Britain secures Indo-Pacific trade bloc agreement
The UK has become the 12th member of the Indo-Pacific trade bloc this week
What does it mean for supply chains?
The UK this week will become the latest member of the Indo-Pacific trade bloc, also known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Britain will join the current 11 members (Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and Canada) in creating free trade agreements to improve its supply chain relations across these regions, adding to the world’s ‘most significant’ combined free trade area which had a GDP of £11 trillion at the end of 2021.
A statement from Prime Minister Rishi Sunak read, “We have just agreed the biggest trade deal since Brexit. Joining 11 other countries in the Indo-Pacific, it’s set to boost the UK economy by £1.8bn”.
The accession into the CPTPP sees the completion of Britain’s 4th new trade deal since Brexit, having already signed deals with Australia, New Zealand and Singapore. According to the Department of Business and Trade, it will allow for tariff-free trade to around 500 million customers as the bloc’s influence on the global economy continues to grow. As a result of the membership, British companies will also gain greater purchasing opportunities including easier access to raw materials imported from the bloc. According to the British government, the greater buying choice will lead to “more options and better economic resilience for the UK”.
As per the Department for Business & Trade and the Department for International Trade website, the UK will benefit from:
- As a member of a bloc where most goods imports are eligible for zero tariffs, consumers and businesses could benefit from better choice, quality, and affordability. This should include cheaper import prices for high-quality consumer goods like fruit juices from Chile and Peru, honey, and chocolate from Mexico, and vacuum cleaners from Malaysia.
- It could also lead to cheaper import prices for inputs to manufacturing with tariffs eliminated on a wide range of inputs, including machinery and chemicals.
- Over 99% of our goods exported to CPTPP member countries will be eligible for zero tariffs, improving goods market access for British firms. Businesses selling key UK exports such as cars and machinery will benefit from the removal of tariffs. In the long run, joining CPTPP could lead to a £1.7 billion boost to UK exports to other CPTPP countries. Exporters of dairy products, including cheese and butter, will get greater access to lower tariffs in Canada, Japan, and Mexico, building on the £23.9 million of dairy products we exported to these countries in 2022; and exporters of chocolate will benefit from zero tariffs on exports to Mexico and Malaysia.
- The removal of tariffs should also help UK businesses be more competitive and reach CPTPP’s vast consumer base.
Diversifying British supply chains will give businesses the ability to increase economic resilience by deepening trade links across the Asia-Pacific and Americas. Modern ‘rules of origin’ could make British businesses more competitive by allowing them to trade more freely across the bloc and take advantage of new export opportunities. For example, UK automotive manufacturers could sell car engines tariff-free to a car maker in the bloc, who could then sell their cars tariff-free to any member country. This will also help exporters diversify their supply chains, making it easier for companies to buy and use raw materials from across the bloc.