- On Friday, the government said it would join the 11-member Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, unlocking access to a region with a total GDP of £11 trillion ($13.6 trillion).
- The UK said this was the country’s biggest post-Brexit trade deal and makes it the first European nation to join the CPTPP.
- Prime Minister Rishi Sunak said the deal puts the UK at the center of a dynamic and growing group of Pacific economies.
A Union Jack flag flies near the Elizabeth Tower, commonly known as Big Ben, at the Houses of Parliament in central London, Britain, on March 29, 2017.
Justin Tallis | AFP | fake images
Britain has reached a historic trade deal to join a vast Indo-Pacific trading bloc after nearly two years of intense negotiations.
On Friday, the government said it would join the 11 mEmber Comprehensive and Progressive Trans-Pacific Partnership Agreementunlocking access to a region with a total GDP of £11 trillion ($13.6 trillion).
The UK said this was the country’s biggest post-Brexit trade deal and makes it the first European nation to join the CPTPP, since it came into force in 2018.
Prime Minister Rishi Sunak hailed the deal, saying it places the UK at the center of a dynamic and growing group of Pacific economies.
“We are an open, free-trade nation at heart, and this deal demonstrates the real economic benefits of our post-Brexit freedoms,” he said in a statement. “British companies will now enjoy unprecedented access to markets from Europe to the South Pacific.”
The trade block covers Canada, Mexico, Japan, Australia, Vietnam, Singapore and Malaysia, among others. The deal is expected to be formally signed by the end of the year, after final approval by Parliament and all 11 member states.
The trade pact evolved from the now-defunct Trans-Pacific Partnership, or TPP, which originated in the United States but fell apart after former President Donald Trump scrapped US involvement.
Britain said the deal will cut tariffs on exports of food, drink and cars, grant access to a market of around 500 million people and be worth 15% of global GDP once the UK joins. to the trading block.
The UK estimates that joining the CPTPP will boost its economy by £1.8bn in the long term and raise wages by £800m compared to 2019 levels.
Trade Secretary Kemi Badenoch said the deal sends a “powerful signal” that Britain is using its “post-Brexit freedoms to reach new markets around the world and grow our economy.”
Natalie Black, the UK’s trade commissioner for Asia Pacific, called it a “progressive deal” for Britain.
“This deal is, yes, about economic performance today. But it has a lot, a lot to do with economic performance going forward,” he told CNBC’s “Squawk Box Asia” on Friday.
“This is the part of the world that will drive economic growth and also drive the rules of the road for trade going forward. We want to be a part of those discussions.”
Still, it remains to be seen how much the deal actually benefits Britain’s growth prospects. Based on the government’s own estimates, the deal will raise long-term domestic debt GDP in only 0.08%, that it will have little impact in offsetting European trade losses as a result of Brexit.
Deborah Elms, executive director of the Asian Trade Centre, said it is very difficult to calculate these trade figures, especially based on existing trade flows.
“If you’re a UK company, you probably have limited existing trade flows to many of the CPTPP countries like Australia, New Zealand, Japan and Singapore,” he told CNBC’s “Capital Connection.” “Simply, because the distance is great and because you used to be very involved with the European Union.”
Trade flows are always “below what you are likely to see in reality as companies recognize the benefits and start using a trade agreement like the CPTPP,” he added.
Still, negotiations to finalize the trade deal have not always been easy. A dead end between Great Britain and Canada on agricultural market access had to be softened to remove the final hurdle to closing the deal.
“This has been a complex deal to negotiate,” Black acknowledged. “We have been negotiating across various time zones on a variety of complex issues. And they are not always straightforward. But ultimately all parties have agreed that the UK is a great new member of CPTPP.”
China has also applied to join the trading bloc, but has not made as much progress as the UK
There are many “aspiring economies” that have “declared that they want to formally join or we know that they are interested in joining,” Black said.
While the trade commissioner said it would “not be appropriate” to comment on individual economies, she noted that the barriers to joining the trade bloc are very high.
“It’s really up to those coming after us to make sure they meet member expectations for high-quality apps.”