Understanding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Recently, the United Kingdom (U.K.) achieved a milestone in its trade agreements by signing onto the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The country’s Prime Minister used this achievement to highlight how Brexit has opened new opportunities for international partnerships.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Explained
The CPTPP is a Free Trade Agreement (FTA) that currently involves eleven countries from the Pacific Rim. These include Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam. This agreement removes 99% of tariffs on goods and services between these nations and seeks to cut down wildlife trafficking, thereby helping several marine species and protecting against environmental abuses like unsustainable logging and fishing. Each of these eleven countries also partakes in the Asia-Pacific Economic Cooperation (APEC).
The CPTPP had its roots in a smaller 2005 trade agreement among Brunei, Chile, New Zealand, and Singapore. This agreement eventually evolved into the Trans Pacific Partnership (TPP), which included twelve nation-states. However, after the United States withdrew, the remaining countries continued their talks, leading to the current form of the CPTPP on 8 March 2018.
Understanding Brexit
Brexit refers to the U.K.’s decision to leave the European Union (EU), a step that was formalized in January 2020 after a 2016 referendum. This move has resulted in new trade policies and tariffs with EU and other countries, significantly reducing the U.K.’s access to the EU market and increasing regulatory burdens on U.K. businesses trading with the EU.
The Benefits of the CPTPP for the U.K.
The U.K.’s inclusion in the CPTPP has several advantages. More than 99% of British exports, like cheese, cars, chocolate, machinery, gin, and whisky, will now face zero tariffs. In the long run, this deal could add GBP 1.8 billion (USD 2.2 billion) annually to the U.K.’s economy, equating to a modest boost of 0.08% to the GDP.
Moreover, the CPTPP also serves as a “gateway” to the Indo-Pacific region, which is projected to contribute to 54% of the global economic growth in the future. As a CPTPP member, the U.K. can veto China’s inclusion in the treaty. Furthermore, U.K. firms will enjoy greater ease in operating within the host countries since there will be no need to establish a local office or be resident to provide services.
India’s Stance on the CPTPP
Despite the perceived benefits, India has chosen not to join the CPTPP because the agreement compels higher labor and environmental standards on its partners. Additionally, the CPTPP includes detailed qualifications on standards for investment protection, provisions to protect the host state’s right to regulate, and the imposition of meticulous transparency requirements. These stringent rules have led to India’s current stand on the CPTPP.
The recent developments in international treaties and agreements, particularly the U.K.’s signing of the CPTPP, provide new avenues for trade and partnerships among nations. However, each country must evaluate the benefits and consequences of such agreements based on their unique circumstances and priorities – as seen in the contrasting positions of the U.K. and India on the CPTPP.
Last Modified: February 20, 2024