Brexit: a conflict of interests

By Richard North - April 1, 2023

You can tell that something is up when Ambrose Evans Pritchard eulogises over a particular subject in his Telegraph column, no more so than his paean of praise over the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

This comes after the UK recently concluded negotiations to join the 11-country bloc which comprises Japan, Canada, Vietnam, Malaysia, Singapore, Mexico, Peru, Chile, Australia, New Zealand, and Brunei.

Although the agreement is widely hailed as a major step in cementing the UK’s post-Brexit trade arrangements, Ambrose has at least got one thing right. Its immediate impact on British trade will be slight as we already have separate deals with nine of the 11 members. In this respect, it brings nothing much new to the table.

Rather, he cites David Collins, specialist in WTO and international investment law at the City Law School, who tells us it is about the geopolitical dynamic in world trade over the next 20 or 30 years. The primary effect of British membership, in Collins’s view, is to raise the UK’s status in the global economy.

There is some truth in this. Pre-Brexit, received wisdom was that the regulation of world trade would be carved up between three blocs, respectively led by the United States, China and the European Union, with the UK part of the latter.

Now the UK has pulled clear from the EU and is joining CPTPP, it becomes part of a grouping that will command 16 percent of global GDP, leap-frogging the combined EU which just about touches 15 percent and is set on a downwards trend bringing it to an estimated sub-14 percent level by 2027.

With the bloc heading for 20 percent if a string of states in the Far East and Latin America join the grouping, says Ambrose, by the end of this decade it will probably be the world’s largest trading system by a wide margin. That will, in theory, give it a strong voice in setting the tone and rules of global commerce, adding, if you like, a fourth major player to trade negotiations.

To an extent, this could serve to give the UK the chance of the seat at the table that it lost with Brexit, replacing – and potentially improving on – the relatively limited influence it was able to exert as a member of the EU.

However, contrary to the overblown enthusiasm of some pundits, the capability of the CPTPP to exert influence in global trade negotiations may be limited. Despite the 631-page length of the Agreement, there is no institutional architecture which would enable members to agree a common position – as is the central feature of the European Union.

Nor is there the territorial integrity or governmental cohesion of the United States, which means that CPTPP members would hardly constitute a single negotiating bloc, able to pursue common objectives. In fact, in many areas there would be little common ground between, say, Japan and the UK on certain issues, whence we could see individual bloc members taking opposing positions, especially on agriculture and manufacturing.

Furthermore, the agreement does not stand aside from the world trading system: references to GATT and the WTO permeate the agreed text, and key provisions work with rather than replace WTO agreements such as the agreement on technical barriers to trade and conformity with international standards.

Rather than challenging the WTO system, and the network of global regulatory bodies, the CPTPP buys into the likes of the WTO SPS Agreement and fully accepts the remit of the so-called “three sisters”, the Codex Alimentarius Commission, the World Organisation for Animal Health and the International Plant Protection Convention.

We also see the parties agreeing to collaborate on issues such as pharmaceutical standards, “through relevant international initiatives such as those aimed at harmonisation”, seeking to “improve the alignment of their respective regulations and regulatory activities”.

This then is no grand liberalising sweep and nor is it the “seismic moment for the global trading” that has been painted by some of its enthusiasts. In detail, as Pete pointed out some time ago, it actually represents a cautious, entirely conventional endorsement of the existing system.

Looking at the deeper background, one must also recognise that this agreement carves out a position in a highly unstable part of the world, where two geopolitical giants, China and the United States, are vying for influence – with the possibility of war not ruled out.

Recalling also that CPTPP is son of TPP (Trans-Pacific Partnership), which included the US as part of president Barack Obama’s strategic pivot to Asia, the structure that the UK has joined is not necessarily going to keep its current shape.

TPP was seen as a mechanism for advancing US strategic interests in the Asia-Pacific region, acting as a constraint on Chinese influence in the region. The absence of the US from CPTPP leaves a geopolitical vacuum which, in September 2021, China sought to fill by applying to join the agreement.

China, of course, is pursuing its own interests through the Regional Comprehensive Economic Partnership Agreement (RCEP), the membership of which overlaps with the CPTPP.

The United States is hardly likely to look upon the current developments passively and has already taken its own action to pursue its economic and geopolitical interests.

One move was reported by the Financial Times in May last year when Joe Biden launched a trade initiative with 12 Indo-Pacific countries specially to counter a more assertive China.

This was the Indo-Pacific Economic Framework (IPEF), looking for an agreement with Japan, Australia, New Zealand and South Korea. But it was also looking to include India and seven south-east Asian nations – Singapore, Malaysia, Indonesia, Vietnam, the Philippines, Thailand and Brunei – representing 40 percent of the global economy and covering much of the same territory as the CPTPP.

As of March this year, the Biden administration was holding a second round of talks, part of what was called an “aggressive” negotiating schedule throughout 2023”, which includes a potential deal on labour, environmental, digital trade and technical assistance.

China is responding by promoting the adoption of RCEP, claiming that this grants member states huge market access which IPEF is said to lack. Neither has it abandoned its application to join the CPTPP and is also considering membership of the Digital Economy Partnership Agreement (DEPA), currently covering Chile, New Zealand and Singapore, building upon the digital or e-commerce chapters of the CPTPP.

Rather than creating a comfortable niche for the UK, where it can extend its influence in the back yard of two competing global superpowers, the CPTPP is actually launching the UK into a highly contested cockpit of conflicting interests, where new deals in the making may well marginalise its influence.

Such is the turmoil in US politics, though – and the regional instability – that any predictions about the shape of future arrangements would be unwise. But it is fair to say that the UK’s great “victory” may shortly end up as collateral damage in a much bigger game.

For the time, though, we can savour the moment.