What just happened? 

Liz Truss, who is the British Secretary for International Development, told the Japanese and New Zealand Trade Ministers on the 1st February that the UK officially wanted to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). 

Hold it: what’s the CPTPP? 

It’s a free trade agreement of 11 countries: Japan, Malaysia, Brunei, Australia, New Zealand, Canada, Mexico, Peru, Chile, Singapore, and Vietnam. Japan, the group’s biggest economy (and the world’s third biggest), was a big proponent of the deal. 

Why all the letters though? 

You’ve got a point. What was originally a small pact between four countries grew and grew into the TPP: the Trans-Pacific Partnership. This involved the US, too, and President Obama okayed it in 2015. However, it was axed as an immediate victim of President Trump’s “America First” programme, not to mention suffering criticism from both major parties. The remaining members scrambled to save it, and they repackaged it as the CPTPP in 2018. 

Why should I care?

You may be thinking ‘out of sight, out of mind’, but we could be witnessing a real-time reorientation of how Britain interacts with the rest of the world, affecting the UK’s security and economy right down to the products that appear on supermarket shelves and how much they cost.

This is no small fish in the global pond. The bloc is the fourth biggest free trade zone in the world, about 13% of the world’s economy as of 2018. But the UK is fresh out of the European Union, the world’s most integrated bloc, and is joining another (looser) bloc based literally on the other side of the globe.

Making sure that Britain stays integrated in international trade has been a top government priority: not only to protect its trade interests, but also to temper fears that the UK is becoming more inward-looking.

But wait, it’s not in the Pacific, right? 

Well, technically it is — 50 British citizens live on the Pitcairn Islands, a British Overseas Territory. 

Smart-arse.

Fine. But no country has to be located there to join. As long as all members approve, there is nothing to say that a non-Pacific state can’t join. 

Go on, then, sell me the CPTPP.

I already mentioned that it’s the fourth biggest free trade bloc in the world. If the UK joins, it can expect tariffs (taxes governments put on imports to protect its domestic producers) to be slashed in key industries, making trading more attractive. An important part will also be the “Rules of Origin” laws, meaning products from any member country will count as “originating”. This makes manufacturing using different products from different countries easier because tariffs won’t apply when parts move between CPTPP members as it’s being made (this is the ‘supply chain’ — very important for Britain’s car industry, for example).

Other benefits include easier business travel, and shared rules on small businesses and digital enterprise. However, maybe most importantly for Britain, in its opinion “joining does not require the UK to cede control over our laws, borders, or money.”

How is that different from the EU? 

The EU is the political union of European countries pooling their individual national power (their national ‘sovereignty’) into making coordinated policies on particular subjects. These are decided at the European level by representatives of the member countries and EU officials, away from national parliaments like in London or Paris. These include managing the euro, funding EU-coordinated projects, open internal borders, and trade deals with non-EU nations, exactly what the British government no longer wanted to do.

Inside the EU, there’s the European Single Market (ESM), and that’s the free-trade pact between the EU countries (like CPTPP). You don’t have to be an EU member to be in the ESM: just ask countries like Norway and Liechtenstein. The UK’s problem was that ESM membership meant surrendering more sovereignty than they wanted (which was, for many, the point of Brexit). It meant following EU laws without any say in making them.

The UK also left the EU Customs Union, which is what ensures tariff-free access inside the EU, so it could make its own trade deals. Government representatives have stated they want Britain to be a ‘rule maker’ and not a ‘rule taker’. 

What’s Britain doing instead, then? 

Up to now, the Department for International Trade was mainly focussed on ‘continuity agreements’: these basically continue the UK’s trading relationships as they had been as an EU member. Britain did this quickly, and most existing agreements have been rolled over (including with most of the CPTPP members). These are only really considered to be short-term, though; Britain wants to develop these arrangements further now that their relationships are stabilised. 

The UK also signed a trade deal with the EU days before leaving the ESM (not having signed one in time would have made things even trickier than some are already finding). The current deal it has with the EU is much smaller: whereas the previous arrangement had access for British goods and services, the current one centres largely on goods. Services are 80% of the British economy and 42% of British exports to the EU. With 49% of total UK exports in 2018 going to the EU, Brexit won’t make life easy for many sectors, at least in the short-term. Nor will CPTPP be a quick fix: as of 2019, only 8% of UK exports went to member countries, which is about the same as its exports to Germany alone.

Oh yeah, Brexit. So this is just “Empire 2.0”, then?

I mean, some think that. Many are looking at the figures — which suggest Britain has far more to gain right now from being closer to Europe than in far-flung corners of the world — and saying this is purely a British delusion of grandeur now lost to history. In the words of one academic, Britain entering the CPTPP is marked with the “self-importance, nationalism, and colonial nostalgia that have driven Brexit.” Pulling no punches there, then.  

