When I was back in my British homeland last summer, it sat squarely in the North Atlantic. France is just a stone's throw to the southeast. The very north of Scotland is on a latitude with southern Norway. I caught a train from London to Amsterdam.
I'm pretty sure about all that. But a post-Brexit Great Britain is doing a little geographic rejigging with its decision to put some UK in the CPTPP, a trade bloc that is equivalent to around US$13.5 trillion in economic might.
UK Prime Minister Rishi Sunak announced on Friday that the United Kingdom will become the first nation to join the CPTPP since it formed with its original 11 member nations. Combined, the bloc will contain 500 million people and economies contributing 15% of global GDP once the United Kingdom joins.
The group, however, needs a new name. The second "P" in CPTPP stands for the Pacific Ocean; the full name is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
It was once true that the sun did not set on the British Empire. But I've broken out my atlas to check, and no, Britain does not share any shores lapped by the warm waters and fringed by the coral reefs of the Pacific. It is literally an ocean away. That's a heck of a lot of "trans" over the Pacific. The land masses of Europe or the Americas stand in the way.
Geographic realities aside, it's quite a coup to join the body, which originally spun out of free-trade talks between the United States and Japan. And it's a missed opportunity as long as the United States refuses to sign on. There's always been a "my way or the highway" streak of individualism and protectionism about U.S. trade and foreign policy. But the free world faces its challenges, with dictatorships such as Russia and China flexing their might. Creating a mighty trade bloc that can act in unison is a great way to mount an economic and sanctions-driven fight back.
The late Shinzo Abe spent a significant amount of political capital to get Japan, which also has a protectionist nature as well as powerful labor and farm lobbies, to agree to the deal. But the then-Japanese prime minister was jilted at the alter by former president Donald Trump, who literally made pulling out of the free-trade deal his first act on taking office in January 2017.
Japan chaired talks on Britain's accession to the group. The Tokyo leadership is continuing to chase the United States to get back on board, but U.S. President Joe Biden has resisted those overtures. I'm not sure why, as the United States would benefit immensely from joining, too.
Brexit was a colossal mistake, in my eyes. Brits in rural areas and northern cities cast a protest vote against immigration while the southern cities that get the most immigrants voted to remain.
There were also false promises -- let's just call them what they were, lies -- by former PM Boris Johnson that Brits would gain enormous oil-drilling income from the North Sea. He lied that Britain would reclaim £350 million (US$433 million) per week that it was shoveling in fees to the European Union -- a figure that even the mos -strident pro-Brexit campaigners knew was nonsense.
And now just look at the dire straits the U.K. economy is in. It's the only G7 economy expected by the International Monetary Fund to enter recession in 2023, and it will have the worst economic performance among its G7 peers in 2024. There's a strike of some kind almost every week. I commiserate with Brits here in my adoptive hometown of Hong Kong, and we agree that Britain is falling apart.
Maybe this CPTPP deal will undo some of the damage, or at least forge new trade partnerships that offset the problems produced by Brexit. You still won't be able to find an affordable plumber or get anyone to put your scaffolding up -- all the Poles, Slovakians and Romanians who were doing that dirty work had to leave -- but the free-trade bloc is supposed to ease doing business and moving between member nations.
It is appropriate that it is Sunak, the Southampton-born son of East African immigrants to England and ultimately of Indian descent, who is the man to ink the deal. He is the face of modern England, not to mention absolutely loaded, because he married the daughter of the man who founded the Indian IT outsourcing company Infosys (INFY) . He knows a thing or two about global commerce.
"We are at our heart an open and free-trading nation, and this deal demonstrates the real economic benefits of our post-Brexit freedoms," Sunak said in announcing the agreement. This is the fruition of talks that started in June 2021, concluded at trade talks on the Vietnamese resort island of Phu Quoc earlier this month, and was finally agreed today in a virtual meeting of ministers from the various nations.
Globalization has faced its setbacks, and the nativist streak evident in many Western nations runs deep. But anyone complaining about the perils of global trade is likely posting their polemic to Beijing-owned Tiktok on an iPhone designed in California but assembled in China, India or Vietnam. Then they hop in their U.S.-made Toyota to drive to pick up groceries at German-owned Trader Joe's or Dutch-owned Stop & Shop before heading to work at an e-commerce multinational doing business all around the world.
Britain's Business and Trade Secretary Kemi Badenoch, who was born in London but grew up partly in Nigeria and the United States herself, says the deal is "an important moment" for the United Kingdom. She sees it as a "powerful signal" that Britain is using its post-Brexit freedom to reach out to new markets elsewhere in the world.
The United Kingdom already has trade deals with many of the members of the CPTPP. For the record they are, by economic size: Japan, Canada, Australia, Mexico, Malaysia, Singapore, Vietnam, Chile, New Zealand, Peru and Brunei.
The United Kingdom would slot in just above Canada, so it's a significant addition. Sunak's office estimates that the move will boost the U.K. economy by £1.8 billion (US$2.2 billion) each year in the long run and lead to an £800 million (US$990 million) increase in wages.
For U.K. exports, 99% will now have zero tariffs for shipments into that grouping. For the year through September 2022, exports to those nations were already valued at £60.5 billion (US$75 billion) and are only set to grow now.
While the immediate benefits on exports are limited because of Britain's existing trade deals, there's an important clause for the "rules of origin" in the CPTPP. Those new rules allow for a U.K. company to, for instance, make a car engine and ship it tariff-free to a company assembling a car in, say, low-cost Vietnam. The Vietnamese company can then sell the finished vehicle tariff-free to another nation in the bloc, something that's not possible with bilateral trade deals.
Britain can use the other 11 nations as a beachhead to ship goods elsewhere in the Asia Pacific region. This is also the first time Britain has struck a trade deal with Malaysia. Although we normally think about shipping goods -- cheese, cars and chocolate are the first things Sunak mentioned as part of the deal -- services are arguably more important, accounting for 43% of Britain's exports to CPTPP nations.
The CPTPP has been championed as a "next-gen" trade deal that focuses as much on services, digital goods and intellectual property as it does on heavy manufacturing. U.K. service providers will now not need to set up an individual office in each of those countries to serve them. Such remotely delivered services to CPTPP member nations were valued at £20.5 billion (US$25.4 billion) in 2020. The deal also cuts red tape on cross-border investment among the member nations. CPTPP member nations have invested £182 billion (US$225 billion) in stocks into U.K. markets.
It is going to take a lot of work to undo the damage and disruption caused by Brexit, but the U.K. has taken the first step. That long journey of repair can begin.
