Expanding Trade Globally. The UK’s Trans-Pacific Trade Deal

Expanding Trade Globally, Tackling the EU Nearer Home

The UK’s Trans-Pacific Trade Deal

The Prime Minister‘s report of the G20 summit highlighted the steps Britain has taken to exploit its Brexit freedoms and develop its global role, including accession to the trans-Pacific trading bloc, CPTPP.  Here the economic and trade lawyer David Collins explains why this deal matters for the UK. It may also help resolve the political legacy of EU economic dominance in Northern Ireland.

The UK’s two-year negotiations to join the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) concluded in March of this year with the UK signing its protocol of accession in mid-July. This is an important achievement on the part of the UK government realizing a key pillar of the Global Britain strategy. Together, the 12-nation pact comprises 15 per cent of global GDP and more than half a billion people. The Pacific region is also among the fastest-growing segments of the global economy. New accessions of Costa Rica and Korea appear imminent. Taiwan and the US, which created the original agreement, will  hopefully sign on to the CPTPP in the coming years.

As with any signing of any international agreement, much is made of the degree to which the UK must surrender its national sovereignty in joining the CPTPP. But unlike membership in the EU, which required the regulation of wide swaths of the economy in a highly proscriptive, often prohibitive way, adherence to the CPTPP is based on mutual recognition. Parties commit broadly to opening their markets, with few limitations, promising to accept each-others’ laws as equivalent thereby precluding redundant, inefficient over-regulation. The UK’s market access commitments for goods, services and investment are similar to those offered by the original CPTPP signatories. This is encouraging because it confirms that CPTPP members will insist on a high standard of market liberalization as a condition of membership, ensuring the attractiveness of the agreement to future signatories.

In terms of imposing upon the UK’s regulatory autonomy, there are two features of the UK’s accession protocol worth mentioning in that they expressly enable UK domestic law to override international obligations of CPTPP membership.
First and more positively, on investment: Article 6(2) of the Protocol specifically excludes decisions made regarding the entry of foreign investors on national security grounds, taken under the UK’s National Security Investment Act 2021 from review under the CPTPP’s investor-state dispute settlement (ISDS) mechanism. ISDS is a highly controversial procedure where foreign companies can bring legal claims directly against the host country in which they operate through international arbitration tribunals rather than in that country’s domestic courts. Although ISDS is widely reviled, especially among academics as an affront to sovereignty, investors continue to indicate that they favour having access to it, which is probably why the CPTPP chose to keep it. National security-oriented disputes (for example one involving the denial of an investor’s ability to purchase a UK company because of a threat to critical infrastructure) are particularly prone to allegations of encroachment into national sovereignty. Empowering a tribunal of private arbitrators to decide whether national security-oriented discrimination is warranted is a step too far for many. Therefore, the UK’s decision to disallow these types of claims from the CPTPP tribunal scrutiny is a wise one. It may transpire, as national security investment statutes proliferate, that other CPTPP members apply similar restrictions.

The other, more widely publicised and problematic element of the CPTPP that also touches on the issue of national sovereignty is the special provisions relating to the Windsor Framework (WF, formerly the Northern Ireland protocol). Article 15(2) of the protocol specifically provides that the WF prevails in the event of inconsistency with the CPTPP. The provision is circumscribed by WTO general exception-style language which specifies that the CPTPP-offending measure must not be “applied in a manner that would constitute a means of arbitrary or unjustified discrimination against any other Party or a disguised restriction on trade.” In other words, the UK cannot use the WF as an excuse to engage in trade protectionism against the CPTPP members.

The WF exception should be viewed for what it is – an indulgence on the part of the CPTPP membership with regards to the UK’s ongoing entanglements with the EU. Enabling the WF to trump the CPTPP in this manner is clearly meant to be temporary, understandably so. CPTPP members will not tolerate NI transgressions indefinitely. Article 15(5) specifies that CPTPP members, as represented by the CPTPP Commission, have oversight of the extent to which the exception impacts upon trade through regular reviews. One suspects that if a wide range of goods from CPTPP countries continues to be blocked from entering NI, either directly or via GB (notwithstanding the supposed effectiveness of the green lane arrangement), then CPTPP members will put pressure on the UK to get the NI arrangements sorted out. This could ultimately lead to formal disputes, likely of the state-to-state variety. Persistent problems in the implementation of the WF could well have impacts beyond the CPTPP: it is hard to see how the UK will be able to sign FTAs with other countries in the years ahead while a portion of its territory is effectively under foreign control.
While entry into force of the UK’s protocol still requires ratification by CPTPP members (expected sometime in 2024), for now the UK’s CPTPP accession is a cause for celebration; one which will ultimately yield tangible benefits in terms of GDP but also geopolitical influence in one of the world’s most thriving regions.