The UK’s bid to join CPTPP is generating momentum

Dec 17, 2020

Away from the fraught endgame of the Brexit negotiations, there has been positive news in UK trade in the last few weeks. International Trade Secretary Liz Truss added to the growing portfolio of UK trade agreements by securing a deal with Mexico on 15 December, following similar deals with Singapore and Vietnam last week. These are continuity agreements, which roll over the EU’s deals with the three countries onto a bilateral basis with the UK. Without these deals, UK trade with all three countries would have defaulted onto World Trade Organisation (WTO) terms on 1 January, when it loses access to the EU’s trade agreements.

Mexico, Singapore and Vietnam are all relatively important trading partners for the UK. According to the ONS, Singapore comprised 1.2% of total UK trade in 2019, while Vietnam and Mexico made up 0.4% each. Securing this trade locks in the benefits of the existing relationship and provides certainty for UK firms operating in these markets. In the case of Mexico, DIT has also announced that it will seek to negotiate a new bilateral deal next year, which it hopes will “go much further than the existing deal.”

Moreover, the deals are also the latest chapter in a wider DIT success story of securing continuity trade deals. They follow hot on the heels of the recent continuity agreement with Canada (1.6% of total UK trade) and the partial continuity agreement with Norway and Iceland (a combined 1.9% of UK trade), plus other deals with smaller partners such as North Macedonia and Egypt.

Analysis of the ONS trade statistics suggests that countries that have FTAs with the EU amount to 15.7% of the UK’s total trade. 90% of this has now been secured (either through continuity deals or with new deals, notably with Japan). This could rise to as high as 98% if a deal with the most important outstanding partner, Turkey, is completed before the end of the year. This, however, relies on the outcome of the UK-EU talks; Turkey’s customs union with the EU would prevent it from lowering its industrial tariffs on UK products in the absence of a UK-EU FTA.

Not all of these deals will fully preserve existing trade. For example, the UK-IcelandNorway deal does not cover services, and both this deal and the earlier deal with Switzerland do not (indeed cannot) replicate the levels of regulatory alignment that these countries have with the EU. Trade with these countries will therefore face some new barriers compared to the status quo. Nevertheless, though, DIT – despite criticism – has done very well to secure the bulk of these agreements on time, and deserves credit for doing so.

Delivering these continuity deals also gets the Government a little closer to its manifesto target of having 80% of UK trade covered by FTAs by 2022, with continuity agreements to date (plus the new Japan deal) putting the total at 14.1%. The 80% target is, of course, heavily dependent on reaching a deal with the EU as the UK’s largest trading partner; if this can be secured in the coming weeks and is followed by a new deal with Turkey, 62.6% of UK trade will be covered by FTAs. From there, completion of the deals currently being negotiated with the US (16.3% of UK trade), Australia (1.3%) and New Zealand (0.2%) would allow the UK to hit the 80% target.

In addition to securing trade continuity, the UK is also seeking to negotiate a new Digital Economy Agreement with Singapore. Digital trade – goods and services which are either ordered or delivered online – is a dynamic and fast-moving area that generates a growing level of economic value. Singapore is one of the world’s most forward-looking countries in this space (it has previously signed high ambition digital agreements with New Zealand, Chile and Australia). A digital deal with Singapore would therefore be an ideal opportunity to co-operate with and learn from a like-minded partner, in an area that will be vital to the UK’s future prosperity.

Finally, and most importantly, the Singapore and Vietnam deals in particular fit into a wider strategy of expanding trade and foreign policy ties in the Indo-Pacific region, as recommended by Policy Exchange’s Indo-Pacific Commission. Specifically, both Singapore and Vietnam, as well as Mexico, are members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). CPTPP is an 11-member trade bloc around the Pacific Rim which the UK has said it will seek to join, which also contains Canada, Australia, New Zealand, Japan, Malaysia, Brunei, Peru, and Chile.

The accession process for the CPTPP requires the UK to engage with all 11 existing members, and for all 11 to agree to the UK joining. Bilateral deals with individual members are likely to smooth the future accession process; if preferential trade terms are already agreed with a particular partner, said partner would be unlikely to object to the UK joining the bloc on similar or improved terms. Indeed, speaking at a Policy Exchange event over the summer, Singapore’s Trade Minister Chan Chun Sing explicitly advised the UK to use bilateral deals with key CPTPP members as “building blocks” to generate “momentum” towards CPTPP. Liz Truss, who spoke at the same event, has clearly taken his advice on board. 

This all highlights that the UK’s accession to CPTPP may come sooner than some think. The UK has now secured bilateral deals with 7 of the 11 members; as well as the recent continuity deals with Singapore, Vietnam, Mexico and Canada, and the improved deal with Japan, it also secured continuity deals with Chile and Peru under the previous Government. Of the remaining 4, the UK is negotiating bilateral deals with Australia and New Zealand. If these negotiations are successful, the UK could have deals with 9 of the 11 members of CPTPP prior to launching accession negotiations, with only Malaysia and Brunei outstanding.

Map of UK trade progress with CPTPP members

Moreover, the content of the prior bilateral deals with CPTPP members may also facilitate UK accession in some cases. For example, the UK-Japan deal went further than CPTPP in liberalising digital trade, sending an important signal that the UK is unlikely to object to CPTPP’s advanced provisions in this area. Similarly, the bilateral negotiations with Australia and New Zealand can be used to establish the UK’s bottom line in areas such as agricultural market access, and may also go beyond the CPTPP in areas of mutual interest such as services trade.

Finally, it is also worth noting that at least 7 of the 11 CPTPP members have publicly expressed support for the principle of UK accession. This does not mean it is a done deal, as the devil will be in the detail, but it is a promising start. Together with the strong progress the UK has made on deals with individual members, the overall picture is clear: the UK’s bid to join CPTPP is generating momentum.

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