The United Kingdom has completed negotiations to accede to the Comprehensive and Progressive Agreement on Trans-Pacific Partnership, marking a significant step in the development of post-Brexit trade policy.
The final accession agreement was signed off following a virtual meeting of CPTPP trade ministers in the early hours on Friday morning (31 March) and represented the culmination of more than two years of negotiations.
The deal marks the first enlargement of the CPTPP bloc since its creation in 2018. The UK will become the first country from outside the Indo-Pacific region to accede.
“Being part of CPTPP will deliver new opportunities for growth in a way that is tailored to the UK’s economy and reflects the future of the global economy,” said a statement from the UK department of business and trade.
Britain’s accession is the most tangible sign to date of the country’s ‘Indo-Pacific tilt’ since leaving the EU, and positions it to become part of a bloc whose joint gross domestic product totalled around £9 trillion in 2021, around 13% of global output.
The UK is now set to become the second largest CPTPP economy after Japan.
The 11 existing members of CPTPP account for just under 7% of total UK trade. The deal itself only creates entirely new market access for less than 0.5% of UK trade, given that Britain already has bilateral trade agreements in place with all CPTPP members other than Malaysia and Brunei.
UK government figures indicate that joining CPTPP will boost UK GDP by no more than 0.08% over the coming decade.
British membership is expected to be formally approved at a CPTPP ministerial meeting this summer, while entry into force will occur after the deal has been ratified by all parties.
Within the UK, this process will include the same scrutiny processes as for the earlier bilateral FTAs with Australia and New Zealand. This will include the delivery of a report by the Trade and Agriculture Commission to verify the consistency of the agreement with UK law on food safety, animal welfare and the environment.
The agreement does not alter the texts of the CPTPP agreement, nor does it entail any additional market access commitments on the part of CPTPP members.
Instead, the accession talks have focused on how the UK – which is to become the second largest CPTPP economy after Japan – will fit into the existing CPTPP framework of trade rules and market access schedules.
No accession texts have yet been published.
UK keeps farm quotas in place
The most sensitive aspect of the CPTPP negotiations has inevitably revolved around agriculture.
Here, the UK has been on the defensive following the political furore over its market-opening FTA deals with Australia and New Zealand in 2021 – and a consequence, its gains in terms of new agri-food market access in key CPTPP markets have also been limited.
For beef, Canada had initially been pressing for full market access similar to that already agreed for Australia and New Zealand.
But Ottawa has had to content itself with a new duty-free beef TRQ which will rise to 13,000 tonnes after 10 years – a quota which it will share with Brunei, Chile, Malaysia, Mexico, and Peru.
The same countries will also share TRQs of 55,000t for pork and 10,000t for chicken – again with a 10-year phasing-in period.
Other CPTPP countries will have access in accordance with their existing bilateral FTA deals.
There will also be TRQs of 10,000t for long-grain milled rice shared by Brunei, Chile, Malaysia, and Peru, and of 25,000t for sugar shared by Brunei, Chile, Malaysia, Peru, and Vietnam.
There are to be no concessions at all – i.e. continuation of MFN duties – for rice from Australia, Japan and Mexico, or for sugar from Mexico. As already agreed bilaterally, Australia will have no preferential market access for pork, chicken, rice or eggs.
Malaysian palm oil in
The duties of up to 12% of Malaysian palm oil are to be eliminated on entry into force – a controversial move given concerns over deforestation in the southeast Asian country.
This has been partially addressed by the UK and Malaysia stating that they will publish a joint statement, as part of the environment chapter of the agreement, setting out “our shared commitment to work together to promote sustainable production and protect forests”.
For bananas, duties are to be cut to £62 per tonne for all CPTPP parties – the same rate as under the UK-Central America FTA – while TRQs of 8,000t each are created for both Mexico and Peru, with a special in-quota tariff rate of £40 per tonne.
80% reduction of whisky duties in Malaysia, Canada dairy doors remain sealed
The price that the UK has had to pay for its largely defensive approach on farm trade is limited access to sensitive CPTPP markets.
Canada has made no additional market openings, with the UK required to battle it out with the other eleven members for access to Canada’s CPTPP TRQs for beef and dairy products.
The same applies for UK access to the markets of Chile, Japan, Mexico, Peru and Vietnam.
The one big win for the UK agri-food sector is Malaysia’s agreement to reduce its tariffs of up to 80% on UK whisky down to zero over a 10-year period.
More than 99% of current UK goods exports to CPTPP members will be eligible for tariff-free trade upon accession.
The principle has been agreed that the UK will ‘catch up’ with other CPTPP members on the staging of tariff cuts where these are being phased out. This is significant, as the bloc is currently into Year 6 of its various multi-year tariff phase-out schedules.
Malaysia – the one major CPTPP economy with which the UK does not already have a bilateral trade agreement – will progressively eliminate its 30% tariff on UK car imports.