If that really is Liz Truss’s intentions, then she’s going to find out pretty quickly that won’t wash. Britain comprises 3% of the world economy right now, which is significant, but not bulldozingly powerful (the US comprises almost a quarter). Its colonies and military bases that helped it project global power no longer remotely exist like they once did. The days of superpower Britain protecting its trade interests died once and for all with the Suez Crisis in 1956. But while some Brexit talk indulges in ‘swashbuckling Britain’, the official government rhetoric has been more about taking control of Britain’s destiny. They want to be Singapore, not reconquer it. 

I should also mention many CPTPP countries have been enthusiastic about the idea of Britain joining. 

Why would they want some country on the other side of the world in their Pacific trading community? 

Different metrics of GDP (the size of an economy) over the past few years put Britain between positions five and seven in the world; it’s a global financial, cultural and educational powerhouse, with a significant amount of ‘soft power’; and it’s one of the bigger diplomatic and military players in world politics.

It has strong export industries in machineries and vehicles, chemicals, manufacturing, energy, and consultancy. It also opens up another wealthy market to the rest of the group, and countries like New Zealand are particularly interested in accessing the British agricultural market.

The UK doesn’t have as much leverage as some might wish it had, but it’s no damp squib either. This isn’t important because CPTPP members want to blow smoke up Britain’s backside as some sort of post-Brexit confidence boost. This is important because the UK’s re-entry into the Asia-Pacific plays into the power dynamics shaping the region today.  

Who’s enthusiastic, then?

Japan, particularly. Britain and Japan have been good partners since 1945, and Margaret Thatcher was instrumental in bringing in investment from the Japanese car industry. They were dismayed by Brexit — not least because it made supply chains harder for the car companies — but a slightly evolved version of a continuity agreement was signed between the two in 2020. Bringing Britain into the CPTPP has been mooted ever since former Japanese PM Shinzo Abe floated it to Theresa May in 2018. 

Yes, it would make things like supply chains easier. Yes, Japan would have better market access. But, for them, Britain’s entry is more about regional politics. 

Why?

Japan, now under new PM Yoshihide Suga but continuing Abe’s policies, knows China is the next Goliath. Japan’s no David, but it has been stagnating economically since the 1990s. This means that it has to contain China rather than match them, preferably by creating the region’s dominant system of trade rules. They see the CPTPP as a collective way to challenge China’s economic presence in the region. There is even talks of making the CPTPP becoming too irresistible for China to continue to stay out of, but only so long as China joins on existing members’ terms.

Getting Britain in shows the bloc is globally attractive, adds an economically-powerful country with long-standing credentials in respecting legal and democratic institutions (although…), and may further incentivise the US government to mould an increasingly influential trade bloc in its chief trade rival’s back garden. This cannot be after China joins, though. China joining first would mean the bloc would be more at the mercy of its weight without the US acting as a balance.

This is Japan playing the strategic long-game in a region that’s going to become pivotal in twenty-first century geopolitics; having Britain, a trade ally, as the bloc’s second-biggest economy would be a boon to its regional position. Vietnam and New Zealand have also given public support.

What about “America First”? 

It’s a concern. Joe Biden hasn’t exactly rowed back on Donald Trump’s “America First” protectionism, which pulled out of or demanded change to unsatisfactory trade agreements, made global trade about transactional national security, and started trade conflicts with Beijing and Brussels. Despite committing to reasserting US global leadership, the Biden administration will probably decide to sort out domestic fires before rejoining international trade deals. Experts reckon it won’t be until 2022 that CPTPP is seriously discussed in Washington. In the meantime, Japan can lay the groundwork with the UK and other interested countries like Thailand and South Korea.

Is China desperate to join?

Not yet, although Chinese President Xi Jinping has expressed some interest (although this may have just been a propaganda exercise). But they’ve created their own trade bloc that includes seven CPTPP members. It has looser conditions on areas that China doesn’t want to compromise on (e.g. state-owned industries and intellectual property — things like respecting copyright), called the RCEP (Regional Comprehensive Economic Partnership).  

More letters!

Sorry, trade agreements aren’t known for being works of art, exactly. It’s a step for China, though: the RCEP is the first multilateral trade agreement it’s ever signed. But the RCEP is on their own terms, and is weaker than CPTPP both in its ambitions for cooperation and its economic potential (although it’s not a perfect comparison, there’s a projected 0.2% GDP growth per RCEP member, compared to the US projecting 0.5% GDP growth with the original TPP). CPTPP members will watch closely to see if the draw of a more lucrative trade agreement with global reach will force China’s hand.

Even if the US and other strong economies get involved, China could still fight tooth and nail to water down requirements to its liking as it has other trade arenas like the World Trade Organisation (WTO). That’s why Japan needs the US to join first to act as that economic and ideological support, as well as gaining the support of other international law-advocating countries like the UK to make the coalition as strong and attractive as possible.

