On Sunday, the United Kingdom became the first new country to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), bringing membership to 12.
Europhile commentators have played down the story, because they can’t admit that anything good has come out of Brexit. But the implications, economic and strategic, are huge. As well as boosting GDP, our membership will promote an approach to regulation superior to the EU’s, pave the way to a deal with the United States and strengthen the free world against Chinese revanchism.
Let’s start with the most basic case for membership. The CPTPP, unlike the EU, is growing. Its members, which include Australia, Singapore, Malaysia, Japan, Peru and Chile, have averaged eight per cent growth this century to the EU’s 1.7 per cent.
Yes, the EU was bigger to begin with, accounting for a larger share of the world’s economy – though Britain’s switch brings the two groups close to parity, and the CPTPP will overtake the European bloc in the next couple of years.
But Europe’s prosperity is a fading memory. Mario Draghi’s 400-page report into EU competitiveness found that low growth was “an existential challenge” to the Continent. As the Italian prime minister, Giorgia Meloni, puts it: “America innovates, China replicates, Europe regulates.”
The EU made unforced errors, adopting the euro and contracting out its energy policy to cultists. But even if it were run by so many Thatchers and Reagans, it would still face the problem of demography. Its median age is 45; in the CPTPP it is 36. The EU, unlike the CPTPP, is already struggling to support increasing numbers of pensioners with fewer and fewer workers.
We live in an age when there is a mass of statistical data, allowing both sides of any debate to cherry-pick. Sure enough, the Euro-nostalgists point to a four-year-old study claiming that CPTPP membership would boost our economy by only £1.8 billion.
It was an obviously flawed piece of work, and has since been superseded. It ignored, among other things, the way trade deals encourage businesses to behave differently and the possibility that the CPTPP might expand.
Among the countries that have either officially applied or signalled an interest in joining are Ecuador, Costa Rica, Thailand, the Philippines, Indonesia, and South Korea; South Korean accession alone would boost the economic benefits of CPTPP for Britain by 30 per cent.
We should see the CPTPP as a welcome return to Britain’s blue-water foreign policy, after a Twentieth Century that was, for good reasons but anomalously in the wider sweep of things, focused on Europe.
Disraeli liked to observe that Britain was as much an Asian as a European power, and one reason the other CPTPP members were so keen to get us in, after the US withdrew its application in 2016, was that they wanted a nuclear power with global naval reach. Only yesterday, the Australian Submarine Agency signed a contract with BAE Systems to buy British nuclear-powered subs.
Several people can take the credit for our membership, including Liam Fox who mooted the idea as Trade Secretary, Liz Truss who made the application and, by no means least, Kemi Badenoch who got it over the line at the CPTPP’s Mexico summit.
Let us tip our hats too to Jonathan Reynolds, Badenoch’s successor, who, instead of sneering at the achievement as so many Remainers feel obliged to do, has celebrated CPTPP accession as part of Britain’s growth strategy. He is right. Indeed, it may be the only thing that has happened since the election that will unambiguously increase Britain’s GDP.
One aspect of CPTPP has gone almost wholly unreported: it makes a UK-US trade deal logistically easier.
Donald Trump was elected in 2016 on a promise to scrap NAFTA. Once he got in, he realised that undoing a deal that covered a third of all US exports was a bad idea so – to save face and comply with his election pledge – he instead downgraded NAFTA slightly, replacing it in 2018 with the USMCA (US-Mexico-Canada).
What was the difference between the two? USMCA was a slightly less comprehensive deal, though the thrust of NAFTA was kept in place. The changes were largely adapted from the CPTPP, which had been negotiated around US strategic interests and, in no small measure, by US officials up until the 2016 election.
As long as the US is in USMCA and Britain is in CPTPP, most of the commercial obligations the two states undertake are the same. The standards of the two organisations are remarkably similar.
The reason I describe the CPTPP model as superior to that of the EU is three-fold.
First, there is no associated political union, parliament, currency, criminal courts, or foreign embassies. Second, it is a free trade area, not a customs union – in other words, it does not prohibit members from signing trade deals with other countries. Third, it concerns itself largely with the standards of traded products rather than poking its nose into domestic issues.
All the nonsense we have been listening to over the past eight years about “chlorinated chicken” is not just false (there is more chlorine in a bag of washed salad); it is beside the point, since nothing in either USMCA or CPTPP could force a member state to admit such a product if it failed to meet domestic regulations.
In an ideal world, the two trade organisations would merge. In other words, the US would join the CPTPP, which was the original plan (Canada and Mexico are already members). In 2018, Trump did express an interest in re-engaging with the Pacific nexus provided it represented “a substantially better deal for the United States”.
But given the mood in Congress, to say nothing of Trump’s threats of tariffs against Canada and Mexico, I suspect a bilateral US-UK FTA is the only deal in town.
The question is whether Labour will have the vision and patriotism to seize one. Oddly enough, I am optimistic. The party doesn’t like the optics of doing a deal with Trump. And Brussels wants Britain to suffer any tariffs it faces in solidarity.
However, the potential gains will, I suspect, outweigh that distaste. If it plays its cards wisely, Labour could end up being that party that delivered what the Tories never did: free trade with both the EU and the US.
It might even persuade Trump to re-engage. We would, of course, have to rename the CPTPP, whose clunky name was chosen by Justin Trudeau. But we should do that anyway.
One more thing to consider – especially for the Secretary of State, if he’s reading – is that the EU will eventually find a way of doing its own deal with the US.
If Britain hangs back out of a combination of Europhile nostalgia and anti-Trumpery, it risks being left standing when the music stops. Take the win, Labour. Opportunities like this don’t come twice.