No British concessions on SPS measures
Much of the controversy in the run-up to UK accession had centred around Canada’s attempts to make the UK lift its ban on hormone-treated beef.
In this Ottawa has, predictably, been unsuccessful.
“Joining CPTPP will not compromise our high animal and plant health, food safety or animal welfare standards. All food and drink products imported into the UK will continue to have to comply with our import requirements. Nothing in CPTPP restricts the UK’s sovereign right to set our own animal welfare and antimicrobial resistance policies,” the UK government said in a statement.
The deal does provide a framework for greater transparency and information sharing on SPS measures.
Importantly for the UK, the deal formalises the principle of ‘regionalisation’. This means that countries agree to limit trade restrictions only to the affected regions in cases of animal or plant disease outbreaks.
Cumulation of rules of origin – Malaysian side-letter
Multilateral cumulation applies within CPTPP. This means that intermediate goods from any member country counts as ‘local’ for the purposes of accessing tariff concessions on trade within the bloc. This will help manufacturers of UK auto parts in particular.
Where more generous specific provisions apply in bilateral free trade agreements – e.g. the agreement between the UK and Japan to allow EU components to count as qualifying ‘local’ content – then traders can choose to operate on this legal basis, rather than under CPTPP rules.
A ‘side letter’ is to be signed with Malaysia to allow ‘more liberal’ rules of origin on automotive exports than the usual CPTPP rules, according to the UK government.
Services
London says that joining CPTPP ‘will provide certainty and transparency for UK service suppliers in key UK industries and sectors such as professional and business services’.
One significant gain for the UK is that British companies will be able to operate in all CPTPP countries without having to establish a local base in that territory.
The standalone financial services chapter within the CPTPP will also be supportive for the UK’s major strengths in the sector.
CPTPP rules to facilitate temporary movement of business people will deliver gains especially for those doing business in Mexico, Chile, and Malaysia.
E-commerce – UK brings in its own new rules
Joining CPTPP will automatically extend the more ‘modern’ provisions contained in recent UK FTAs, such as those with Australia and New Zealand, to countries with whom the UK has older ‘rolled-over’ trade agreements.
This is notably the case for Vietnam, Chile, Mexico, and Canada.
The UK government stated that the CPTPP commitments on free flows of data ‘will not change or weaken the UK’s high-standard domestic legislation on personal data protection’.
Investment and ISDS – Australian and New Zealand carve-out
A potentially contentious provision for UK civil society is that the UK has signed up to CPTPP’s investor-state dispute settlement mechanism.
ISDS will however not apply in the case of investments in and from Australia and New Zealand, both of whom have pre-existing CPTPP carve-outs.
The provisions “will ensure that UK investors can access an independent form of legal redress in the event of unfair treatment”, the UK government said.
“The government is clear that where we negotiate investment agreements and ISDS provisions, we will maintain our right to regulate in the public interest, including in areas such as the environment and labour standards,” it added.
No ISDS case has so far been brought under the terms of the CPTPP investment protection agreement.
Intellectual property – no clash with European Patent Convention
The big issue with UK accession to CPTPP rules on intellectual property revolved around grace periods for patent applications.
These are banned by the European Patent Convention, of which the UK is a member – but mandated by CPTPP.
The compromise has been that the UK will maintain its existing status quo pending efforts to reach international agreement on this point in the relevant organisations.
“The UK will not make any domestic changes regarding grace periods until the necessary amendments to the relevant international conventions have been made. The UK has therefore ensured our accession to CPTPP is consistent with our existing international obligations, such as [the EPC],” the government stated.
Technical barriers to trade
The CPTPP agreement includes detailed provisions on minimising TBT, including seven sector-specific annexes – covering wine and spirits, ICT, pharmaceuticals, cosmetics, medical devices, proprietary formulas for pre-packaged foods, and organic products.
The rules will also provide for UK conformity assessment bodies to be automatically accredited across all CPTPP members. There is no requirement for any changes to regulatory requirements for products sold in the UK.
Government procurement
Only six of the 11 existing CPTPP members are parties to the WTO’s government procurement agreement, so the CPTPP rules in this area, which largely replicate GPA, extend the provisions of that deal to the other five members Peru, Chile, Mexico, Malaysia and Brunei.
The UK believes it will not need to offer any market access beyond what it has already offered in bilateral agreements, and it has specifically carved out provision for the UK national health service from the scope of the deal.
One benefit is that Canada will expand its coverage of services procurement such that UK businesses will have improved access to Canadian central government and provincial government contracts.
Environment commitments
The extensive CPTPP chapter on the environment largely formalises commitments already made by the parties – including the UK – in other international fora.
The agreement also “recognises the importance of promoting trade and investment in environmental goods and services and endeavours to address and remove barriers to trade in those areas,” the UK government said.
