Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Tuesday 18 July.

“The Secretary of State for Business and Trade signed the accession protocol to the comprehensive and progressive agreement for trans-Pacific partnership on Sunday 16 July in Auckland. The UK will be the first new member since CPTPP was created. With the UK as a member, CPTPP will have a combined GDP of £12 trillion and will account for 15% of global GDP. Accession to the agreement sends a powerful signal that the UK is using our post-Brexit freedoms to boost our economy. It will secure our place as the second largest economy in a trade grouping dedicated to free and rules-based trade. It gives us a seat at the table in setting standards for the global economy.

The agreement is a gateway to the wider Indo-Pacific, which is set to account for the majority of global growth and around half of the world’s middle-class consumers in the decades to come. That will bring new opportunities for British businesses abroad and will support jobs at home. More than 99% of current UK goods exports to CPTPP countries will be eligible for zero tariffs. The UK’s world-leading services firms will benefit from modern rules, ensuring non-discriminatory treatment and greater transparency. That will make it easier for them to provide services to consumers in other CPTPP countries.

In an historic first, joining CPTPP will mean that the UK and Malaysia are in a free trade agreement together for the first time. That will give businesses better access to a market worth £330 billion. Manufacturers of key UK exports will be able to make the most of tariff reductions to that thriving market. Tariffs of around 80% on whisky will be eliminated within 10 years, and tariffs of 30% on cars will be eliminated within seven years. Joining CPTPP marks a key step in the development of the UK’s independent trade policy. Our status as an independent trading nation is putting the UK in an enviable position. Membership of that agreement will be a welcome addition to our bilateral free-trade agreements with more than 70 countries. I pay tribute to the many officials and Ministers who have worked on this deal over the past two years, some of whom are in the Chamber today.”

My Lords, while we will always welcome improved trade relationships, the political capital invested by the Government in this announcement seems disproportionate to the potential economic impact. The deal will increase the UK’s GDP by 0.08% after 15 years. Since the Government were not able to negotiate the terms of the UK’s membership, I will ask the Minister two questions. Will it lead to the lowering of food standards or of our intellectual property protection standards? China applied to join CPTPP in September 2021—what assurances on economics and security have Ministers asked for from existing CPTPP members in relation to China’s membership?

Noble Lords, it is a momentous occasion to be able to talk in this House about the signing of the CPTPP. This is a tongue twister, but we are all going to have to get our mouths around it because we are going to hear a lot more about this in the future. This is a massive region of 11 countries in the Indo-Pacific, which account, together with the UK, for 15% of world trade GDP.

We know that this trade deal originally had the US in it, and Donald Trump took the US out. That created a gap. For those of us who play the game of rugby football, you always go for the gap. The UK has taken that gap and got into this deal, which, to come to the specifics of the question, will in no way impact on our food standards and regulatory standards.

On the matter of China, China is not a member of this group. China has expressed some interest, but there are other interested countries such as Costa Rica, Ecuador, Uruguay, the Philippines and Korea that are in line before China. So, as far as we are concerned, at the moment we are not commenting on China’s accession. China has expressed an interest but, on the exact question, there will be no reduction of food standards and general regulation through this deal.

My Lords, I very warmly welcome the 0.08% estimated growth over 15 years of this momentous agreement. But, with regard to China, it is more than simply expressing an interest; it is seeking to commence the accession process. If that happens, we will be bound to share data with China under part of the CPTPP common data provisions. That will mean that we will no longer have data adequacy with the European Union. We currently have a trade deficit in goods with China of £43 billion. Would it not make more sense to have eased trade with Europe rather than more trade deficit with China?

Some 45% of our trade in the world is with the EU. In fact, if you take Europe as now being 34 countries—if you take the likes of Norway, Switzerland, Israel et cetera—it is pushing 50% of our trade, whereas China is £100 billion, which is more like 10%. So we are very clear that our primary market is with Europe and the first deal we did on Brexit was a free trade agreement with Europe. So we have free trade with Europe, as we stand, and that will continue to be our dominant market. This is the bonus that we get from going to international markets that we could not get access to before. If we were inside the EU, we could not have signed this deal, just as we could not have signed a deal with India. When you have 28 people wanting 28 different things, it is difficult to negotiate, is it not? Here we have a deal with the CPTPP which we would not have access to otherwise and I think we should celebrate.

