UK Joins the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

Syllabus: GS2/ International Relation

In News

• Britain became the 12th member of the CPTPP, marking its most significant trade deal since Brexit.
  • Britain joins Japan, Australia, Canada, and eight other nations in this trans-Pacific trade pact.

What is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership?

• Historical Context: Originated as the Trans-Pacific Partnership (TPP), a U.S.-led trade pact.
  • Renamed the CPTPP after the U.S. withdrew in 2017 under President Donald Trump.
  • The agreement now includes 12 members and aims to foster economic cooperation across the Pacific.
  • These countries were – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
• Objective: The pact requires countries to eliminate or significantly reduce tariffs and make strong commitments to opening services and investment markets.
  • It also has rules addressing competition, intellectual property rights and protections for foreign companies.
  • The bloc accounts for about 15% of global GDP and provides trade access to a market of more than 500 million people.

Implications of Joining

• Expanded Market Access: The CPTPP provides the UK with preferential access to a large and growing market in the Indo-Pacific region. This can boost exports and create new opportunities for British businesses.
• Diversification: Joining the CPTPP helps the UK diversify its trade relationships beyond Europe, reducing its reliance on traditional markets.
• Rules of Origin: The agreement offers more flexible rules of origin, allowing UK businesses to source components from a wider range of countries within the CPTPP, potentially lowering production costs.
• Limited Impact on GDP: While the estimated economic gains are relatively small in terms of GDP percentage, the deal’s long-term impact on trade patterns and investment could be more significant.
• Indo-Pacific Tilt: Joining the CPTPP signals the UK’s commitment to engaging more deeply with the Indo-Pacific region, a key area of economic and strategic importance.
• Countering China: The CPTPP is seen as a way to counter China’s growing economic influence in the region. The UK’s membership strengthens the bloc and its ability to set trade standards.
• Influence over Membership: The UK now has a voice in deciding whether to admit new members, including China and Taiwan, which has significant geopolitical implications.

Challenges 

• Competition: UK businesses will face increased competition from other CPTPP members, particularly in sectors like agriculture.
• Regulatory Alignment: While the CPTPP does not require full regulatory harmonization like the EU, there will be some adjustments needed for UK businesses to comply with the pact’s rules.

Challenges and Considerations

• Competition: UK businesses will face increased competition from other CPTPP members, particularly in sectors like agriculture.
• Regulatory Alignment: While the CPTPP does not require full regulatory harmonization like the EU, there will be some adjustments needed for UK businesses to comply with the pact’s rules.
• Impact on Existing Agreements: The UK needs to ensure that its CPTPP membership complements its existing trade agreements with other countries.

Way Ahead For India

• Recently, NITI Aayog CEO BVR Subrahmanyam also advocated that India should be a part of the Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
• India can get access to a wider range of markets with reduced tariffs can boost India’s exports, particularly for its MSME sector, which is crucial for employment and economic growth.
• Joining these trade blocs can help India integrate more deeply into global value chains, leading to increased investment, technology transfer, and productivity gains.

Source: LM