‘Britain is back’ as trade horizons widen

UK Prime Minister Keir Starmer has been the subject of recent UK media criticism suggesting that he has spent too much time on foreign policy in his first 150 days in office. However, he hit back this week declaring that “Britain is back on the world stage” and asserting, rightly, that this could help drive a new era of domestic prosperity for the nation.
Giving the annual Lord Mayor’s Banquet speech in London, a major address on foreign policy, Starmer pledged that renewed, post-Brexit UK international engagement will help drive much-needed domestic economic growth. In coming months, the UK intends to continue a series of business trade missions, including to the Middle East.
One of the biggest, potential longer-term opportunities comes with the UK’s accession on Dec. 15 to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the big trade bloc stretching from the Asia-Pacific to the Americas.
While the UK will be a clear geographical “outlier” among the agreement members, the move makes a reality of aspirations, post-Brexit, to strengthen ties with longstanding allies outside Europe — in effect, trying to create a stronger business “bridge” from Europe to the Asia-Pacific and the Americas.
The CPTPP opportunity is seen most accurately as a long-term opportunity for Britain. The last UK government’s impact assessment declared that the economic gains will be fairly small in the medium term — only around .08 percent of gross domestic product over the next decade.
However, optimists such as UK Conservative Party leader Kemi Badenoch, who helped promote the deal as a former UK trade and business secretary, argue that the partnership is akin to a “startup”. She says that those 10-year estimates do not account for the fact that some members — for example, Vietnam — are rapidly growing in importance in global trade. She also flags that a key perk of the new deal is greater access to all CPTPP markets, including a pledge to eliminate or reduce the overwhelming majority of import charges or tariffs.
It will be some years before it is possible to know if Badenoch is proven right, or not. However, what is much surer already is that CPTPP opportunities for the UK will be heavily country and sector specific, at least to begin with in the 2020s.
One of the most significant country opportunities, in the immediate term, may well be Malaysia, the only CPTPP nation apart from Brunei with which the UK does not have an existing trade agreement. While Malaysia is not in the UK’s largest, existing export destination, it is a growing market, and businesses will see some product-specific tariff and non-tariff barriers reduced as a direct result of CPTPP accession.
In terms of sectors, one of the significant opportunities might be in food and agriculture. For instance, with Malaysia and Brunei, UK manufacturers will eventually see removal of tariffs, including more-or-less complete removal on entry into force of Malaysian tariffs on a significant number of manufactured products, such as confectionary items. 

The UK intends to continue a series of business trade missions, including to the Middle East.

Andrew Hammond

UK exports to the other CPTPP members could also become significantly more competitive. In part, this is because the deal cuts tariffs on a range of products, providing more competitive access for UK importers to many ingredients and raw materials used in UK manufacturing that either are not produced domestically or not in sufficient quantities. This includes access to a tariff-free cheese export quota and grain opportunities in Canada; additional access for dairy and cereals in Japan; dairy access in Chile; and the removal of tariffs on chocolate and confectionery, plus better beef and poultry access to Mexico.
CPTPP also provides more flexibility for manufacturers to access tariff-free trade. Rules of origin are the terms and conditions that dictate if a trader is able to access a preferential tariff in a trade agreement. CPTPP includes a single set of rules that offer alternatives for businesses to those in the UK’s existing trade agreements, and this may help to unlock additional opportunities for UK exporters.
On the metals and mineral resources front, it is hoped that all tariffs will eventually be eliminated on UK exports to Malaysia. There could also be opportunities in wider markets, too, including Australia, and Chile, which is part of the so-called “lithium triangle,” with just under two-thirds of global reserves collectively with Argentina and Bolivia.
Another sector where there might be significant, new UK business opportunities is data flows. Joining CPTPP will help remove remaining barriers faced by UK-based companies, such as data localization requirements, ensuring data can flow between UK and CPTPP members.
CPTPP accession may also help the UK become a significantly stronger international leader in digital trade, with modern rules on data and freer access to bloc-wide services sectors.
Moreover, CPTPP accession could also help UK producers of items such as machinery and medicines — among the UK’s most valuable, existing exports to the bloc — by allowing them to expand supply chains across member nations.
Taken together, Starmer is right to argue that deeper UK international engagement, including in the Middle East, Asia-Pacific and Americas, can help boost UK prosperity in the generation ahead. While the CPTPP specifically will probably not yield game-changing economic opportunities in the 2020s, it may prove to be a significant source of UK growth in the second quarter of the 21st century and potentially beyond.

• Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.