On 15 December 2024, the United Kingdom's (UK's) accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) entered into force.

CPTPP in brief

The CPTPP is a free trade agreement (FTA) between 11 (now 12, including the UK) countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

In March 2023, the UK struck an agreement to join the CPTPP, making the UK the first non-original member. Over the last year, the agreement made its way through domestic parliamentary approval processes and was ratified by the UK and nine CPTPP countries.

What does the UK's accession mean for businesses?

From 15 December 2024, UK traders will be able to trade under the agreement's preferential conditions with CPTPP parties that have ratified the agreement — Japan, Singapore, Chile, New Zealand, Vietnam, Peru, Malaysia and Brunei. From 24 December 2024, this will further include trade with Australia.

UK businesses will not be able to trade with Canada and Mexico under the CPTPP (but will between the respective bilateral UK-Canada and UK-Mexico FTAs) as the parties have not yet ratified the UK's accession to the CPTPP.

What is new for UK traders?

The UK has existing trade deals with nine of the eleven CPTPP members, such as the UK-Australia FTA. The CPTPP is the first trade agreement that the UK has with Malaysia and Brunei, posing immediate benefits for UK businesses. Specific benefits include:

1. Tariff reductions and market access: Over 99% of UK goods exported to CPTPP-member countries will be eligible for zero tariffs, improving market access for British firms.
   • Sector-specific tariff reductions: Key exports such as cars, machinery, dairy products and chocolate will benefit from the removal of tariffs. For example:
     • Automotive: UK car manufacturers will benefit from the staged removal of tariffs of up to 30% on exports to Malaysia and more liberal rules of origin.
     • Dairy products: Exporters of dairy products, including cheese and butter, will gain greater access to lower tariffs in Chile, and Japan, building on the £23.9m of dairy products exported to these countries in 2022.
     • Chocolate: Exporters of chocolate will benefit from zero tariffs on exports to Mexico and Malaysia, where they currently face 8% — 20%, plus specific tariffs, totaling 10% — 15 % respectively.
     • Whisky: Tariffs of 80% on UK whisky exports to Malaysia will be eliminated over time.
     • Engines and medicines: Tariffs on exports of engines and medicines to Vietnam will be eliminated sooner than they would be under existing bilateral agreements.
   • Catch-up approach: The UK has agreed to "catch up" on CPTPP members' tariff staging, meaning the UK will benefit from the same reduced tariffs that all other CPTPP members do, despite the UK's having joined several years after the founding members. This ensures that UK exporters are not at a disadvantage compared to other CPTPP members.
   • Rules of origin and cumulation: The rules of origin chapter allows for cumulation, meaning goods inputs from any CPTPP member that has ratified the agreement will count as "local" to all CPTPP members for the purpose of qualifying for tariff-free trade. This can simplify the process of meeting the rules-of-origin requirements to trade under preferential duties, particularly for UK businesses with supply chains in the CPTPP region.
2. Services trade: The CPTPP includes ambitious provisions for services trade, which pose significant benefits for the UK as the world's second-largest services provider. These include:
   • National treatment: CPTPP countries are required to treat UK businesses and traders in the same way as domestic competitors or competitors from any other CPTPP country or a third country.
   • Removal of service value limitations: The CPTPP prohibits any limitations on the value of services transactions, assets or the number of employees a provider may employ.
   • Removal of local-presence requirement: Businesses are no longer required to be resident or to have established a local presence in a CPTPP market to supply a cross-border service.
   • Mobility easements: Accession to the CPTPP facilitates travel for UK nationals to CPTPP members, providing greater legal certainty for traders across sectors.
   • Mutual recognition: A dedicated Annex of the CPTPP encourages the recognition of professional qualifications and facilitates licensing and registration procedures between members.
3. Digital Trade: The CPTPP's dedicated E-Commerce Chapter, contains provisions on digital trade, including high data-protection standards, prohibitions of unjustified data-flow restrictions, a ban of data localization requirements and no transfer of software source code. While the CPTPP's digital trade provisions represented significant advancements upon its initial conclusion in 2018, since then there have been developments that have superseded the original agreement and have been identified as an area for future improvement.
4. Investment: The CPTPP encourages investment by guaranteeing protections for investors and supporting job creation across the UK. The agreement includes provisions for nondiscriminatory treatment of investors, enabling equal access for UK investors to CPTPP markets and vice versa. The Investor State Dispute Settlement dispute mechanism enables investors in CPTPP countries to bring litigation against governments, if they feel not treated.

What will happen next?

Expansion ambitions: On 28 November, CPTPP members announced the establishment of a new Accession Working Group with Costa Rica, chaired by Peru with support from Australia and New Zealand. Although there are six more applications pending and a growing waiting list of countries that have expressed an interest in joining, the CPTPP expansion process has been slow, driven by strict membership criteria and high standards for entry.

Businesses should consider engaging in the UK Government's public consultation on Costa Rica's accession, which runs until 24 January 2025.

General review: The CPTPP has committed to undertake a review of its economic relationship and partnership among parties every five years. This General Review began in spring 2024 and will continue into 2025. Topics such as supply chain resilience, economic security and market distorting practices are key focus areas of the Review.

What steps can businesses take?

To take advantage of the new opportunities, UK businesses can consider taking the various steps, including:

• Evaluate new market opportunities: Review supply chains and distribution channels to identify new market opportunities across CPTPP-member countries, particularly Malaysia and Brunei, leveraging more beneficial cumulation rules and facilitated market entry.
• Leverage tariff reductions: Identify products eligible for zero tariffs and other tariff reductions under the CPTPP and update pricing strategies to reflect cost savings and improve competitiveness in these markets.
• Look at services trade: Explore how CPTPP service provisions can enhance business operations. Take advantage of national treatment, the removal of local presence requirements and mutual recognition of professional qualifications to expand service offerings in CPTPP markets.
• Monitor ongoing developments: Monitor any announcements or updates related to the CPTPP general review process and whether reform of the existing rules could impact business.