The UK’s accession, announced today, to the multilateral Pacific trade bloc will be a key to unlock Britain’s future as a trading nation globally, with the UK’s service economy particularly to benefit, says David Collins. Gone are the days of top-down diktat stifling growth. High standards will be based on equivalence recognition, underpinned by independent arbitration.
The UK’s accession this week to the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) is a victory in trade and geopolitical policy, marking a major milestone in the UK’s post-Brexit journey. It should also help silence critics of Boris Johnson’s Global Britain strategy and vindicate Liz Truss, without whose work as Trade Secretary and Foreign Secretary in Johnson’s government, joining the CPTPP would have been unlikely. The early appreciation of the economic potential of the Far East and Pacific Rim will prove to be a significant boon to the UK’s economy in the coming decades.
Critics of the CPTPP, typically still lamenting the UK’s departure from the EU, cite the low GDP growth projections resulting from the UK’s accession to the Pacific pact. But these figures obscure the broader implications for geopolitical influence and long-term trends in the global economy. With the UK’s accession, the CPTPP’s membership will grow to 12 countries, together comprising a higher component of the world’s GDP than the EU. While the UK’s trade relationship with the EU will always be important, it becomes ever less so as the EU continues to decline in economic relevance. This is sharp contrast to the Pacific region, poised to grow faster than any part of the world and often on the cutting edge in regulatory approaches to new technologies.
The UK now not only has a foothold in this region; it has a powerful voice on the CPTPP with the ability to shape the agreement’s future direction including its acceptance of new members. With three G7 members on board, the CPTPP is fast becoming the trade pact that everyone wants to join. While China’s accession is unlikely given its preference for state owned monopolies, it is quite likely that Taiwan will sign on in the near future. It is not hard to imagine that the US will revisit its unwise decision to pull out of the CPTPP’s forerunner (the original TPP) regardless of who sits in the White House. With the multilateral trade agenda under the World Trade Organization (WTO) in decline, perhaps terminally so, as a grouping of leading like-minded pro-trade countries, the CPTPP may well become the most important trading arrangement in the world.
It is true that the UK already has bilateral trade agreements with several of the CPTPP partners including Japan and Australia, but the CPTPP goes deeper than many of these, especially in relation to services, perhaps the UK’s greatest strength. Services, unlike goods, are less geographically dependent, meaning that they can generate wealth despite distance. Since the CPTPP is a free trade agreement, not an economic integration project like the EU, its signatories retain sovereignty over their own laws. Rather than telling its members what to do and how to do it, the CPTPP is focused on recognizing as equivalent each others’ standards with a view to providing the greatest market access. While it enables structured dispute settlement through international arbitration, it does not have its own court or rule-making body. There is some discussion of the CPTPP adding a secretariat to serve an administrative function, particularly in relation to new accessions, but it would never reach the level of true transnational governance of the kind seen in Brussels.
Another great advantage of the CPTPP is its adaptability to each country’s regulatory approach as long as the high-level of market access is maintained. One area where this aspect of CPTPP is poised to become more important is in relation to digital trade. While the CPTPP was at the forefront of rules on e-commerce, this is a rapidly changing sphere and there are already new instruments which are bolder and deeper. Chief among these is the Digital Economy Partnership Agreement (DEPA), signed by the three CPTPP countries Singapore, New Zealand and Chile. DEPA is focused on common principles, such as free flow of data, non-discrimination as well as the protection of privacy. It also contains innovative provisions on cooperation in AI and digital identities as well as emphasis on the use of electronic invoicing and customs. Two other CPTPP members, Canada and Korea are expected to sign on to DEPA, and it would be a surprise if the UK did not also do so. It is easy to envision a situation in which DEPA is slotted into CPTPP – as it was designed to do. CPTPP is therefore able to continually renew itself, keeping up with trends in the global economy while maintaining its core focus on trade liberalization.
Securing the UK’s membership in CPTPP is a tremendous achievement for the UK government and its negotiators. Much as it represents a point of no return from Brexit, it also opens up a new path towards the future of a genuinely global marketplace of cooperation and prosperity.