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UK Becomes First European Nation to join CPTPP Trade Bloc

UK Becomes First European Nation to join CPTPP Trade Bloc

16-12-2024

 

  1. In December 2024, The United Kingdom officially became the 1st European and 12th member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), marking a significant milestone in post-Brexit trade relations.
  2. This move is part of Britain’s effort to establish stronger trade links globally, particularly in the Indo-Pacific region.

Key Points:

  1. Britain’s Membership:
    1. On December 15, 2024, Britain became the first European country to join the CPTPP.
    2. This is Britain's largest trade deal since leaving the European Union (Brexit) in 2020.
  2. Economic Impact:
    1. The accession allows Britain to benefit from CPTPP’s trade rules, which include lower tariffs and expanded market access to the member countries.
    2. From December 17, 2024, Britain will start applying these trade provisions with 8 of the 11 existing members (Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, and Vietnam).
    3. The trade agreement with Australia will enter into force on December 24, 2024.
    4. Once Canada and Mexico ratify the agreement, it will apply to them 60 days later.
  3. Trade with New Partners:
    1. Britain will now have its first free trade agreements with Malaysia and Brunei, enhancing its economic presence in Southeast Asia.
    2. While Britain had previous trade agreements with other CPTPP members, this deal allows deeper economic cooperation, especially with respect to "rules of origin," giving businesses more flexibility in their trade.
  4. Strategic and Economic Significance:
    1. While the economic benefits are significant but modest (estimated at £2 billion annually, less than 0.1% of Britain’s GDP), the strategic importance of the deal is clear.
    2. Britain will now have a voice in decisions regarding the potential accession of China and Taiwan to the CPTPP, which aligns with its broader foreign policy goals, particularly in countering China’s economic influence.
  5. Future Growth:
    1. Costa Rica is the next country expected to join the CPTPP, while Indonesia has also expressed interest in accession.

Implications for the UK and the Region:

  1. Post-Brexit Strategy: The UK's decision to join the CPTPP is part of a broader strategy to diversify trade relationships beyond the European Union.
  2. Global Trade Positioning: The deal enhances the UK's influence in the Indo-Pacific region, which is a key area of economic growth and geopolitical interest.
  3. China’s Influence: With the UK joining, the CPTPP becomes more significant as a counterbalance to China's economic power, especially with future discussions regarding China and Taiwan’s possible accession.

 

What is the CPTPP?

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a major free trade agreement (FTA) involving 11 countries. It serves as a platform for deeper economic integration across the Asia-Pacific region. The agreement aims to promote trade, investment, and economic growth by reducing trade barriers, enhancing market access, and improving the rules-based trading environment.

Participating Countries:

  1. Australia
  2. Brunei Darussalam
  3. Canada
  4. Chile
  5. Japan
  6. Malaysia
  7. Mexico
  8. Peru
  9. New Zealand
  10. Singapore
  11. Vietnam

Timeline of Agreement’s Signing and Implementation

  1. Signed on: 8 March 2018 in Santiago, Chile.
  2. Entered into Force:
    1. 30 December 2018: Australia, Canada, Japan, Mexico, New Zealand, Singapore
    2. 14 January 2019: Vietnam
    3. 19 September 2021: Peru
    4. 29 November 2022: Malaysia
    5. 21 February 2023: Chile
    6. 12 July 2023: Brunei Darussalam

Relationship with the TPP

The CPTPP is a revised version of the Trans-Pacific Partnership (TPP), which was initially negotiated but not ratified due to the U.S. withdrawal in 2017. The CPTPP includes the majority of the provisions from the original TPP agreement but excludes a limited set of suspended provisions.

Key Features:

  1. Open to Future Members: The agreement is designed to be a platform for future countries to join, provided they meet the high standards established by the agreement.
  2. Market Access: The agreement ensures that the substantial market access package secured under the TPP is maintained. This includes:
    1. Market openings for goods and services.
    2. Commitments on foreign investment regulations.

This results in increased opportunities for businesses, especially exporters and investors, to access new markets in the Asia-Pacific region.

Support for Small and Medium-sized Enterprises (SMEs)

  1. SMEs face particular challenges when expanding into new international markets. The CPTPP acknowledges these challenges and includes several provisions designed to support SMEs:
    1. Simplified procedures: Making it easier for small businesses to navigate the complexities of exporting.
    2. Assistance in reducing trade barriers: Ensuring that SMEs can take advantage of preferential tariffs and reduced non-tariff barriers across CPTPP member states.

Resources for Exporters and Importers

  1. DFAT’s FTA Portal:
    1. The portal is a valuable resource for Australian exporters and importers, providing information on how to leverage the benefits of the CPTPP and other FTAs.
    2. Key Resources:
      1. Access to preferential treatment under CPTPP.
      2. Step-by-step guides on tariff reduction and market entry.
  2. Visit DFAT FTA Portal
  3. Guide to Using the CPTPP for Exports and Imports:
    1. Detailed information on how to qualify for tariff cuts, including documentation and compliance requirements.
    2. Information on how to use the CPTPP for smoother customs clearance and reduced duties.

Certification of Origin under the CPTPP

To claim preferential tariff treatment under the CPTPP, importers must present a Certification of Origin, which attests that the goods qualify for tariff reductions. This certification can be completed by:

  1. The importer
  2. The exporter
  3. The producer

Key Points on Certification:

  1. Unlike other FTAs, the CPTPP does not prescribe a specific format for the Certification of Origin.
  2. The certification must be in writing (can be electronic).
  3. It must meet minimum data requirements. A template is available to assist businesses in meeting these requirements.

Conclusion

The CPTPP is a critical agreement for businesses in the Asia-Pacific region, offering expanded market access, reduced trade barriers, and regulatory commitments that benefit both large corporations and SMEs.

 

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