The UK Has Joined The CPTPP

Regardless of your politics or what the MSM (Main-stream media) say or more to the point don’t say about it, this is very big news.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam signed on 8 March 2018 and it became effective on 30 December 2018.

Its eleven members have a combined population of 500 million people; a GDP (size of economy) of ￡9 trillion or 13% of world GDP and 15% of world trade.

In a nutshell, its big, very big.

And now the UK has become its first new member since its inception.

The Economic Implications Of Joining...

The UK joining the CPTPP means that more than 99% of UK exports to member countries become eligible for tariff-free trade. It will provide particularly significant benefits to highly taxed industries such as financial services or spirits, where tariffs will either be significantly reduced or eliminated. For example, tax on Scotch Whisky in Malaysia could drop from 165% to 0%, opening up new trading opportunities for this key UK export.

Another benefit is it could play a key role in helping UK businesses build trusted supply chains away from China. We all experienced what happened with our over-reliance on China during the COVID pandemic.

And The Political...

Beyond the economic considerations, amidst growing tensions with China, the UK joining the CPTPP can only strengthen its relations with nations in the Indo-Pacific region, itself of not only economic but political and military importance.

In addition, the CPTPP is a purely economic group without a capital or a parliament or an army or political union so the UK is not going to find itself repeating recent history.

A Lesson From History

In a speech in early February, President Xi of China made some very important statements about the path of developing countries. Historically China has argued that the West’s competition-based system has delivered growth but insisted China be left to pursue its own version of capitalism. In February, Xi went much further and effectively said that the Western model had failed to deliver growth and Beijing’s choice is a better one – not just for China, but for all countries.

Some analysts have suggested that China clearly feels that it is time to adopt a more assertive approach to the West and to present a different option to the rest of the world.

It could therefore be argued that it has become more important than ever for the West to demonstrate how classical liberal economics has resulted in more people being lifted out of poverty in the last 70 years or so than the preceding 2,000 and that those ideas are the result of universal values.

What flows naturally from this set of beliefs is a limitation on the size of the state. Where the government is involved, it tends to crowd out the private sector and makes it almost impossible to compete fairly.

Singapore adopted these approaches affirmatively and deliberately in the 1960s, and in doing so went from third to first world.?Singapore’s GDP per capita now far outstrips Malaysia, from which it separated in 1965 and indeed most of the world.

What Is The Potential For Future Growth?

Like most things in the real world, there isn’t a simple way to assess the costs and benefits of this trade agreement and like Covid, we all saw how inaccurate the statistical models used proved to be but it’s true to say that the CPTPP nations are among some of the fastest growing in the world and a key cornerstone of the Indo-Pacific market that is expected to generate 56% of global growth from 2019 to 2050. If that potential growth is realised, the UK will have gained a foothold in an increasingly important market and access to a fast-growing middle-class population.

The other factor that is worth bearing in mind is that the UK, having become the first new member to join since the inception of the CPTPP in 2018 triggers a domino effect in membership growth. China, Costa Rica, Ecuador, Taiwan, and Uruguay have all already formally applied to join. Most importantly, the US was a member of the predecessor Transpacific Partnership and had been negotiating to join under President Obama only to withdraw its application under President Trump.

The CPTPP And Its Effect On The Future Value Of The Pound Sterling

Since the announcement that the UK has joined the CPTPP only came through last week, its fair to say that its far too early to tell but looking ahead, it should only be positive for the Pound as it helps diversify the UK economy and should also help attract further capital inflows form other member countries.

The Cosmos Offer

Of course, currency market volatility can bring trouble but with careful monitoring can also bring opportunity.

At Cosmos, we provide our clients with a relationship not a transaction-based service.

We are pro-active not reactive.

We offer local collection accounts in the USA; Canada; the EU and the UK saving clients time and money on transfers.

Cosmos Currency Exchange has won multiple awards for its customer service and pro-active approach.

Please call +44 (0) 300 124 6409 or click here to email us to discuss your individual currency requirements.

Further information can be obtained on our website by clicking here or your can view our brochure here.