The UK has agreed to join the Trans-Pacific free trade partnership of 11 countries, cutting tariffs on the export of most goods and making it easier for firms to buy and use raw materials from the region.
The deal to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is expected to be formally ratified later in 2023 and follows two years of negotiations.
The UK will be the first European member of the bloc, which also includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The 11 original signatories represent approximately 13 per cent of global GDP.
The government believes joining will boost the UK economy by £1.8 billion in the long-run. The UK already had bilateral free trade agreements with 9 of the 11 countries, but by becoming a member of the CPTPP more than 99 per cent of UK goods exports to Malaysia and Brunei will be eligible for zero tariffs for the first time.
Additional benefits include modern ‘rules of origin’ that allow manufacturers to trade more freely. For example, UK engine manufacturers could sell engines tariff-free to another car maker in the bloc, who could then sell those cars tariff-free to any member country. This is currently not possible under existing bilateral trade agreements and will help exporters to diversify their supply chains, making it easier for companies to buy and use raw materials from across the region.
William Bain, Head of Trade Policy at the British Chambers of Commerce (BCC), commented:
“We see particular relevance for small and medium sized businesses in reduced costs to import components from member countries to use in manufactured goods for export through the rules of origin in the agreement.”
The wider Indo-Pacific region is home to 60 per cent of the world’s population and is set to account for more than half (54 per cent) of global economic growth in the decades ahead. Other countries that have formally applied to join the CPTPP so far include Costa Rica, Ecuador and Uruguay. Thailand, the Philippines and South Korea have also expressed an interest in joining.
However, some groups have expressed concerns about possible adverse impacts on British food and drink producers, who may be undercut by exporters from CPTPP countries where environmental standards are lower. In particular, there are concerns about the elimination of tariffs on palm oil, which is a major cause of deforestation in countries like Malaysia.
More information on the details of the agreement can be found on the GOV.UK website.
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