Don’t underestimate the free trade agreement Britain just joined
The UK’s full entry into the CPTPP, the world’s largest free trade area that does not include the US, EU or China, should not be underestimated, writes Australia’s former Minister for Foreign Affairs Alexander Downer
It’s been a dramatic few weeks in global markets, with a trade war erupting between the United States and Canada and an actual war flaring up in the Middle East. But amid the noise we also witnessed a much more profound – and positive – development in the economic and geopolitical landscape. As of 1 September, the UK has gained full access to the benefits of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
What is the CPTPP?
The CPTPP is the world’s largest free trade area that does not include the US, China or EU. Instead, it includes a diversified group of ‘middle power’ economies including Canada, Australia, Japan, New Zealand, Singapore, Chile, Mexico, Peru, Malaysia, Brunei and Vietnam.
As Australia’s former Minister for Foreign Affairs and High Commissioner to the UK, I am confident that this achievement offers far-reaching opportunities for the UK. It also puts to bed the idea that leaving the EU meant the UK was retreating into international isolation.
With a combined GDP of around £13 trillion (14 per cent of global GDP), the grouping is almost as large as the EU (18 per cent of GDP) and compared to individual economies is only smaller than the US (26 per cent of global GDP) and China (17 per cent of global GDP).
Policy Exchange, which I chair, was the first think tank to call for the UK to join the CPTPP in 2018. The UK subsequently signed up to the CPTPP in 2023 but has been waiting on an agreement with Canada to complete its full membership. As of this week, UK businesses operating in Canada will benefit from easier travel arrangements, while businesses in both countries gain enhanced access to each other’s public procurement markets.
The economic benefits for the UK
In terms of direct economic benefits, the government estimates that CPTPP membership will boost the UK’s economy by around £2bn a year. However, as risks around global trade wars intensify, agreements like the CPTPP also help to underpin stable trading relationships among countries looking to diversify their supply chains and exports.
Importantly, the UK is now the second largest member of the CPTPP in terms of GDP, only behind Japan, and is also the only country not located on the Pacific Rim. As Policy Exchange has previously argued, the UK’s membership of the CPTPP is likely to encourage other countries to join the group over time. A range of countries, including South Korea and the United Arab Emirates, are now considering joining. The combined economy of the group is already outpacing growth in existing free trade zones and could conceivably overtake the size of the EU over the coming years.
The fast-growing manufacturing hubs of Vietnam and Malaysia, including for semiconductors, also provide an alternative to China for like-minded countries looking to diversify their supply chains in an increasingly uncertain world. From a geopolitical perspective, the UK’s membership of the group could also give it increased leverage over the US and China if either country seeks to join the CPTPP in the future.
Opportunities for ‘regulatory diplomacy’
The CPTPP also expands the UK’s presence in the rapidly developing Indo-Pacific region. As outlined in Policy Exchange’s landmark Indo-Pacific Commission report back in 2020, which was endorsed by former Japanese Prime Minister Shinzo Abe, the region offers a range of opportunities for the UK. These include a massive market for the UK’s world-leading services as well as sizeable opportunities for ‘regulatory diplomacy’, where the UK can help co-author international rules for emerging technologies and intellectual property.
While these long-term issues tend to take a backseat to the political news cycle and volatility in global markets, the UK’s full entry into the CPTPP should not be underestimated. Establishing an economic anchor to one of the largest and fastest growing regions in the world will help secure the UK’s economic and geopolitical security well into the future.
Alexander Downer is chairman of trustees at Policy Exchange and was Australia’s Minister for Foreign Affairs from 1996 to 2007