UK takes major step towards joining Indo-Pacific trade bloc
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership Act receives Royal Assent.
- UK poised to join Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade group later this year as the Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Act receives Royal Assent
- Business and Trade Secretary Kemi Badenoch signed the accession treaty for Indo-Pacific bloc last July following two years of negotiations
- With the UK as a member CPTPP will account for 15% of global GDP – worth £12 trillion in 2022
The UK is today [20 March] one step closer to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) later this year, as the new Trade (CPTPP) Act received Royal Assent.
In July, the UK signed up to the vast Indo-Pacific trade group, bolstering its combined GDP to £12 trillion in 2022 – a huge 15% of the global economy. Under the deal, over 99% of current UK goods exports to CPTPP countries will be eligible for zero tariffs, including Scotch whisky and cars.
Business and Trade Secretary Kemi Badenoch said:
I am delighted that the CPTPP Bill has become law – a major step towards the UK becoming a full-fledged member of the Indo-Pacific bloc and the many benefits that will come with that membership.
We are leveraging our freedoms as an independent trading nation to open-up a new era of partnership with the fast-growing economies of tomorrow.
Becoming a member of CPTPP offers brilliant new opportunities for British businesses and consumers through greater access to a market of over 500 million people – helping to grow the UK economy.
Minister of State for Trade Policy Greg Hands said:
This is exciting news for British businesses up and down the country.
My message to the British business community is clear – start looking now at what this deal can do for you, so you are ready to take full advantage of the brilliant opportunities it presents when the deal comes into force.
Head of Trade Policy at the British Chambers of Commerce William Bain said:
Royal Assent for CPTPP is a red-letter day for our traders. UK companies will have more flexibility in their supply and manufacturing chains, easier ability to transfer data, and stronger procurement and investment opportunities in a fast-growing part of the global economy.
We are looking forward to working with Government to ensure our firms can use these improved trading conditions to drive export growth across the other 11 members, from the Americas to Asia-Pacific.
Director General of the Institute of Export & International Trade Marco Forgione said:
This is an important event which will help reshape the UK economy for the future. As well as trade in goods and preferential agreements on cumulation and rules of origin, entry into CPTPP opens up high growth markets to the UK’s world leading services sectors.
The partnership with CPTPP nations in South East Asia, Central and South America can help us build resilient and robust supply chains, which are essential in an increasingly uncertain geo-political landscape where trade is being weaponised. As we’ve seen with the success of the Australia Free Trade Agreement there is tremendous demand for U.K. goods and services in CPTPP markets.
Chief Executive Officer of TheCityUK Miles Celic said:
Receiving Royal Assent for the CPTPP Act is an important step in moving the UK closer to its full accession to this strategic trade bloc. Joining CPTPP will enable the UK to kickstart growth, helping our world class financial and related professional services industry to progress in the world’s fastest growing markets and generate more export opportunities for UK firms.
The UK will be the first European member and first new member since CPTPP was created, which would have been impossible had we remained in the EU. Being part of CPTPP will support jobs and economic growth across the country, with every nation and region expected to benefit.
The agreement is a gateway to the Indo-Pacific, a region set to account for the majority of global growth and around half of the world’s middle-class consumers in the coming decades. It will bring new opportunities for British business, cut red tape for exporters, and support jobs.
With Royal Assent secured, the Government will now seek to pass technical secondary legislation to ensure the UK is ready to ratify its accession to CPTPP as soon as possible. The Government will then formally accept the terms signed last year with New Zealand, as CPTPP depository, by mid-July 2024.
Other Parties also have to complete their domestic processes to ratify UK accession (with six needed for the agreement to enter into force), with Japan and Singapore having already completed this. Entry into force is expected by the end of the year.
Background
Once a bill has completed all the parliamentary stages in both Houses, it is ready to receive Royal Assent. This is when the King formally agrees to make the bill into an Act of Parliament (law). More information on Royal Assent is available here.
Additional benefits of UK accession to CPTPP include:
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Boosting services: The UK is the world’s second largest services provider and services accounted for 45% of our trade with CPTPP members last year. Joining the agreement can reduce red tape – UK firms will not be required to establish a local office or be resident to supply a service and will be able to operate on a par with local firms.
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Increased flexibility: Modern ‘rules of origin’ could make British businesses more competitive by allowing them to trade more freely across the trade area. For example, UK car manufacturers could sell car engines tariff-free to a car maker in the grouping who could then sell those cars tariff-free to any other member country, subject to meeting the rules of origin. This is currently not possible under all the bilateral trade agreements the UK has in place with CPTPP members and will help exporters diversify their supply chains and create new export opportunities.
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Pro-investment: Investment between the UK and CPTPP countries is expected to increase as the agreement contains provisions to limit barriers and encourage more inward investment. Inward investment stocks to the UK from CPTPP countries were worth £182 billion in 2021.
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Cutting-edge: Remotely delivered services from the UK to CPTPP were worth £23 billion in 2021. CPTPP sets modern rules for digital trade across all sectors of the economy and will support UK businesses of all sizes to seek new opportunities in CPTPP markets.
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New Markets: Joining means we will have a Free Trade Agreement with Malaysia for the first time, giving businesses far more access to an economy worth £330 billion in GDP in 2022. Tariffs of around 80% will be eliminated on UK exports of whisky within 10 years and tariffs of 30% on UK exports of cars will be eliminated within 7 years, helping the UK get a larger share of the market.
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Cheaper consumer prices: Reduced tariffs on imported goods could also lead to cheaper prices for British consumers on high-quality products like fruit juices from Chile and Peru and honey and chocolate from Mexico.