December marked a particularly significant moment in terms of the UK’s trade positioning in the global marketplace – on 15 December 2024, it became the first European member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
A major free trade agreement, the CPTPP enables UK businesses to trade with those countries which have ratified the UK’s accession to CPTPP – Japan, Singapore, Chile, New Zealand, Vietnam, Peru, Malaysia, Brunei and Australia – thereby offering significant benefits and potential to boost reciprocal cross-border trade.
Origins of the CPTPP
The CPTPP has its origins in a smaller scale Trans-Pacific Partnership (TPP) trade agreement, signed in 2016 in New Zealand – though it never came into force after the US withdrew. The ambitions, objectives and text of the trade agreement subsequently evolved, ultimately resulting in the CPTPP agreement in 2018, with six initial ratifying countries.
The number of members continued to grow, with the UK making its formal application to join the agreement in February 2021. Successful accession negotiations concluded in July 2023, bringing the current total number of member countries of the CPTPP to 12.
Although the UK already has existing bilateral agreements in place with some of the countries party to the CPTPP, membership to it brings with it some notable advantages, as Gavin Wilkins, Chief Commercial Officer at Hawksford, explains:
“The UK’s membership of the CPTPP has the capacity to deepen the UK’s integration with rapidly growing markets – particularly in the Asia-Pacific. This will unlock new opportunities for both inbound and outbound trade in goods, services, investments, and intellectual property,” he says.
By reducing tariffs and simplifying customs procedures, the agreement also seeks to modernise digital trade rules and evolve environmental standards.
UK opportunity
For the UK, there’s no doubt this marks a significant moment in its global trade journey.
It has the potential not only to deepen relationships with familiar markets, but also to unlock considerable new economic opportunities for the UK economy as a whole, in new geographical markets and industry sectors. This is important both in the context of the UK operating in a post-Brexit landscape, and in a global market where major economies are moving towards more protectionist policies and higher tariffs.
Overall, it’s estimated that 99% of UK goods exported to CPTPP-member countries will be eligible for zero tariffs, offering the prospect for enhanced market access for British firms.
“Estimates indicate that UK exports under the CPTPP could be boosted by some £2.5bn,” explains Peter Fenyves, Business Development Manager at Hawksford in London. “In particular, this could be in areas where the UK has established world-leading expertise, such as in financial and professional services, legal consultancy, education providers, and digital firms.
"The CPTPP puts services and digital trade at the forefront of trading relationship with countries in the Asia-Pacific, which means that UK businesses will be operating on a more level playing field with local firms.”
There are significant advantages in terms of digital data flows too – the lifeblood of modern trade – with the CPTPP ensuring data can flow seamlessly between the UK and CPTPP members by removing barriers such as data localisation requirements.
There are opportunities for growth for the UK in areas where there are currently no other trade agreements of note too – such as in the automotive products or beverages sectors. Equally, the CPTPP opens up trade agreements for the first time ever for the UK with certain markets, including Malaysia and Brunei.
There are less tangible, but equally important opportunities too – including the opportunity for the UK to strengthen relationships between regulators across members, and collaborate with stakeholders across the region to drive greater innovation and access new sources of knowledge and expertise.
“As the CPTPP includes some of the key economies of the Asia-Pacific, the UK’s membership further underlines its commitment to this region,” adds Gavin. “It provides a unique and compelling opportunity for the UK to learn and grow in tandem with an economic area that can evidence some of the most positive economic growth forecasts globally.”
Benefits for overseas businesses
While the CPTPP presents numerous opportunities for the UK in CPTPP member states, it’s worth noting that it also offers overseas firms with opportunities within the UK too, by taking advantage of preferential access to the UK market.
The UK should, for instance, see improved import prices on goods from CPTPP members as a result of the agreement, particularly in areas such as high-quality consumer goods.
At the same time, the UK is likely to see a jobs boost in priority sectors, such as the digital economy and green energy – sectors that have particular resonance within CPTPP economies.
“The UK market is an attractive proposition for overseas investors – it is a leading financial services marketplace and a premium investment destination, with a growing and complementary tech sector that is ripe for collaboration and investment,” explains Peter.
“The fact that the CPTPP introduces strengthened investor protections under the CPTPP will be pivotal in attracting foreign direct investment into the UK, while the UK is also recognised as a key strategic gateway to Europe.”
Looking forward
The CPTPP is, of course, vast and broad in its remit. From a UK perspective, the benefits of membership will not be an overnight transformation. It will take time for businesses to understand, analyse and strategise in order to realise its full potential.
It is an evolving trade agreement too. A number of members have not yet ratified the UK’s accession to the CPTPP, including Canada and Mexico, meaning that UK businesses will not be able to access CPTPP trade benefits with those countries until such time as they approve the UK’s accession.
In addition, the CPTPP is open to new members – economies such as Costa Rica, Ecuador and Uruguay have formally applied to join CPTPP, while Thailand, the Philippines, and South Korea have also expressed an interest in joining.
“As the CPTPP continues to grow, it offers the potential to be an extremely powerful cross-border economic area,” explains Gavin. “As a trade bloc, it has an overall combined GDP of some £15 trillion, representing around 15% of total global GDP. It might take some time for businesses to navigate the opportunities it offers, but there’s no doubt the potential is considerable.”
In that light, it will be important for businesses to familiarise themselves with the CPTPP and position themselves in order to avail of the ample opportunities it offers cross-border trade.
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