The official Chinese government line is that interest in CPTPP comes from wanting a mutually beneficial, multi-country trading arrangement — something that might even defuse the tensions between Beijing and Washington for good. Some also suggest that China wants to join the CPTPP to help make economic reforms at home, rather than gut the CPTPP before the US can join. But this is all just the warm-up: no one’s even made it to the table yet.

So Britain’s a pawn in other people’s games, then? What sort of ‘sovereignty’ is that? 

In the short term, probably a bit. Britain is under no obligation to join, but if it does, it won’t be a ‘rule maker’ because it will have to adhere to arrangements already decided by the original members. It will only be able to shape decisions once it’s in, and its lack of Pacificness might reduce leverage and goodwill among members if Britain starts getting punchy. CPTPP members aren’t extending the hand of trade friendship just out of flower power here. 

But for a more ‘flexible’ post-Brexit Britain, there are some very good strategic reasons for joining. If the UK gets in early, and then the trade bloc becomes more influential over time, it will have a seat at the table when big hitters apply to join. This is very important when it comes to the US and China. 

How?

If the US seeks entry after the UK becomes a member, the elusive UK-US trade deal is a neat side-effect. There’s potential for a little more leverage to protect sectors like the NHS because Japan and Canada both have deals to protect important sectors. It also means getting a US trade deal without having to go through Congress, a tough ask for Britain acting alone with considerably less power to make demands.

For China, the UK again has a seat at the table to try to rein in a powerful economic actor. Recent EU policy has centred around hesitant conciliation and the WTO has been at deadlock for years, so this is possibly the best forum for Britain to advance its more sceptical trade interests. It could also put Britain in more regular proximity to discuss UK-China issues such as Hong Kong self-rule and using Chinese technology companies in national security-sensitive infrastructure projects like 5G.

Outside the power games, the government also sees opportunities to integrate itself in future technologies in important growing economies. It wants to craft a digital trade treaty with Singapore, one of the first of its kind. Much is made about the specific agreements for smaller businesses in CPTPP, particularly about how to integrate them into the global marketplace. Again, helping to shape the rules early means being able to create industrial conditions that better suit their needs later down the line. 

Finally, joining makes sense inside Britain’s larger policy emphasis on Asia. The UK has already opened new bases in the Middle East, the first since the UK pulled out of what’s now Yemen in 1971. The Foreign and Commonwealth Office (FCO) unveiled their foreign policy objectives in 2018. Before its current diplomatic anger with China, the UK’s “All of Asia” policy committed to using British financial expertise to work with China’s flagship Belt and Road project, although it’s not clear if this has continued in practice.

It also recommitted to the Five Power Defence Arrangements, and engaging further with ASEAN (a looser version of the EU for South East Asian countries south of China). It also joined the China-led Asian Infrastructure Investment Bank in 2015, the first G7 country to do so (Obama's Washington wasn’t so happy about that one...). The CPTPP is just another piece of that Asia-Pacific puzzle.

Sunshine and rainbows, then? 

Depends. There might be little immediate benefit to the UK, but Liz Truss says this is about working for Britain in “2030” and “2050”. With the longer-term strategic opportunities, it’s hard to disagree with her. 

But there are other arguments against, though. In response to Abe’s suggestion in 2018, the Trade Justice Movement fiercely rebuked the apparent benefits. High on their list is the investor-state dispute mechanism. These take disputes from private corporations towards government policy (eg. anti-smoking laws) and potentially sue governments for having harmed their profit margins. The legal fees are costly, which can be very damaging to smaller CPTPP members.

Then there’s the potential environmental effects of trading with people further away. There’s the more general criticism of free trade agreements: that they force open developing economies to more powerful developed economies on equal trading terms, giving developed economies’ companies the competitive advantage. There’s the worry that CPTPP won’t comply with UK/EU GDPR rules on data privacy. The EU does currently consider the UK an adequate data partner, as well as CPTPP members New Zealand and Japan, but could UK-EU politics complicate things? 

Will the CPTPP cause the catastrophe that financial liberalisation saw in 2008? Will strong intellectual property laws allow "Big Pharma” to charge through the nose for vaccines in the post-COVID era? Does this give up national sovereignty in a far more pernicious way? Does it stop all countries working together to make trade better? If CPTPP becomes a serious prospect, expect to hear all these debates getting louder and louder.

What next for the UK, then? 

Now that the formal request has been submitted, the member states have to set up a working group to decide whether they want to let them in. Meanwhile, Britain has to decide what terms it wants to enter on and how it’s going to adapt to the terms of their agreement. If everyone decides Britain’s got a good trade vibe, they’ll formally invite the UK to the club. 

What is clear, though, is that the CPTPP is no post-Brexit quick fix. Instead, we should be viewing entry as sowing the seeds for opportunities down the line, and considering whether or not the CPTPP is right for the Britain of “2030” and “2050”, not of 2021. In the meantime, Britain still needs to stem the short-term post-Brexit pain somehow. The jury’s still out on that one.