Flagship Brexit trade deal with Pacific has ‘no major economic gains for UK’

Top trade experts say conditions for hidden benefits claimed by Kemi Badenoch are ‘highly unlikely’

Jon Stone
Policy Correspondent
Sunday 23 July 2023 12:37 BST
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The government’s new flagship Brexit trade deal with Pacific countries will "not lead to substantial economic gains for the UK", top trade experts have said.

Business secretary Kemi Badenoch last week signed Britain up to the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and claimed it would provide "a big boost" for the economy possible only outside the EU.

She claimed official estimates from her own department of just a tiny 0.08 per cent GDP gain over 10 years were too small and did not take into account potential hidden benefits from joining.

But academics at the respected UK Trade Policy Observatory who have examined the agreement say the conditions for such a hidden further boost appear to be “highly unlikely”.

The Sussex University academics also note that the deal’s small benefit of 0.08 per cent appears to “fall somewhat short of compensating for the predicted 4 per cent GDP loss of leaving the EU”.

CPTPP is a free trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam and was established in 2018 to cut trading barriers between the countries involved.

But the agreement’s benefits to Britain are small, the researchers say, because the UK already has bilateral free trade agreements with all but two of its members – Brunei and Malaysia.

The government’s hope is that the trading area will expand further to cover more countries, such as China. Chinese entry into the bloc could be a game-changer, the researchers say – but it is also very unlikely.

China applied to join CPTPP in 2021, but since then “intensifying China-US hegemonic rivalry, China’s expansionism in the South China Sea and the China-Taiwan conflict” - as well as differences on standards - mean it is “unlikely that China will join the CPTPP in the foreseeable future”, the researchers conclude.

Its application to join has however also complicated matters, casting a geopolitical cloud over proceedings that could potentially disrupt the accession of other countries to CPTPP, such as Taiwan.

“Accession to the CPTPP will not lead to substantial economic gains for the UK,” the authors Dr Minako Morita-Jaeger, Dr Manuel Tong Koecklin, Nicolò Tamberi, and Guillermo Larbalestier write.

“Any such gains will largely depend on possible future expansion of the CPTPP, primarily should China ever accede, and to a lesser extent Taiwan, Thailand and Uruguay who have also applied to join.”

“China’s accession into the CPTPP seems highly unlikely,” they conclude, noting that the country’s application "may have knock-on effects to other accessions, especially Taiwan” and that “China’s application to the CPTPP has made the club more difficult to expand”.

The draft paper, shared with The Independent, also notes that it is not clear whether the UK would even want China in the bloc for political and strategic reasons. In March this year former prime minister Liz Truss, who has positioned herself as a hawk on China, said it was “essential” that the UK reject any proposals for China to join the bloc.

Without new countries joining, the bloc largely replicates existing agreements the UK has a bilateral basis.

An analysis by the researchers notes that the vast majority of existing agreements Britain has with the CPTPP existing members are copies of or closely based on agreements the UK enjoyed because of its EU membership.

But crucially, the agreements Britain already has with the countries in CPTPP are in some cases better than the terms on which it could trade with them as part of CPTPP.

“For some products, [CPTPP’s terms] are more restrictive than the UK has with those countries through recently signed bilateral agreements,” they say.

“Product-specific analysis is required to understand which products could benefit from the CPTPP rules of origin arrangements”.

The analysis is a blow to the UK government, which has been trumpeting CPTPP as its main objective in trade ever since the US government cooled on a trade deal.

Such free trade agreements were said by Brexiteers to be a good justification for leaving the EU single market and customs union – allowing Britain to strike deals independently of Brussels.

Liberal Democrat foreign affairs spokesperson Layla Moran said the latest research was “clear that the CPTPP will not come anywhere near to making up for the damage the Conservatives have done to our economy”. She criticised the government’s “botched deal with Europe and their broken manifesto pledge for a trade deal with the US”.

“Instead, there are serious concerns about it undermining the UK’s high standards for food quality, the environment and animal welfare. No wonder Conservative ministers didn’t let anyone scrutinise the deal properly before they signed it," she said.

“This out-of-touch Conservative government has repeatedly let down British businesses and the public with their broken promises and botched trade deals. Liberal Democrats are clear that to grow the UK’s economy we must get the Conservatives out and fix the broken relationship with Europe.”

A Department for Business and Trade spokesperson said: “This is a great deal for the UK economy, delivering billions of pounds worth of trade each year and every nation and region will benefit.

“CPTPP will now have a combined GDP of £12 trillion and account for 15 per cent of global GDP. CPTPP businesses employed one in every 100 UK workers in 2019 so joining the group will support jobs, increase wages and create opportunities across the country.”

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