EU Exit Perspectives: Joining CPTPP – What could it mean for UK agriculture?

The CPTPP is a free trade agreement between 11 countries in the Pacific Rim, including Canada, Australia, New Zealand, Japan and Vietnam. It’s the artist formerly known as the Trans Pacific Partnership or TPP but minus the US after Donald Trump pulled out of the agreement. So what’s in it for the UK?

One of the benefits of joining a trade bloc such as the CPTPP is that it saves time and effort as you can enjoy free trade deals with a group of countries, rather than having to negotiate separate bilateral trade deals. The thing is, the UK already has trade deals in place for seven of the 11 countries. If we include the current negotiations with Australia and New Zealand, then really, the only free-trade relationships the UK will gain on accession to the CPTPP are those with Malaysia and Brunei.

UK agricultural exports to CPTPP countries amounted to nine per cent on average in value terms between 2017 and 2019. This figure includes food, feed and beverages. Drilling down to individual sectors, beef, pork and sheep meat exports from the UK to CPTPP countries averaged around under two per cent of total exports of these products in value terms in 2019. For some perspective, exports to the EU during the same time period average at more than 75 per cent. UK dairy exports to CPTPP countries were better than meat (just under four per cent of total dairy exports in value terms in 2019) but cereals and oilseeds were lower.

I think it’s fair to say, at the moment the benefit of joining the CPTPP from an agricultural perspective seems quite limited. Nevertheless, there is some potential looking forward. Unlike the EU, where GDP growth is pretty much flat, the emerging middle class in a range of countries which comprise the CPTPP is an opportunity. As incomes increase, consumption of meat, dairy products and vegetable oils is likely to rise and the UK could take advantage of this, although there will be competition.

The potential of other countries joining the CPTPP is also a plus point here as the likes of Thailand and Indonesia, to name a couple, have expressed interest in joining the bloc. Further down the line, the US may return to the table, although we shouldn’t expect this sometime soon as President Biden has indicated that domestic issues are a priority at the moment.    

Another benefit of joining the CPTPP is that under Rules of Origin criteria, a country can export products to another CPTPP member which may contain materials that originate from other CPTPP countries and still qualify for preferential tariff rates. So, a product which may contain say 20 per cent of materials from the UK, 60 per cent of materials from other CPTPP countries and 20 per cent of materials sourced from the EU, for example, would be eligible for preferential tariffs when exported to another CPTPP country. This contrasts with the EU in that products imported from the EU cannot automatically qualify for tariff-free export back into the EU except under specific circumstances.

The issue here though is the costs, both financial and environmental, involved. CPTPP countries are hardly on our doorstep and so how much sense would it make to import materials from halfway round the world to produce a product which is then sent back halfway round the world? Perishability is another factor here. It may be easy to move car parts around in this manner but it’s more difficult for agricultural goods. 

Trade facts and figures aside, there are the political realities to consider. The UK is applying to join a club where the rules and conditions have already been agreed and set. CPTPP members have no obligation to change the way they do things in their trade bloc to accommodate the UK, who will be the first country to accede to membership since the agreement’s inception. That’s not to say that this will definitely be the case but it is certainly not a given. Issues such as food standards will be important here as the CPTPP generally adopts the US risk-analysis approach rather than the EU’s precautionary stance. Given that the EU is an important trade partner for the UK, the latter will need to navigate carefully in this area.

Geographic Indications (GIs) is another area where the UK will need to tread with care. To fulfil terms of the EU Withdrawal Agreement, the UK needs to provide the same level of protection to products with characteristics linked with their place of production as the EU. Protection of GIs is not a CPTPP priority and so the UK would need to ask for an exemption on this matter, which means lower negotiating capital for other areas.

What we need to sit and back and consider is where does agriculture fit in the grand scheme of things? In the CPTPP government policy paper, digital trade and services are highlighted as ‘areas of increasing importance for UK industry and business’. Looking at total UK exports to CPTPP countries, machinery, vehicles and pharmaceutical products account for a much larger slice of the pie than agriculture. So, it’s reasonably safe to infer that agricultural trade is unlikely to be at the top of the list of priorities for the UK’s accession to the CPTPP.

As discussed, there are some opportunities and challenges for UK agriculture when it comes to joining the CPTPP. It’s important to note that the UK’s desire to join the CPTPP is not based on the motivation to increase agricultural trade. This is where the bilateral trade deals the UK has already negotiated or is in the process of negotiating will be or become more important.  

For more on the potential trade deal with Australia, check out last week’s blog

AHDB is running a series of online events during March focusing on the implications of EU Exit for our agricultural and horticultural sectors:

8 March: EU exit: EU Exit: Short term impacts, long term opportunities?

9 March: Brexit: impacts on the ornamentals industry, trade agreements, plant movement and plant passporting

16 March: Brexit: impacts on the ornamentals industry, sourcing and retaining labour

31 March: EU Exit & the red meat trade: the reality three months on