As you may have seen, over the weekend the UK ascended to the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP). As a result, businesses can immediately benefit from the CPTPP when trading with eight countries (Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam) and with Australia from Christmas Eve.
The two remaining countries which made up the original 11 CPTPP members (Mexico and Canada) are yet to ratify the UK’s accession to CPTPP however, once this step has been taken, the agreement will be ready to be applied 60 days later.
However, what does this agreement actually provide and how can it benefit UK SMEs? Below we’ve outlined some of the possible ways in which your business could utilise the CPTPP to grow your international trade.
0% Tariff of Movement of Goods:
Of all the current goods that UK businesses ship to CPTPP members, over 99% will now be eligible for zero tariffs. As with any free trade agreement, businesses will still need to make sure that they comply with origin requirements before claiming a preferential tariff. However, as you will see further down, it may now be easier to do just this.
Removal of Data Localisation Requirements:
Remotely delivered services from the UK to the CPTPP was worth a total of £23 billion in 2021. By joining the CPTPP, UK businesses have had barriers, such as data localisation requirements, removed.
Also, each member is committed to the highest data protection standards so any UK business can expand with confidence and knowledge that their data is secure.
Opportunity to Diversify Your Supply Chain:
Regardless of where you sit on the supply chain, the CPTPP could provide you with opportunities to diversify and, in turn, make your supply chain more resilient.
Rules of origin requirements allow you to not only benefit when goods are produced within one, singular CTPPP member, but to also incorporate raw materials from various member states. This cumulation will make it easier for UK businesses to benefit from preferential tariff rates in comparison to bilateral trade agreements. For example, a UK manufacturer could import raw materials from other CPTPP countries, carry out processing within the UK, and then export finished products to any of the CPTPP countries under preferential trade.
As an exporter of raw materials or appliances, this can make your goods more appealing to fellow exporters in other CTPP countries while, as an importer, it can provide you with more options for when you are looking to source your goods.
First Trade Deal with Malaysia:
For most countries within the CPTPP, it can be argued that the agreement only builds upon a trading relationship that was already in place rather than creating an entirely new relationship.
However, the CPTPP goes above and beyond most of the existing FTAs that the UK currently has with CPTPP members and will mark the first trade deal with Malaysia.
In 2022, the Malaysian economy was worth £330 billion in GDP and was the 37th largest economy in the world in 2023. In the four quarters to the end of Q2 ‘24, trade in goods and services between the UK and Malaysia totalled £5.7billion.
Encouraging Investment:
In 2021, the level of investment from CPTPP countries in the UK was roughly £182 billion which accounted for at least 9% of the total UK inward investment. This investment supported the creation of over 5,000 jobs between 2021 and 2022.
By being a member of the CPTPP, and guaranteeing protections for investors, it should encourage further investment in the UK.
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