The UK has now signed its accession protocol to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This is almost the final stage in the UK’s accession to the CPTPP, with only UK and existing-member ratification outstanding. 

The CPTPP is a successor to the Trans-Pacific Partnership (TPP), the proposed trade agreement between what became the 11 current CPTPP members and the United States. President Trump withdrew the US from the TPP with the consequence that it was not ratified and did not enter into force.

The UK’s accession to the CPTPP is a key moment in its post-Brexit journey. Whilst some argue the economic benefits of membership are relatively small (and note that the UK has trade agreements with many CPTPP members already), others note the significant economic growth of the indo-pacific region and its wider geopolitical importance. Some UK commentators have also suggested that the US may at some point in the future join the CPTPP, thereby giving the UK an indirect trade agreement - which has thus far proven elusive - with the country. 

Entry Into Force

The entry into force provisions under the UK’s accession protocol are relatively complex. In short, the UK will become a member of the CPTPP on the earlier of:

a) 60 days after all 11 CPTPP members and the UK have completed their ratification processes; or

b) 60 days after the UK and six of the existing 11 CPTPP members have completed their processes, and fifteen months (or more) have passed since the signature of the protocol.

In practice, this means that the entry into force of the protocol will not occur for a minimum of 60 days from the date of signature (being 16 July 2023), but in practice is likely to take longer. The UK government expects the entry into force to take place in the second half of 2024.

In the case of (b), the protocol will enter into force between the UK and the CPTPP members that have ratified the protocol; therefore, it could initially come into force with a more limited geographic scope, with a broader application as and when outstanding members ratify the UK’s entry.

The CPTPP – an overview

With UK membership, the CPTPP will have 12 members, spanning four continents, covering a population of more than half a billion people. The combined GDP of the 12 CPTPP members will be around £12tn (15% of world GDP). More broadly, the indo-pacific region is the fastest growing in the world and is expected to originate 54% of economic growth through to 2050.

Under the CPTPP, more than 99% of the UK’s goods exports to CPTPP members will be eligible for tariff free trade (albeit for some products this will be a staged process). In many respects, CPTPP membership terms largely reflect the UK’s existing free trade agreements, however it does for example liberalise trade with Malaysia and Brunei where no FTAs were previously in place.

More broadly, the CPTPP provides for the diversification of UK supply chains, with a single set of rules of origin and product specific rules which define whether a good is “originating”. Helpfully, UK businesses will be able to count inputs from all CPTPP members in the production of their goods in order to meet the relevant rules of origin, making it easier for certain UK exports to qualify for the preferential tariff rates of the CPTPP. Broadly, “originating” goods are:

1. Certain categories of goods wholly obtained or produced in CPTPP territory and exclusively derived from it (typically these are agricultural goods or natural resources).
2. Goods that include some non-CPTPP origin materials where those non-CPTPP materials have undergone substantial transformation in CPTPP territory, where “Product Specific Rules” have been met; these rules enable a customs authority to determine whether the relevant good has undergone “substantial transformation”.
3. Goods produced entirely in CPTPP territory where they are produced from (1) or (2) above.

The CPTPP also provides for a reduction in non-tariff trade barriers. For example, with a commitment to take steps to seek to improve the efficiency, transparency and predictability of members’ customs procedures. This includes by way of target timeframes for releasing goods from customs, easy-access information for traders and provisions in respect of advance rulings on customs valuations.

In terms of investment, the CPTPP contains an investor-state dispute settlement mechanism (ISDS) to provide independent legal dress should investors not be provided with the treatment they are guaranteed under the Treaty; for example, in respect of unfair, arbitrary or discriminatory treatment. Crucially, however, the UK has ensured that its investment screening decisions made on national security or public interest grounds – for example under the National Security and Investment Act 2021 – cannot be challenged. It is notable that Australia and New Zealand have been carved-out of the ISDS provisions of the CPTPP as regards the UK.

The UK has a very strong services sector and is the world’s second largest exporter of services. Traditionally, services provisions have been the poor relation to goods in trade agreements . The CPTPP liberalises services exports to an extent, with provisions to prevent barriers to market access in key sectors; for example, UK businesses will be able to provide certain services in CPTPP members’ territory without having to establish a local presence.

The UK has pushed hard for digital trade provisions in its trade agreements, particularly with New Zealand and Japan. Often, these provisions “lock-in” existing practice. The CPTPP will ensure, for example, customs duties cannot be imposed on electronic transmissions and their content, and prevents data localisation requirements being imposed. Whilst seemingly niche provisions, data localisation requirements for example can impose significant costs on business.

Authored by Aline Doussin and Daniel Shapland.