The Union Jack flag flies near the Elizabeth Tower, commonly known as Big Ben, at the Houses of Parliament in central London, Britain, March 29, 2017.
Justin Tallis | AFP | Getty’s paintings
Britain has struck a historic trade deal to join the vast Indo-Pacific trade bloc after nearly two years of intense negotiations.
On Friday, the government announced that it might join the so-called 11 member A comprehensive and progressive Trans-Pacific Partnership Agreementunlocking access to a region with a complete GDP of £11 trillion ($13.6 trillion).
The UK said it was the country’s biggest post-Brexit trade deal and makes it the first European country to join the CPTPP since it went into effect in 2018.
Prime Minister Rishi Sunak praised the deal and said it puts the UK at the center of a dynamic and growing group of Pacific economies.
“We’re an open and free-trading nation at heart and this deal demonstrates the real economic advantages of our post-Brexit freedoms,” he said in an announcement. “British corporations will now enjoy unparalleled access to markets from Europe to the South Pacific.”
The trading bloc includes Canada, Mexico, Japan, Australia, Vietnam, Singapore and Malaysia, amongst others. The agreement is predicted to be formally signed by the end of the yr, after final approval by Parliament and 11 Member States.
The trade pact evolved from the now-defunct Trans-Pacific Partnership (TPP), which originated in the United States but fell apart after former President Donald Trump resigned from US involvement.
Business Advantages
The UK said the deal would lower tariffs on food, drink and automobile exports and provides access to a market of around 500 million people and be price 15% of world GDP once the UK joins the trade bloc.
The UK estimates that joining the CPTPP will boost its economy by £1.8bn in the long run and lift wages by £800m in comparison with 2019 levels.
Trade Secretary Kemi Badoch said the deal sends a “powerful signal” that the UK is using its “post-Brexit freedoms to succeed in latest markets around the world and grow our economy”.
Natalie Black, the UK’s Asia-Pacific Trade Commissioner, called it a “progressive deal” for the UK.
“Yes, this deal is about today’s economic performance. But it is very, very much about future economic performance,” Squawk Box Asia told CNBC on Friday.
“That is the a part of the world that will drive economic growth in addition to guide trade rules in the future. We would like to be a part of those discussions.”
Nevertheless, it stays to be seen to what extent the deal actually advantages the UK’s growth prospects. Based on the government’s own estimates, the deal will raise the long-term national GDP by only 0.08%, which will have little impact on offsetting losses in European trade consequently of Brexit.
Deborah Elms, executive director of the Asian Trade Centre, said it was very difficult to calculate these trade figures, especially based on existing trade flows.
“If you happen to’re a UK company, you have likely restricted existing trade flows to quite a few CPTPP countries corresponding to Australia, Latest Zealand, Japan and Singapore,” Capital Connection told CNBC. “Just because the distance is great and since you were very closely connected to the European Union.”
Trade flows are all the time “underneath what you possibly can actually see in reality as corporations see the advantages and begin using a trade deal like CPTPP,” she added.
High entry bar
Still, negotiations to finalize a trade deal haven’t all the time been easy. Standoff between Great Britain and Canada market access for agricultural products in order to remove the last obstacle to the conclusion of the agreement.
“It was a posh deal to barter,” Black admitted. “We negotiated across multiple time zones on quite a few complex issues. They usually are usually not all the time easy. But ultimately all parties agreed that the UK is an awesome latest member of the CPTPP.”
China has also applied to join trade bloc, but has not made as much progress as the UK
There are quite a few “aspiring economies” which have either “declared that they need to join formally, or we all know they have an interest in joining,” Black said.
While the trade commissioner said it “wouldn’t be appropriate” to comment on individual economies, she noted that the barriers to joining a trade bloc are very high.
“It’s really as much as those behind us to be sure that they meet members’ expectations of getting quality apps.”