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On 15 December, the UK officially joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement with 11 countries predicted to add £2 billion to the country’s GDP and encourage trade with new, emerging economies.
The agreement, a modified version of the planned Trans-Pacific Partnership trade deal that once involved the US before President Trump pulled out in 2016, was signed by Rishi Sunak’s Conservative government in July 2023 and goes into force today. Under the CPTPP, the UK will effectively benefit from tariff-free trade with the 11 other countries in the agreement: Australia, New Zealand, Canada, Chile, Mexico, Peru, Japan, Malaysia, Singapore, Brunei, and Vietnam.
The UK already had some form of trade deal with all of these countries, with the exceptions of Malaysia and Brunei, but the CPTPP would enable zero-tariff exports and imports for 99% of traded goods, including cars, machinery, and financial services. The agreement only currently extends 8 of the 11 countries, with Mexico and Canada yet to ratify it and Australia to enforce it from 24 December.
Business Secretary Jonathan Reynolds celebrated the deal, saying the CPTPP would “boost trade and create opportunities for UK companies abroad, support jobs, raise wages, and drive investment across the country.”
However, it is unclear whether the deal will have any immediate impact: its long-term impact is only predicted to amount to 0.08% of the UK’s GDP at most (while Brexit, for example, was calculated to decrease GDP by 4% initially). While in opposition, current UK Prime Minister Keir Starmer said the CPTPP’s economic impact would be “very small” and not comparable to that of a deal with the EU or US, both of which have a much more substantive trade relationship with the UK.
Nonetheless, the deal’s indirect impact could be welcome news for exporters trading between the countries involved. The removal of tariffs could make transporting goods easier and simplify supply chains, limiting disruptions and delays. The agreement is especially expected to boost the services trade: according to the government, UK services firms can now operate “on a level playing field to domestic firms,” which should increase exports of financial and consulting services, high-value sectors crucial to the UK economy.
Although the economic impact of the CPTPP isn’t guaranteed, it is an important move in the UK’s expansion beyond the EU to diversify its trading partners and solidify its post-Brexit trading position. The EU is currently the UK’s largest trading partner, responsible for 40% of its exports and over half its imports. However, disputes with China on electric car tariffs and the chaos likely to ensue once President-elect Trump takes office and enacts the aggressive tariff policies he has promised has been motivating countries to look to new frontiers for trade partners.
The CPTPP gives the UK access to several countries with emerging, expanding economies – including for the first time Malaysia and Brunei, with a combined 35 million people and a fast-growing GDP – which could be less affected by a potential trade war, and provide much-needed new export markets and sources of raw materials.
