will mean parliamentary scrutiny of the agreement in accordance with the Constitutional Reform and Governance Act 2010 and the passage of any necessary implementing legislation. This will certainly include secondary legislation (such as Treasury regulations to cut tariffs on imported goods) and may include primary legislation (like the Trade (Australia and New Zealand) Act 2023 passed to implement the UK’s agreements with Australia and New Zealand. Many of the other CPTPP members will also need to pass legislation or hold votes in parliament to agree the UK’s accession.
The UK will formally become a CPTPP member 60 days after the last of the current members gives notice that it has completed its domestic legal procedures.
What will the UK get out of CPTPP membership?
The UK government published its ‘Scoping Assessment’ of UK accession to CPTPP in April 2021, shortly before negotiations began. 11 UK Accession to CPTPP: The UK’s Strategic Approach That suggested that joining CPTPP would increase UK GDP by about 0.08%. The government will produce a further assessment when it lays the Protocol of Accession before Parliament, but there is nothing to suggest that this figure will have changed dramatically and the government relies on its earlier Scoping Assessment in its most recent policy paper.
The reason this figure is rather small is that the UK already has FTAs with all CPTPP members except Malaysia and Brunei. This means that the economic benefits of CPTPP for the UK will be limited to:
- FTAs with Malaysia and Brunei
- better market access than the UK has under its existing FTAs – for example, the UK will be able to export more cheese to Canada under CPTPP than it was able to under the bilateral UK-Canada FTA
- more ambitious text than is found in some of the rolled-over FTAs on issues such as digital services and data flows
- the ability to operate under a single set of rules of origin.
These benefits may grow if new countries join the CPTPP or if trade develops in a way for which the CPTPP rules are particularly helpful. For example, it has been suggested that the rules on data in the CPTPP will become more valuable for digital trade if countries begin to impose tighter controls on where their citizens’ data is held.
The UK government has also stated that it sees geopolitical advantages in CPTPP membership, since it would put ‘the UK at the centre of a network of countries committed to free trade and to the global rules underpinning international commerce’ and strengthen its place in the ‘Indo-Pacific’ region. In this sense, joining the CPTPP forms part of the ‘Indo-Pacific tilt’ discussed in the 2021 Integrated Review of Security, Defence, Development and Foreign Policy.
Would joining the CPTPP clash with the UK’s trade deal with the EU?
Not for the most part. Like the UK, many CPTPP members also have trade agreements with the EU.
For example, Article 58(2) of the Withdrawal Agreement requires the UK to protect ‘traditional terms’ for wine. These are terms such as ‘château’, ‘clos’ or ‘tawny’ which, in the EU’s view, are associated with specific winemaking regions and should be reserved for them. The US disagrees vehemently and so secured a provision prohibiting the parties from restricting the use of such terms. The UK would need to secure an exemption from this rule to comply with its obligations under the Withdrawal Agreement. Canada secured such an exemption in the original TPP talks and it seems likely the UK has done the same.
Will joining the CPTPP force the UK to change its regulations?
Not immediately. There are no ‘CPTPP regulations’ as there are in the EU, so the UK will not have to change its standards to join the club. There have been suggestions that the Canadian government attempted to use the leverage of joining the CPTPP to convince the UK to remove its ban on hormone-treated beef. 12 As the Institute suggested might happen in its paper on Trade and Regulation But the UK seems to have resisted this pressure successfully.
In the longer term, CPTPP members make certain commitments in relation to their regulatory processes, such as making decisions about food safety regulations based on scientific evidence. In addition, the agreement has a chapter on Regulatory Coherence under which members agree to discuss and cooperate when they are developing new regulations to try and stop them becoming a barrier to trade. This could influence UK regulations going forward.
Why is the CPTPP important?
The original TPP (including the US) would have been one of the world’s largest economic blocs, accounting for over 30% of world GDP. For this reason, it was thought that it would have been able to exercise a high degree of influence over the rules governing the world economy. In particular, the Obama administration hoped that it could become a vehicle to constrain the rise of China, setting rules for such a large group of countries that China would be compelled to follow them. That is why CPTPP contains much stricter rules on state-owned enterprises than the World Trade Organisation requires: the US hoped that the strength of the CPTPP bloc would force China to restrict what it sees as unfair advantages given by China to its state-owned companies that distort global markets.
