|Kenneth Atkinson - Founder and senior adviser Grant Thornton (Vietnam) |
The signature marks the formal confirmation of the agreement for the UK to join the group, following substantial negotiations earlier this year. The UK government will now seek to ratify the agreement, which will include parliamentary scrutiny and the completion of other CPTPP countries’ legislative processes. Vietnam supported the UK’s entry into the world’s largest trading bloc, again emphasising the strong strategic partnership between the two countries.
Accession will help build on the UK–Vietnam Free Trade Agreement (UKVFTA) and it helps align the UK economy with some of the fastest growing and most dynamic economies in the world. The CPTPP will now have a combined GDP of £12 trillion ($15.4 trillion), increasing the coverage from roughly 12 to 15 per cent globally, and it will mean that the UK will have a free trade agreement with countries such as Malaysia for the first time.
The deal will be a big boost for British businesses, and will also open up huge opportunities and unparalleled access to a market of over 500 million people.
The UK will be the first member country from Europe into a trading bloc, which the UK has been targeting in the post-Brexit era. The incredible growth potential due to the population demographics and growing middle class in many of the member countries mean it is set to account for half the world’s middle-class consumers in the decades to come.
The UK’s accession will contribute additional economic strength to this progressive and dynamic trade alliance, adding £2 trillion ($2.46 trillion) to the combined GDP of the bloc.
Being part of the CPTPP will mean that more than 99 per cent of the UK’s current goods exports to CPTPP countries will be eligible for tax-free tariffs. Dairy farmers, for example, will benefit from reduced rates on cheese and butter exports to Canada, Chile, Japan, and Mexico. This will build on the £23.9 million ($31.2 million) worth of dairy products that were exported to these countries in 2022.
The British Embassy to Vietnam has said that, as the fifth-largest economy in the world by GDP in 2021 and with a market of 67 million consumers, the UK is an attractive market for Vietnam. Expanding the CPTPP to include the UK will help business to diversify their supply chains, remove trading barriers, and encourage more trade for our businesses.
At present, the Vietnam-UK trade and investment ties are largely driven by the UKVFTA, which took effect in May 2021, in addition to the Southeast Asian economy’s improved investment and business climate. As part of the deal, 85.6 per cent of tariff lines for goods imported by the UK from Vietnam were eliminated in 2021, and 99.2 per cent will be removed by 2027, according to the UK’s Department for International Trade.
Once the CPTPP enters into force with tariff reductions and removal, businesses from the UK and Vietnam can select the CPTPP or the UKVFTA to apply for their exports to their respective markets based on their own conditions and ability to meet requirements under each agreement. If they fail to meet the requirements, their exports will not be able to benefit from any incentives from both agreements and, instead, still have to be subject to export conditions as usually applied.
For British businesses, from small firms to large-scale organisations selling physical goods or services, the agreement represents a new gateway in which they can sell to with far fewer barriers. From whiskey, confectionary, and cars to jewellery and clothing, the removal of tariffs will make our finest British products more readily available to consumers in the Indo-Pacific bloc.
This agreement has the additional benefit of strengthening the value chains and supply chains within the bloc. For example, automotive parts from Mexico can now be imported tariff-free into the UK, and cars produced there can then be sold into the Malaysian market, benefitting from the terms of the CPTPP.
According to the UK government, Vietnamese footwear will be one of the beneficiaries of UK accession to the CPTPP.
Looking at services, the UK is the second-biggest services exporter in the world, behind only the US, and the sector contributes around 80 per cent of the UK’s GDP. Being part of CPTPP has secured enhanced market access for UK service suppliers who exported £30 billion ($38.5 billion) worth of services to CPTPP countries in 2021 – and this is set to continue to grow through this agreement.
For the British consumer, the goods we import from these nations – whether it is a Japanese television, Australian wine, or Peruvian coffee – will be tariff-free. The existing taxes on these products are currently paid directly by consumers. Now, we will see far more of our familiar, everyday imported products available at lower prices.
Commitments will also facilitate business travel to CPTPP member countries, providing greater legal certainty for individuals and businesses across multiple sectors and supporting long-term economic growth and investment. Companies such as Standard Chartered and their clients are likely to benefit from smoother access to markets such as Singapore, Malaysia, and Vietnam.
The services sector is likely to be one of the biggest beneficiaries, including transportation services, insurance and pension services, and digital services with the CPTPP removal of barriers to data localisation. Because CPTPP has advanced provisions to facilitate digital trade, it offers a foundation for the UK to influence the global trade rulebook, and the deal could be a useful template for progressing the e-commerce negotiations taking place at the World Trade Organization.
The UK is also helping to ensure its future economic security by joining one of the world’s most dynamic trading areas, while protecting its sovereignty. As the CPTPP grows, the UK will help shape its development to fight unfair and coercive trading practices that threaten the future of international trade.
British businesses will benefit from enhanced access to more markets while trading under fair rules that allow them to compete and thrive on the global stage. With the strength of the bilateral strategic partnership and the stronger trade and investment relationship, Vietnam is also set to share this benefit.
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