With CPTPP, Britain is re-emerging as an economic powerhouse

The announcement that the UK is to join the Comprehensive and Progressive Trans Pacific Partnership is a huge achievement. It should not be underestimated. This will open up free trade between the UK and 11 economies in the Indo Pacific region. It means free trade not just with Australia and New Zealand but with countries like Japan, Canada and Mexico, as well as Singapore and Vietnam. It will in time prove transformational for the British economy.

These countries have a population of 500 million and a GDP of $9 trillion. Japan is the third largest economy in the world. Of the others, many are fast growing and progressive economies, and then there are the more traditional, stable, developed economies of Australia, Canada and Singapore.

The UK will be in a unique position. It already has a free trade agreement with the EU which may not be quite as liberal as being a member of the single market, but nevertheless gives the UK tariff and quota free access to the EU market, as well as being able to import from the EU duty-free. No country has freer trade with the EU than the UK. Add to that free trade with 500 million people in the Indo-Pacific and the UK has amongst the best trading arrangements of any country on earth.

At the moment, the UK’s trade with the CPTPP countries constitutes just 7.8 per cent of its total trade. Critics may think that is unimportant, but remember: these countries are some of the most economically dynamic on earth. It is estimated that by 2030, 65 per cent of the world’s middle-class consumers will be in the Indo Pacific region. So for the naysayers who think the CPTPP may not be important to the British economy, let me remind them that the growth on trade with those 11 economies is already running at around 8 per cent a year.

Once trade barriers are torn down, expect that trade to grow a great deal faster. And while we have no idea how well British exporters will fare in those Indo Pacific markets, the opportunities have now opened up as never before. Getting into the CPTPP is not just beneficial in the short-term, it is locking the British economy into the most economically dynamic region in the world. It constitutes a very serious investment in the future.

Added to the trade statistics, it is important to remember that UK service suppliers are already deeply integrated with the Indo Pacific region. UK service suppliers exported nearly £30 billion worth of services to CPTPP members in 2019.

Of course, membership of the CPTPP also has geo-political importance. While the return of British Armed Forces to the Indo Pacific region over the last year is significant, joining the CPTPP is the single most important step the UK has taken as part of the tilt to the Indo Pacific. Some have argued the tilt is unaffordable, and that the UK should focus on its own neighbourhood. I think this vision is wrongheaded.

By engaging with the Indo Pacific, the UK is making a serious contribution to balancing the growing power of China, both in the region and beyond. By joining the CPTPP, the UK will have the opportunity to reduce its dependency on supply chains from China. It will be possible to establish new supply chains with other countries in the Asia Pacific. At the high technology end, building further links with Japan is highly prospective. Already that is a critically important economic relationship for the UK and extending it further makes a lot of sense.

But in terms of lower cost economies, building supply chain networks with a country like Vietnam or Mexico does mean less dependency on China.

So the UK is now starting to re-emerge as a significant partner for other liberal democracies in the Indo Pacific region, as a country, which contributes to balancing China’s growing power, and as a nation which is seizing the economic opportunities from the fastest growing economic region in the world.

None of this would have been possible had the UK remained in the EU. And although we will all accept there are some disadvantages from being outside of the EU, there are also very substantial opportunities if the British government is prepared to take them. In the case of joining the CPTPP and meeting the terms of membership, the Government has shown a real determination to make the most of the post Brexit world. The long-term consequences should be very beneficial.

Alexander Downer is a former Australian foreign minister and High Commissioner to the United Kingdom. He is Chairman of Trustees at Policy Exchange