|The UK is joining a select group of nations in the wide-ranging CPTPP
The UK formally signed a treaty to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in New Zealand on July 16, kickstarting the UK’s membership of a modern and ambitious trade deal spanning 12 economies across Asia-Pacific and now Europe.
The UK government will now seek to ratify the agreement, which will include parliamentary scrutiny, while other CPTPP countries complete their own legislative processes. It is expected that the deal will come into force next year.
The signing comes as a new government report revealed one in every 100 UK workers was employed by a business headquartered in a CPTPP member nation in 2019, equating to over 400,000 jobs across the country.
Membership of the trade group is expected to spark further investment in the UK by CPTPP countries, already worth over $238 billion in 2021, by guaranteeing protections for investors.
Accumulatively as of June 20, the UK’s total registered investment capital in Vietnam was $4.26 billion for 530 valid projects, including $34.1 million worth of newly registered and newly added capital, and stake acquisitions and capital contributions for the January-June 20 period, up 59 per cent on-year, according to Vietnam’s Ministry of Planning and Investment.
British Ambassador to Vietnam Iain Frew said, “Total trade between the UK and Vietnam recently reached £6.9 billion ($8.87 billion), an increase of 29 per cent on last year, and I’m confident that the UK’s accession to the CPTPP will strengthen this even further.”
“This shows the UK’s strategic commitment to the Indo-Pacific region. I am grateful to the Vietnamese government for their support and collaboration in accession, particularly meaningful as we celebrate 50 years of diplomatic relations between our countries. I look forward to working closely with the Vietnamese government, other partners and businesses to make the most of this new partnership.”
UK membership could also benefit businesses and investors in Vietnam through modern rules that make it easier to establish, operate investments and do business in the UK, according to the British Embassy to Vietnam.
“As for Vietnam, joining CPTPP will complement our existing UK-Vietnam Free Trade Agreement (UKVFTA), upgrading our bilateral relationship with additional preferential tariffs,” the embassy said in a statement. “The removal of trade barriers will support our mutual economic security by deepening participation in each other’s supply chains and diversifying our trade. These benefits will increase opportunities for trade, supporting our economies and increasing opportunities for our businesses.”
The UK will be the first European member and first new member since the CPTPP was created. With the UK as a member, the CPTPP will have a combined GDP of £12 trillion ($15.7 trillion) and account for 15 per cent of global GDP.
Being part of the CPTPP will mean that more than 99 per cent of current UK goods exports to CPTPP countries will be eligible for zero tariffs. Dairy farmers, for example, will benefit from reduced tariffs on cheese and butter exports to Canada, Chile, Japan, and Mexico. This builds on the £23.9 million ($30.72 million) worth of dairy products we exported to these countries in 2022.
Chris Jeffery, chairman of the British Chamber of Commerce in Vietnam, said, “We are excited about this further opening up of business opportunities for both Vietnam and the UK, with the existing UKVFTA and now the accession to the CPTPP, the opportunities availed to British business based in Vietnam are some of the best worldwide.”
“Our belief is that trade between Vietnam and the UK will continue its rapid growth, marking the start of our next 50 years of partnership and growing links between the two countries. The opportunity is now there for UK companies to fully benefit from the UK’s focus on developing ties and links with Asia,” Jeffery said.
Currently, Vietnam-UK trade and investment ties are largely driven by the UKVFTA, which entered into force in May 2021, besides Vietnam’s improved investment and business climate. Once the CPTPP takes effect with tariff reductions and removal, businesses from the UK and Vietnam can select that 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 of both agreements, their exports will not be able to benefit from any incentives from the agreements and instead be subject to export conditions as usually applied in the past.
As part of the UKVFTA, 85.6 per cent of tariff lines for goods imported by the UK from Vietnam were eliminated in January 2021, and 99.2 per cent will be removed by January 2027, according to the UK’s Department for International Trade.
“The UKVFTA is on route to become a highway for businesses to reach to the other side’s markets faster and stronger thanks to its extensive tariff reduction roadmap,” said Nguyen Canh Cuong, trade counsellor at the Vietnamese Embassy in the UK.
“This agreement creates advantages for many products of both sides to access the other side’s markets such as telephone sets, ordinary machinery, textiles, footwear, seafood, furniture, iron and steel, coffee, and cashew nuts from Vietnam as well as modern machinery, pharmaceuticals, chemicals, leather and footwear materials, and cars from the UK,” Cuong continued.
The UKVFTA has established a tax-free roadmap for almost all Vietnamese products exported into the UK and vice versa. As a result, many Vietnamese products have a superior competitive advantage in the UK market compared to similar products originating from countries that do not have FTAs with the UK such as China, India, Pakistan, Thailand, Malaysia, and Indonesia, and South American countries.
Benefits of UK accession to CPTPP
Boosting services: The UK is the world’s second-largest services provider, and services accounted for 43 per cent of our trade with CPTPP members last year. Joining the agreement can reduce red tape – British firms will not be required to establish a local office or be resident to supply a service, and will be able to operate on a par with local firms.
Increased flexibility: Modern rules of origin (ROO) could make British businesses more competitive by allowing them to trade more freely across the trade area. For example, UK car manufacturers could sell engines tariff-free to a carmaker in the grouping who could then sell those cars tariff-free to any other member country, subject to meeting the ROO. This is currently not possible under all the bilateral trade agreements the UK has in place with CPTPP members, and will help exporters diversify their supply chains and create new export opportunities.
Pro-investment: Investment between the UK and CPTPP countries is expected to increase, as the agreement contains provisions to limit barriers and encourage more inward investment.
Cutting-edge: Remotely delivered services from the UK to the CPTPP were worth $30 billion in 2021. The CPTPP sets modern rules for digital trade across all sectors of the economy and will support UK businesses of all sizes to seek new opportunities in CPTPP markets.
New markets: Joining means the UK will have a free trade agreement with Malaysia for the first time, giving businesses far more access to an economy worth $431.8 billion in GDP in 2022. Tariffs of around 80 per cent will be eliminated on British exports of whisky within 10 years and tariffs of 30 per cent on UK exports of cars will be eliminated within seven years.
Cheaper consumer prices: Reduced tariffs on imported goods could also lead to cheaper prices for British consumers on high-quality products, like fruit juices from Chile and Peru and honey and chocolate from Mexico. Source: British Embassy to Vietnam
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