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Why Britain joining the CPTPP is clearly not about the economy

South China Morning Post | 19 March 2023

Why Britain joining the CPTPP is clearly not about the economy

by David Dodwell

Six years ago, Donald Trump blundered away from the Trans-Pacific Partnership (TPP) after describing it as “a rape of our country”. These days, UK Prime Minister Rishi Sunak’s government is more kindly disposed to the trade bloc.

After three years of negotiations, Sunak is on the cusp of winning Britain membership of this 11-country trade group centred on the Asia-Pacific, which has rebadged itself as the CPTPP – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Britain’s Department for International Trade has said its membership will “boost the CPTPP’s economic clout” and put Britain “at the heart of a dynamic group of countries, as the world economy increasingly centres on the Pacific region”.

Whether Britain will in fact boost the CPTPP’s clout, and how soon, is open to debate. Regardless of this orphan from Europe, the CPTPP and Asia-Pacific economies are dynamic and set for strong growth.

But Britain, having bludgeoned its way out of the European Union in 2020 after a brutal Brexit debate that divided the country, is in desperate need of new friends and trading partners.

In terms of political optics back at home, where the economic harm arising from severing itself from the EU is becoming clear, this is the kind of win that Sunak cannot afford to miss, however meagre the economic pickings. This is the “Global Britain” Brexiteers dreamed about.

Economic modelling by the UK Department for International Trade back in 2021 predicted that joining the CPTPP would increase exports by £1.7 billon (US$2.07 billion) and imports by £1.6 billion, with most of the import increase coming at the expense of the UK farm sector and food processing, and export gains for the motor industry and beverages.

Whether such predictions prove accurate, they are chicken feed compared with the United Kingdom’s £559 billion trade with the EU in 2021, and the Brexit losses estimated at around £100 billion a year. This deal is not about the economy, stupid.

For CPTPP members, Britain’s membership is also clearly not about the economy. But that does not make it insignificant. First, and obviously, it projects the grouping as a significant global player, rather than a regionally focused bloc.

For members such as Japan, Canada, New Zealand, Australia and Singapore, Britain would be another liberal, democratic member that strengthens the group’s credentials as a regional champion for trade liberalisation, globalisation and multilateral cooperation on global trade rules. This could provide the foundations for a “friendshoring” platform that, even in America’s absence, would make US President Joe Biden happy.

According to World Economics data, with Britain in, the CPTPP would account for about 12.5 per cent of global gross domestic product – not quite as big as the EU’s share of 13.9 per cent, but arguably very large. If the EU were persuaded to join, this would lift the group’s economic heft to above 25 per cent of global GDP. Add China, at a whopping 18.5 per cent, and that rises to almost 45 per cent.

With a CPTPP grown so large, how could the United States plausibly remain outside? But how, also, could it comfortably join alongside China, the very economy the TPP was conceived to block?

And here’s the rub. The next applicant in the queue is China. And there is strong logic to China’s membership in the CPTPP. It is the dominant trading partner for eight of the bloc’s 11 members. Even for Australia, for example, just over 32 per cent of its trade is with China – four times its trade with the US. But the US-inspired TPP was conceived as a bulwark against China and aspects of its economic model – in particular, the practices of China’s state-owned enterprises and extensive use of subsidies.

This lends particular significance to Britain’s membership negotiations, and their importance as a template for other applicants. The CPTPP distinguishes itself as a “high quality” agreement that includes services, digital trade, labour, the environment and regulation of trade and investment.

By holding Britain’s feet firmly to the fire, CPTPP’s members not only burnish their “high quality” credentials, but define membership barriers that an unreformed China would find impossible to surmount.

As an outsider, the US can have no direct role in scrutinising a Chinese membership application (though closely allied members such as Japan, Australia and Canada might be pressured to reflect Washington’s views). So, some CPTPP members hope Britain’s application process might increase pressure on the US to reconsider Trump’s abandonment of the original TPP.

Close observers of Britain’s negotiations say a final agreement is overdue, but emphasise the importance of close scrutiny. At the Washington-based Peterson Institute for International Economics, trade economist Jeff Schott notes that Britain is “under the microscope”. He said: “The Brits have invariably been over-optimistic on timing and the challenges to crossing the finishing line,” acknowledging that completion might, at last, be imminent.

Senior CPTPP officials meet in Auckland in a month, and a final deal might just be cut then. More cautious pundits are talking about a deal by the time of the ministerial-level CPTPP Commission meeting in July.

For the impatient Sunak government, my only advice is that they would be wise to beware what they wish for: membership of this dynamic Asian grouping might expose Global Britain to some competitive forces that have not been anticipated, and may not be welcome.

David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades

 source: South China Morning Post