As to the number on GDP, we are talking about a £2 billion impact on trade, which is a big, big number. It will go all around the UK, not just to London and the south-east. I can give you a breakdown of the numbers in every region, if the noble Lord needs it. The fact is that it will be a dynamic deal. This is going to be the fastest-growing consumer sector in the world. It is going to have a big increase in GDP. As the Secretary of State said at the press conference, it is up to us now. It is up to the UK now to maximise the benefits of this deal and I am very convinced that we will get great trading opportunities out of it.

My Lords, the slightly negative terms introduced by some noble Lords on this is regrettable. Some of the countries within this grouping have very fast-growing economies and represent huge potential for British exporters, so I really do believe that we should welcome this move. We want to see many more trade deals of this sort. I think it is the largest trade deal since we have come out of the EU, but certainly there will be many British exporters up and down this country who would perhaps express warmer feelings towards this than some noble Lords have so far done today.

I thank the noble Lord for that. In fact, the Department for Business and Trade, being ahead of the game as always, is already thinking about how to get utilisation of this trade deal done, to get through to all the regions and nations of the United Kingdom, to make sure in particular that all of our SME community has access to this deal—for example, Malaysia is a country we have never had a trade deal with before, and we now have tariff-free trade with Malaysia. A particular focus of mine, as the export Minister, will be to increase the level of access to our SMEs, because these are real companies, employing real people in real places,

My Lords, does the Minister not agree that there is a geostrategic aspect to this agreement? By almost every measure—investment and everything—the UK has more involvement in that region than any other EU country. We also run global shipping from the UK. In that sense, there is a geostrategic aspect, which is to be welcomed. Does the Minister agree?

The noble Lord will be able to comment much more on the geopolitical aspect than I can, because I come to this looking at it very much as a trade deal. When I was introduced to the deal, I looked at the map and could see that we were nowhere near the Indo-Pacific. The fact that we have come into that deal must surely be because we have such extensive reach in the region, and therefore in addition to trade there will be a knock-on effect for our geopolitical security, I am sure.

My Lords, the nature of the CPTPP is that the countries that are trading with each other have to police the new trade that results from that agreement. Can the Minister tell your Lordships how the Government will set up the process of monitoring and ensuring that the trade we have with this new group is truly free?

The whole idea of the CPTPP deal is precisely to do with free trade and fair trade. That will be very closely monitored within the group. The benefit to our importers and exporters will be considerable, particularly around some of the rules of origin. We will now be in a position to accept goods coming in from these 11 countries, bring them into our supply chains and then export thereafter. The benefits are significant and, in the meantime, fair trade will be monitored, as it always would be.

My Lords, does my noble friend agree that the impact assessment may significantly understate the potential economic benefits, for two good reasons? First, there is increasingly a worldwide digital economy and CPTPP has world-leading digital provisions within the agreement. Secondly, we are predominantly a services economy and those services are likely to grow more rapidly in the member countries. Can he further confirm that we will be full members of CPTPP and therefore able to exercise a view, with others, on the membership of any other country, including China?

I thank my noble friend and will take his last point first. Yes, we have just joined the club and the first thing you do when you join a club is not necessarily to comment on its existing or incoming members. We will get to that in due course, I am sure, but when we are fully ratified we will absolutely have a fair voice at the table on the membership. I thank him for raising digital and services because in my new job I am looking carefully at where and how our trade is conducted. There is an obsession with manufactured goods to the EU, but the fastest-growing part of our economy is digital services to non-EU countries. Our economy is moving rapidly to be two-thirds services versus one-third goods. Having a deal in this region, which has a very young and well-educated middle class, all fully digital, will provide a great opportunity to access this market, particularly for our SMEs.

My Lords, on the point of membership of this partnership, has the Minister considered the effect of trade with Taiwan in relation to this and relationships with China? What is the percentage of trade currently undertaken with Taiwan, and will the Government protect the future of that trade?

Taiwan is an important trading partner of the United Kingdom. Taiwan has expressed some interest in the CPTPP but, again, it is not currently in the queue. As I said before, we will take our membership; we will then have a fair voice at the table and consider those matters when they arise.