UK hopes regarding the new pacific trade pact may yet be dashedby Sam Lowe / August 4, 2020 / Leave a comment
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement between 11 countries including Japan, Canada, Australia and New Zealand, is all the rage in Westminster. Formed after the initial Trans-Pacific Partnership folded, the new (and confusingly-titled) agreement has been talked up as an option for a post-Brexit UK.
In an opinion piece recently shared on Twitter by trade secretary Liz Truss, Liam Halligan of the Telegraph wrote:
“For it is no exaggeration that, by joining CPTPP, and using it to push for new trade protocols in areas like services and digital goods – areas where the EU and even the WTO have lagged behind – Britain could help to rewrite and modernise global trading rules.”
Unfortunately, this portrayal is misleading. The CPTPP already exists, and the UK deciding to join would trigger accession talks, not a fundamental renegotiation. Or to put it another way: the UK will not be re-writing or modernising anything; it will be deciding whether to accept rules and approaches already finalised by others.
When it comes to services and digital trade, there is a need to be realistic as to what the CPTPP has achieved. On services it does little more than lock in existing levels of openness, and comes nowhere close to liberalising cross-border services trade to the extent achieved within the EU. On digital trade, it certainly goes further than other agreements and includes commitments not to levy tariffs on digital flows or force investors to hand over their software’s source code—but again, this can be viewed as an effort to maintain existing conditions, rather than break down new barriers.
Even when it comes to removing tariffs, by the point of accession the UK hopes to already have trade agreements in place with all but two (Malaysia and Brunei) of the CPTPP members, so any additional gains would be marginal. (Although CPTPP membership could make it easier for exports to qualify for tariff-free trade thanks to more flexible “rules of origin” requirements.)
None of this is to say that CPTPP could not benefit the UK. British ministers talking up the possibility of accession helps counter the international perception that the UK has succumbed to protectionism and nationalism. Talking a good game is not enough in itself, but it is better than not. CPTPP membership would also give the UK a fixed position from which to engage in future trade discussions in the Pacific region, and it could provide a useful platform for the UK to engage with the US and China, in the event they decide to re-join/join the CPTPP.
But the UK’s accession to the agreement is not a given. We still do not know where Britain sits on the trade liberalisation spectrum. Lots of countries claim to be pro-free trade only to waver at the first sign of irate farmers holding pitchforks. Many CPTPP countries have committed to remove tariffs on all imports as part of the agreement, and they will be looking for the UK to do the same if it joins. But the UK’s approach to trade in this respect, particularly on agriculture, remains unclear.
Additionally, on food hygiene issues, while America’s absence from the CPTPP means the UK may not face any immediate pressure to accept chlorinated chickens, the rules of the partnership were written when the US was a member, and as such are weighted against the UK’s existing, EU-based, precautionary approach. This would leave the UK vulnerable to challenges from other CPTPP members over its current approach to food safety, if they wished to advance them.
On digital, there remains a concern that the CPTPP’s approach is not compatible with the UK’s desire for a deal with the EU on data. The EU’s GDPR regime requires companies to store personal data only in the EU or countries deemed to have an adequate level of protection, but this kind of forced data localisation is prohibited by the CPTPP. From a technical point of view there is not necessarily a problem: GDPR arguably is covered by CPTPP’s exemption covering legitimate public policy objectives and both Japan and New Zealand are deemed adequate by the EU despite being members of CPTPP. However, it is possible that politics leads to the EU treating the UK differently, especially in the context of existing EU concerns about the UK’s approach to privacy and personal data.
Ultimately, there are lots of reasons for the UK to explore joining the CPTPP, but it would benefit the country if expectations were managed, and the discussion was more grounded in reality.