Sunday, August 14, 2022

UK asks to join Trans-Pacific trade group

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Boris Johnson will mark the first anniversary of Britain’s exit from the EU – the world’s largest trading bloc – by formally applying to join a trade group in the Pacific.

Mr Johnson is hopeful that Joe Biden, US President, will also join the group, opening a back door to closer UK-US trade ties as hopes for a quick trade deal between London and Washington fade away.

Critics say a trade deal with 11 countries halfway around the world would bring limited economic benefits to the UK and see no chance Mr Biden will be in a rush to join the group.

Mr Johnson said joining the Comprehensive and Progressive Agreement on Trans-Pacific Partnership would prove that “a year after leaving the EU, we are forging new partnerships”.

“Applying to become the first new country to join the CPTPP demonstrates our ambition to do business on the best terms with our friends and partners around the world and to be a strong advocate for global free trade.

The CPTPP includes fast growing economies including Mexico, Malaysia and Vietnam, as well as well established regional economies like Japan, Australia, New Zealand and Canada.

Liz Truss, UK Trade Secretary, will address Japanese and New Zealand ministers on Monday to ask to join the CPTPP, with formal negotiations set to begin this year.

Ms Truss believes that joining the partnership would boost trade, which is already worth £ 111 billion and growing 8% a year since the UK voted to leave the EU in 2016.

She believes this will liberalize digital trade, eliminate tariffs on products like whiskey and cars faster, and facilitate faster and simpler visa procedures for businessmen traveling to CPTPP countries.

British officials are also hoping that a higher price could be to use the CPTPP as a means to forge trade ties with the United States, should the Biden administration choose to join the group.

“We hope that the United States will share our ambition to join the CPTPP, which would mean closer trade ties through plurilateral means,” said a British official.

But the new US president has pledged to improve his own country’s economy before signing any new trade deals, and neither a UK-US trade deal nor CPTPP membership is considered priorities.

“President Biden has repeatedly said that the CPTPP should be renegotiated,” said a US administration official. “The administration is currently focused on domestic investment and economic growth that supports America’s middle class.

“As we review current and potential deals with our partners, the administration does not immediately seek to sign new trade deals until major investments are made here in our middle class.

Britain’s demand to join a Pacific trading group while ending free trade with the EU – Brexit has spawned extensive red tape and border controls – is one of the apparent paradoxes of British trade policy.

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Distance remains a key factor in trading. Even a recent UK trade deal with Japan’s huge economy – essentially a renewal of the existing deal between the EU and Japan – has been found by a UK government study as likely to boost UK GDP “long-term about 0.07%“.

Another British government study in 2018 suggested that trade deals with non-EU countries and blocs such as China, India, Australia and the Gulf countries of Southeast Asia would only increase Britain’s GDP by 0.1 to 0.4% in total over the long term.

In contrast, the economic consequences of Boris Johnson’s “Canadian-style trade deal” have been assessed by the British Treasury as likely to reduce British GDP by nearly 5% in the long term.

David Henig, co-founder of the UK Trade Forum, said a Pacific deal would bring limited economic benefits to Britain and that there was no guarantee Ms Truss’ candidacy would be accepted.

As with the agricultural issues that plagued the UK’s trade negotiations with the Trump administration, UK food standards rules could also complicate CPTPP negotiations with countries like Australia and New Zealand.

But Mr Henig said that in terms of trade policy, there was merit in Britain joining a group of “like-minded” countries. He said that while the EU, US and China dominated trade policy, this group could be considered “a mid-size club”.


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