The smaller (if more ambitiously named) CPTPP is less significant than it would have been if the US had become a member, but still accounts for a substantial share (about 13%) of world GDP. When the UK formally joins the CPTPP, that will rise to around 15%.
Will the CPTPP expand further?
Five applications to join the CPTPP have been received formally following the UK’s: from Costa Rica, Ecuador, Uruguay, China and Taiwan. The accession of the first three countries is unlikely to pose a problem and could be completed fairly soon.
China and Taiwan are a bigger challenge for the CPTPP members. Some of them, such as Singapore, support China’s accession and think that it would strengthen the bloc. Others, such as Australia, are strongly opposed. While Taiwan would in principle be a much easier fit for the CPTPP, those members which prize their good relations with China are reluctant to allow Taiwan in without mainland China joining as well. Given the lack of consensus, it seems unlikely that either will join in the near future. That may be why the UK government’s policy paper on concluding negotiations discusses the applications by Costa Rica, Ecuador and Uruguay but does not mention China and Taiwan’s.
In the longer term, Thailand, the Philippines, and South Korea have also expressed an interest in joining but have not submitted a formal application yet.
The greatest prize of all for the CPTPP members would be if the US were to get back on board. President Biden hinted support for such a move before his election, but has since said that the US is ‘not going to enter any new trade agreement with anybody until we have made major investments here at home and in our workers’. Most commentators think the US is unlikely to join in the foreseeable future. In May 2022, the US established the Indo-Pacific Economic Framework, which includes many CPTPP members as well as a few others (including India and Indonesia). It has been suggested that this is an attempt to create an alternative to CPTPP, but so far it remains a high-level discussion forum with little concrete content.
Is the CPTPP like the European Union?
Not really. Unlike the EU, the CPTPP is essentially an economic organisation with no aspirations to political union. Although most of its members are liberal Western-aligned democracies, some are not: Vietnam is a single-party Communist state and Brunei is an Islamic absolute monarchy. There is no suggestion that CPTPP members will pursue a common foreign policy, a common currency, or a common citizenship.
Even in economic terms, the CPTPP is much less integrated than the EU. It is an unusually deep and comprehensive free trade agreement, rather than a customs union or a single market. That means that (for example):
- there are still tariffs on some trade between CPTPP member states
- full customs procedures are necessary for shipments of goods between one CPTPP member state and another
- visa requirements still apply for workers from one CPTPP country to go and work in another (although CPTPP does contain rules aiming to make this easier)
Moreover, beyond the CPTPP agreement itself, there is no such thing as ‘CPTPP law’ and there will be no new ‘CPTPP directives’ developed over time. There is a body called the CPTPP Commission, but it is simply a gathering of representatives of CPTPP member states that meets for short sessions about twice a year to discuss issues arising from the agreement. There is no ‘CPTPP Parliament’. All decisions taken by CPTPP member states are taken by consensus and there are no provisions for majority votes, as there are in the EU.
There is no ‘CPTPP Court’ equivalent to the European Court of Justice (ECJ) either: if a dispute arises between the parties, an ad-hoc arbitration panel is convened. If the panel finds that a member state has breached its obligations under the agreement, there are no fines payable (as in the ECJ). Such a state has a choice of four options:
- Comply with the CPTPP rules as interpreted by the panel.
- Compensate the offended party with a tariff concession.
- Compensate the offended party with a cash payment.
- Accept increased tariffs on its own exports to the offended party.
Will joining the CPTPP stop the UK rejoining the European Union?
No. If the UK were to decide to rejoin the EU, it would have to leave the CPTPP, since having separate free trade agreements is incompatible with being a member of the EU’s single market and customs union. But the UK could do this by giving notice under Article 30.6 of the CPTPP. Six months after the date on which it gave notice, it would cease to be a member of the CPTPP. This would probably take place at a late stage of the UK’s negotiations to rejoin the EU under Article 49 of the Treaty on European Union. Many countries which have joined the EU in the past have had existing FTAs which they have had to leave on becoming EU members. For example, Poland signed an FTA with Israel in 1997, which it then had to leave when it joined the EU in 2004.
It has been suggested that joining the CPTPP will force the UK to change its regulations in ways that are incompatible with EU membership. This is unlikely in the short term, although it could become more of an issue with time. Even if the UK did change its regulations while it was a member of the CPTPP, however, it could always change them back to conform with EU standards if it decided to leave the CPTPP. Most countries joining the EU have to make extensive changes to their regulations so as to harmonise them with EU law as part of the accession process.