Will the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) truly benefit British exporters? What are the UK CPTPP membership perks? We explore.
What is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a landmark trade agreement between 12 countries spanning the Asia-Pacific region, North America, and South America. The partnership was created to enhance economic cooperation and trade among member countries by eliminating tariffs, reducing barriers to investment, and promoting fair competition. The CPTPP's members account for roughly 13% of global GDP, making it one of the world's largest trading blocs. In 2024, the United Kingdom is slated to become the first country to join the CPTPP since its inception, which is expected further to boost trade and investment opportunities for all member countries.
What is the perceived benefit for UK businesses of being part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?
The UK government views CPTT as a gateway to the Indo-Pacific region, which is expected to drive global growth and house around half of the world's middle-class consumers in the coming decades. If the UK becomes a member of CPTT, it will strengthen its ties with some of the world's most dynamic economies, including the UK's 12 trillion pound GDP. The UK will be at the centre of a vibrant group of countries, including Vietnam, which is predicted to have one of the world's fastest-growing economies in the coming years.
Will membership in the CPTPP improve market access for UK businesses?
When the CPTPP develops, the UK will have greater access to new markets, immediately upon joining and, possibly, later. Countries including Costa Rica, Ecuador, and Uruguay have applied to join CPTPP. Thailand, South Korea, and the Philippines want to join. These nations joining CPTPP with the UK would boost 2022 GDP to almost £14 trillion. This enlarged group would account for 9% of UK exports in 2022. If the UK and these economies joined CPTPP.
Will the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) lower tariffs for British exporters?
As a member, the UK'S 99% of its exports to CPTPP nations will be eligible for zero tariffs. This means that British businesses will have improved access to these markets, which could lead to increased trade and economic growth.
The removal of tariffs will particularly benefit UK car and equipment and food exporters, who are likely to see a surge in demand from the CPTPP nations. According to some estimates, the UK's exports to other CPTPP nations could increase by as much as £3 billion.
What are the benefits of the CPTPP for UK Construction Businesses?
Consulting, design, and project management are UK strengths in construction.
CPTPP trade and service facilitation may earn the construction sector £120 million+. The CPTPP gives construction companies tariff-free exports, flexible rules of origin for cumulation across countries, and consistent service provider market access.
What are the benefits of the CPTPP for UK Food & Drink businesses?
Joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will open up more opportunities for UK-produced products such as whisky, confectionery, and dairy in the American and Asian markets. The UK dairy industry will benefit from reduced tariffs in Canada, Chile, Japan, and Mexico. Additionally, the UK will gain entry into the Canadian poultry market and the beef, pork, and poultry markets of Mexico. Furthermore, Mexican imports of British chocolate and sugar confections will be exempt from tariffs.
What are the benefits of the CPTPP for UK Manufacturing businesses?
Tariff Free
UK vehicle and industrial exports to Malaysia and Brunei will be tariff-free, while tariffs on UK exports of electric automobiles and wind turbine towers will be reduced under the CPTPP. All UK-made chemicals, polymers, and metals will be tariff-free in Malaysia. In 2022, the UK exported motor automobiles worth £313.9 million to Malaysia despite the 30% MFN tax imposed by Malaysia.
Origin Rules
CPTPP helps UK exporters get cheap tariffs by defining 'originating' items. UK exporters get preferred tariff treatment over bilateral FTAs. UK firms can import CPTPP inputs, process them and export finished products for lower CPTPP tariffs. Automakers can use Japanese/Mexican parts. A side letter with Malaysia allows the origin of autos if 25% of their worth was donated to a CPTPP Party instead of 55%. UK automakers can export finished cars to Malaysia at lower tariffs, creating new business.
What are the benefits of the CPTPP for UK Life Sciences businesses?
The rate at which tariffs on pharmaceutical exports from the United Kingdom to Vietnam are eliminated will be quicker than under the prior bilateral agreement. Presently, this could add £2.5 billion to the United Kingdom's exports of pharmaceuticals and medical technologies to CPTPP nations in 2022.
Top Tip: Read "CPTPP - What benefits for my Industry?" In this blog, we look in more detail at the construction, life science, food & drink and manufacturing sectors and explore how they can benefit from CPTPP. Read now: https://www.customsmanager.info/post/cptpp-what-benefits-for-my-industry
Diversification of supply networks gives UK exporters more alternatives
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) offers new supply chain diversification options that may improve economic resilience by expanding commerce between Asia and the Americas. It would help the country to diversify its trade relationships and reduce its reliance on Europe for exports. It could also open up new opportunities for British businesses to access fast-growing markets in Asia and the Pacific. For example, automotive manufacturers in the UK may sell vehicle engines to a local car manufacturer, which might then export the finished cars on preferential tariff conditions to other member nations if they satisfy the rules of origin. This may make FTA advantages simpler for Indo-Pacific exporters with supply networks.
Top Tip: Verify the Rules of Origin under CPTPP to understand what rules your products need to meet to qualify for zero duty. We wrote a blog entry specific to Rules of Origin in the CTPP: https://www.customsmanager.info/post/cptpp-unlocked-and-explained-rules-of-origin
A free trade agreement with Malaysia and Brunei for the first time under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
The UK's membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will significantly benefit the country's businesses and economy. By joining the CPTPP, the UK will have access to markets beyond its existing trade agreements, including Malaysia and Brunei. This will increase market access for UK companies, offering better opportunities to tap into economies worth £330 billion and £13 billion in GDP in 2022, respectively.
Joining the CPTPP would allow UK companies to access a market with a GDP of £330 billion in 2022. This could support employment in many important industries and boost UK service exports to Malaysia, worth £1.7 billion in 2022. The UK will eventually abolish 80% of taxes on whisky shipments to Malaysia, giving the UK a chance to acquire a larger market share. Moreover, the eventual reduction of 30% tariffs on UK-exported cars to Malaysia would benefit British automakers.
Increasing availability of high-quality imported goods
A country's involvement in an agreement that reduces tariffs on most imported goods may benefit UK consumers and businesses by increasing variety, quality, and price. This should include reduced prices for high-quality imports like Chilean and Peruvian fruit juices, Mexican honey and chocolate, and Malaysian vacuum cleaners. Abolishing tariffs on a wide range of industrial inputs, such as equipment and chemicals, may lower import prices. Businesses might gain a competitive edge by joining global supply networks.
Conclusion
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTT) is a trade agreement between 12 countries, aiming to enhance economic cooperation and trade by eliminating tariffs, reducing investment barriers, and promoting fair competition. The UK is expected to become the first country to join the CPTPP in 2024, boosting trade and investment opportunities for all member countries. Membership in the CPTPP will improve market access for UK businesses, lower tariffs for British exporters, and provide benefits for construction, food & drink, and manufacturing businesses amongst other industries. The UK's membership could increase exports to other CPTPP nations by up to £3 billion.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) offers UK exporters preferential tariff treatment over bilateral FTAs, allowing them to import CPTPP inputs, process them, and export finished products at lower tariffs. This benefits life sciences businesses, as it allows quicker elimination of tariffs on pharmaceutical exports to Vietnam. The CPTPP also offers new supply chain diversification options, reducing reliance on Europe for exports and opening up new markets in Asia and the Pacific. Additionally, the agreement reduces tariffs on most imported goods, increasing variety, quality, and price.
More information and links
CPTTP: Five Uncomfortable Truths that UK Businesses Should Know
While the UK government touts the benefits of CPTPP, it's important to acknowledge the potential downsides as well.
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