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Perspectives: Why the EU shouldn’t follow the UK into CPTPP

Now that the UK is set to join the 11 country Asia Pacific trade pact CPTPP, some commentators have suggested the EU should follow.  But there are better alternatives for EU CPTPP trade engagement, starting with deepening dialogue on new trade policy issues.

The United Kingdom is set to join the Comprehensive and Progressive agreement for Trans-Pacific Partnership.

After the agreement was announced at the end of March, this move this was accompanied by government hype around its benefits and excitable commentary from supporters of leaving the EU that Brexit was thus vindicated.

Slightly spoiling the party was the official government forecast that only 0.08% GDP growth may spring out of membership, which Secretary of State Kemi Badenoch simply dismissed as outdated. Similarly, given that the UK already has preferential trade agreements in place with nine of the eleven CPTPP members, only 0.33% of total UK trade will fall under the new trade agreement terms.

Beyond the hype, though, there is more wide-spread agreement in policy circles that the UK’s accession to CPTPP matters in geopolitical terms. This is for differing reasons: gaining a change to set the trade rules of the future, working with like-minded middle trading powers, or supporting a foreign-policy ‘pivot’ to Asia.

Which is where the EU comes in. There is in Brussels and member state capitals comparable interests in the Indo-Pacific region.

A number of commentators, perhaps most prominently former EU trade commissioner Cecilia Malmström, have suggested the EU also consider joining CPTPP.  This is comparable to suggestions in the United States to return to the the original Trans-Pacific Partnership which it was negotiating before the November 2016 elections.

On further scrutiny, though, the case for the EU to seek accession to CPTPP does not really hold up.

Concerns about its economic impact and on supply chains would make this a fraught negotiation. Perhaps more importantly, CPTPP rules were never cutting-edge when compared to the simultaneous US-EU TTIP negotiations. These rules are becoming even less important as US and EU political concerns evolve.

Discussing this new world, engaging seriously with Asia-Pacific partners is the better way to proceed.

Content cumulation and supply chains in Europe, Asia, and North America

At heart, the CPTPP is focused on trade in goods. It becomes a ‘mega-regional’ agreeement because of its rule-of-origin provisions. In allowing for tariff-free trade between members based on cumulation, it encourages the deepening of supply chains within them.

Whether this supply chain integration will actually happen has to be an open question, as there is another similar agreement covering more of the regional economy, the Regional Comprehensive Economic Partnership – known as RCEP – which brings together South-East Asia, East Asia, and Australasia.

For existing CPTPP members, an attraction of the UK joining is that it will provide a new greater export market for these supply chains, as the UK tends to be a big importer of goods. China’s concern at this providing an alternative to their supply chains may be one reason for their interest in joining the CPTPP.

Given that there is an existing cumulation zone in Europe, via the EU single market and the wider Pan-European Mediterranean convention, the economics of the EU joining CPTPP would be far more complex. The UK, which is now outside this zone in its own region, is effectively choosing to be more a customer than a participant of manufacturing supply chains.

EU membership in CPTPP would be different. It would create a huge zone of cumulation – which would undoubtedly incentivise trade. However, given the current politics of wanting to retain manufacturing jobs, there would have to be serious questions as to public acceptability of such a move.

This doesn’t feel like the right time for that discussion. Far better for the EU to continue a bilateral programme than go into such supply chain security issues at this time.

CPTPP not at the cutting edge of trade policy – and unlikely to evolve

Members of the CPTPP, and the newly acceding UK, typically describe it as a “high-standard” trade agreement. This is typically to refer to chapters on cross-border data flows, intellectual property, and state-owned enterprises.

Even in 2016, as negotiations on the original TPP were concluding, this couldn’t really be considered as at the leading-edge of trade policy. Notably, there is no mention of climate in the environment chapter, and the regulatory cooperation chapter is limited particularly when compared to the much more elaborate arrangements that were being discussed at that time between EU and US.

Seven years on, as global trade conversations are dominated by different issues such as industrial subsidies, critical raw materials, the net-zero transition, the CPTPP text looks even more dated. So much that members have been looking at further measures and agreements on for example e-commerce or climate change.

These new initiatives however have emerged outside the CPTPP structure. These include the Digital Economy Partnership Agreement between New Zealand, Chile, and Singapore, and the proposed Agreement on Climate Change, Trade and Sustainability, that involves New Zealand, along with non-member countries like Norway and Switzerland.

With 12 members of differing views, it seems unlikely that CPTPP will ever be significantly updated.

Better alternative: discuss new trade rules with allies

For the UK, joining a club that includes a number of mid-sized allies on pursuing open trade such as Japan, Canada, Singapore, and New Zealand makes some sense in the context of leaving its own regional grouping. While CPTPP may not evolve, deepening relationships with other members should facilitate a view distinctive to those of the major trade powers.

As a global rule-maker, the EU is in a very different position. The EU’s rules, such as the carbon border adjustment mechanism and deforestation regulation, are two measures that will have global implications.

Balancing such unilateralism with the need for trade, not least for the measures to have their intended impact, should be the EU priority. To do so existing CPTPP members are ones with whom the EU should deepen collaboration.

Rather than joining that club, with the complications that would entail, formal cooperation may therefore provide a better way forward. A February 2023 article from Kommerskollegium, the National Board of Trade Sweden, suggests a number of ways to do this, such as for example a mutual recognition agreement around the circular economy.

There are many sceptical voices around the ability of ‘dialogues’ to further a trade policy agenda. It seems indeed reasonable to say these should come in addition to free trade agreements to have some impact.

The EU however already has trade agreements in place with most CPTPP members, so building on these by deepening dialogue on the genuinely new issues of trade would seem a better approach than what could be a divisive accession process.

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