The government has formally signed a treaty to join a free trade bloc of 11 countries in Asia and the Pacific, paving the way for new trading relations that could benefit UK manufacturers.
GC Business Growth Hub has provided help and support for manufacturers about international trade over the last 10 years. From showcasing the benefits to managing new routes to market post pandemic, our advisors have helped Greater Manchester businesses navigate the sometimes challenging world of international trade.
What this new deal means exactly for Greater Manchester businesses is still to be seen but it could offer exciting opportunities.
Business and Trade Secretary Kemi Badenoch signed the treaty to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 16 July following two years of negotiations.
Once ratified by Parliament, the UK will become the CPTPP’s first European member. The 11 current members of the group are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The UK already had free trade deals in place with nine of these, but Malaysia and Brunei will now be added to the list of those eligible for zero tariffs on goods.
The government hopes joining the bloc will act as a gateway to the wider Indo-Pacific region, which is set to account for the majority of future global growth.
Joining the CPTPP is also expected to provide specific benefits for manufacturers, with relaxed ‘rules of origin’ requirements making it easier for companies to buy and use raw materials across the region. For example, UK engine manufacturers will be able to sell engines tariff-free to another car maker in the CPTPP, who could then sell those cars tariff-free to another member country. This easy movement of UK-derived goods is currently not possible under existing trade agreements.
According to government research, one in every 25 jobs in the UK manufacturing sector is employed by a business headquartered in a CPTPP member nation.
William Bain, Head of Trade Policy at the British Chambers of Commerce, commented:
“There are not many multi-national trade agreements like this one, and it offers new prospects in a fast-growing region of the global economy. 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.”
Unlike single market arrangements like the EU, there is no requirement in the CPTPP for members to follow harmonised regulations and standards. Some critics are worried that joining the bloc will open the door to cheaper goods made to lower standards, especially in sectors like food and drink.
The government expects the UK’s membership to come into force in 2024. Several other countries – including Costa Rica, Ecuador and Uruguay – hope to follow suit. Thailand, the Philippines, South Korea, Taiwan and even China have also expressed an interest in joining the CPTPP in future.