Britain’s joining CPTPP. So what the hell is it?
POLITICO’s guide to the major Indo-Pacific trade bloc as two years of UK talks come to a head.
LONDON — It’s not every day post-Brexit Britain gets to talk up a trade win. But it’s about to join an Asia-Pacific trade bloc stretching from balmy Malaysia and Singapore to snowy Ottawa, Canada, in what’s being hailed as a major moment in its life outside the EU.
So what exactly is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — and why did the U.K. get its foot in the door?
CPTPP is an 11- (and soon to be 12) member bloc whose existing members are Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and Canada.
The deal started life under the Obama administration in 2015 as the TPP. But, railing against trade during his 2016 U.S. presidential campaign, Donald Trump called the pact “a rape of our country” and pulled out of talks days after he took office in 2017.
The tongue-twisting title was dreamt up by Canada, which wanted to underscore the "progressive" nature of the deal.
The bloc is focused on lowering tariffs. Members mutually drop 98 percent of their barriers on goods. A key aspect of the pact is that it allows different components of final products — such as automobiles — to come from member nations tariff-free.
Why is Britain joining?
Joining CPTPP has been a key aim of "Global Britain" since Brexit. Successive trade chiefs, including the current one, Kemi Badenoch, have played a part in making the U.K. a card-carrying member.
"Follow the money," British Chief Trade Negotiation Adviser Crawford Falconer said of the deal in February, pointing out that “one half of the 2.3 billion [global] middle-class will be in the Indo-Pacific” in the first half of the 21st century.
“This is our new club for good or bad — the middle ground of trade,” said a former trade department official. The members of the bloc are Britain’s “natural allies on trade,” they argued. The deal “very firmly positions the U.K. with those middle powers of trade.”
London already has trade deals with nine of the group’s members. The new pact is estimated to add 0.08 percent to the U.K.’s GDP over the next 15 years. That’s small beer, but “CPTPP will grow,” Falconer explained, with China (more on them in a bit), plus Taiwan and Uruguay filing applications. South Korea and Thailand have also made joining official government policy too.
But it’s not just trade. Britain’s embarked on a major foreign policy reorientation toward the Indo-Pacific. Australia and Japan see the U.K. as a natural ally as they push back against China’s economic coercion and military ambitions.
The deal meanwhile solidifies supply chains for future tech, such as semiconductors and critical minerals used to make electric vehicles and wind turbines.
Falconer said last month that the deal represents the best “Plan B” for Britain amid dysfunction at the World Trade Organization, the beleaguered policeman of global trade rules.
Why are Brexiteers loving it?
Backers of Britain’s exit from the European Union see two main reasons to be cheerful about CPTPP.
Firstly, it’s a win at a time when one of Britain’s other major trade hopes — a big deal with the United States — is going nowhere and gloomy predictions about Britain’s economy have some Brexit-backers feeling regretful.
Euroskeptics also argue joining CPTPP will hinder any hope of rejoining the EU by requiring alignment with the Indo-Pacific bloc’s rules and standards at the expense of Brussels’ regulations.
It may be more complicated than that, say experts. The former official quoted above said CPTPP had been "held up as something that might force us to change our food rules." But Canada has, for example, backed off on its calls for the U.K. to drop a ban on hormone-treated beef as a condition for membership.
The deal does not prevent alignment with EU food and drink rules to minimize checks at the border, said a diplomat from one member country. EU alignment is even encouraged by some members, they added.
Did Britain face much resistance?
Getting Britain into CPTPP is “a coup” for British trade diplomacy, said a former senior official at the trade department. But it’s a big boost for Japanese diplomacy too.
Japan worked “really seriously” to get “the U.K. to accept all existing CPTPP rules without any exception, said Minako Morita-Jaeger, a senior research fellow in international trade at the University of Sussex Business School. The reason for that is China. Letting Britain bend the rules would set a precedent, she added. “This is why they do not want to compromise.”
Canada tried to use those hard-and-fast rules as leverage to reverse Britain’s ban on hormone-treated beef. But it backed down after Tokyo worked throughout the start of the year to “remind members of the spirit of cooperation,” said a diplomat from another member country.
So it’s all good then?
Not quite. Parts of the deal have NGOs and British farmers somewhat spooked. Internal U.K. trade department data seen by POLITICO last year predicted that adding new members in future years could deal a blow to British farmers. But it’s a double-edged sword and, as exporters, they could reap opportunities from it.
That in itself is going to mean ramping up government help, however. British exporters “will need quite a lot of support to be able to use this trade deal as it differs substantially from what they are used to,” said customs expert Anna Jerzewska.
Unions also worry about workers’ rights in CPTPP member nations. “Workplace exploitation is widespread in the countries involved in this agreement — from Vietnam and Brunei where independent unions are banned, to Malaysia where migrant workers are subject to forced labor,” said Paul Nowak, general secretary of the Trades Union Congress (TUC).
“This deal also allows multinational corporations to sue the U.K. government in secret courts for introducing policies which threaten their profits,” Nowak warned, pointing to its investor-state dispute settlement body. “Unions were completely shut out of negotiations,” he said, “despite promises of a seat at the table.”
Although growth in Britain’s economy is driven by services — especially financial and professional services like accounting — the deal also “does more for trade in goods,” points out trade expert Sam Lowe of the Policy Institute at King’s College London.
So what happens now?
Late Thursday (or Friday morning for some of them), trade ministers from the member nations will bend times zones to get an agreement in principle over the line. The signing ceremony is planned for July when member trade ministers meet in Auckland, New Zealand.
Before that, the text needs to be translated into several languages and legally verified. “That takes time,” said the first diplomat quoted above. After more than two years of talks, what’s a couple of months more?