Chris Devonshire-Ellis Discusses UK Joining The CPTPP On Nikkei Asia
Chris Devonshire-Ellis has been interviewed by Nikkei Asia concerning the United Kingdom joining the Asian-Pacific Trade Bloc, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The article can be found here, while the text and Chris’s comments can be seen below:
“The U.K. on Sunday signed an agreement to join the CPTPP in Auckland, New Zealand, formalizing its accession as the first new member to the 11-nation trading bloc, although analysts see little economic impact from the deal.
The main obvious beneficiary is Malaysia, which stands to gain tariff-free palm oil exports into the U.K., from up to 12% now, once the Comprehensive and Progressive Agreement for Trans-Pacific Partnership enters into force. The agreement is expected to give the U.K. economy a marginal boost of £1.8 billion (US$2.36 billion), or 0.08%, over 15 years, based on London’s own assessment in April 2021.
“The impact appears mainly cosmetic, for the U.K. to show it made a trade deal after Brexit,” said Chris Devonshire-Ellis, chairman of Dezan Shira & Associates, an advisory firm that works with investors across Asia. “No one in Asia is taking the pact very seriously.”
The British government, though, is keen to promote the pact, noting that the Asia-Pacific bloc represents half a billion people and accounts for 12% of the global economy. However, the U.K. already has free trade agreements with nine of the 11 member states, many of which were rolled over from when the U.K. was a member of the European Union.
Since the U.K. voted to leave the EU in June 2016, the Conservative government has sought to sign deals with other countries and regions to try to make good the leavers’ campaign promise of “Brexit benefits,” even though no partnership could realistically make up for the loss of frictionless trade with its nearest neighbor and the world’s largest trading bloc.
“We are using our status as an independent trading nation to join an exciting, growing, forward-looking trade bloc, which will help grow the U.K. economy and build on the hundreds of thousands of jobs CPTPP-owned businesses already support up and down the country,” according to a statement released by the U.K. Department for Business and Trade, citing Trade Secretary Kemi Badenoch, who backed the U.K. to leave the EU.
Trade with CPTPP members represents around 6.8% of total U.K. trade, with British exports to CPTPP countries worth £60.5 billion in the year to September 2022. Joining the pact is expected to boost trade with CPTPP members by £3.3 billion.
The government news release says CPTPP membership is “expected to turbocharge investment in the U.K. even further,” although it gave no numbers to back this up. Investment from CPTPP countries to the U.K. was worth £182 billion in 2021.
An impact assessment and detailed market access schedule are expected to be published in the coming days.
Devonshire-Ellis said Asia is not waiting for the U.K.’s membership with bated breath. “There is little expectation from Asia about the CPTPP except maybe political and sectoral trade gains to be had from negotiating slightly better agricultural-related deals with the U.K. than the existing agreements already in place,” he said.
The U.K. and Malaysia are set to publish a joint statement on sustainable agricultural commodity trade and cooperation on conserving forests. Since the countries do not already have a bilateral trade deal, the CPTPP will bring a “drastic reduction of tariffs even at the first year of entry-into-force date for partner countries,” said Juita Mohamad, director of the economics and business unit at Malaysian think tank The Institute for Democracy and Economic Affairs.
“Malaysia’s exporters are given the platform to trade and invest with and in the U.K. to expand their market outside the country,” she said. However, environmental groups have already voiced concerns that British environmental safeguards are too lax to prevent deforestation in the palm oil supply chain.
Away from palm oil, some analysts say the region could gain more investments from the U.K. in sectors such as advanced manufacturing, health care, digital innovation and sustainability, as well as finance.
“More expectation on the Asian side resides in a possible boost of foreign direct investment into Asia by the U.K. firms even if it may not be direct consequences of the commitment under CPTPP,” said Fukunari Kimura, chief economist at the Economic Research Institute for ASEAN and East Asia.
For Britain, the CPTPP will allow tariff-free whisky exports to Malaysia, whose population is majority Muslim, within 10 years from the current 80%. Within seven years, the 30% export tariff for British cars will be eliminated.
The CPTPP was signed by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam in 2018, a year after the U.S. pulled out of the precursor Trans-Pacific Partnership. Each of the 11 now has to ratify the U.K.’s membership before it comes into force, which is expected in the second half of 2024.
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