3. UK eyes CPTPP as Brexit turns toxic

The UK says it is considering accession to the CPTPP - but will Brexit prove too much of an obstacle? Photo: Lynn Grieveson.

Amidst the flurry of ministerial resignations and appointments, the UK’s announcement that it is formally considering joining the CPTPP trade deal was easy to miss. Sam Sachdeva reports on the significance of the announcement, and the obstacles in the way.

As England prepare to take on Croatia in the World Cup semi-final, it’s hard to tell who will end up with more own goals - the 2018 Russia tournament or the British Government.

British Prime Minister Theresa May’s announcement that her Cabinet had approved a negotiating plan at the Prime Minister’s Chequers country house has led to a number of resignations from hard Brexiteers who believe the proposal is too soft, including Brexit Secretary David Davis and Foreign Secretary Boris Johnson.

Given the turmoil, it was easy to miss a trade announcement that could have ramifications for New Zealand.

Speaking in the House of Commons about the Chequers meeting, May said Cabinet had agreed to “consider seeking accession” to the 11-nation CPTPP trade deal.

In response to a further question from a Conservative MP about the decision, she said International Trade Secretary Liam Fox had been championing the chance to join the CPTPP since he came into office, while Australian Prime Minister Malcolm Turnbull had welcomed the UK’s interest.

May’s announcement is in some ways unsurprising, given Fox’s previous advocacy: in January, he told Bloomberg it would be “foolish not to look at all the potential” of the CPTPP.

New Zealand officials have also been supportive in the past of the UK joining the deal, with the world’s fifth-largest economy attractive in its own right and as a possible lure for other big nations like China and India.

'Soft Brexit' a problem for CPTPP deal

Former trade negotiator Charles Finny , a partner at Saunders Unsworth, said the possibility had been talked about widely in Wellington trade policy circles.

However, Finny said there were a number of obstacles to the UK coming on board, including its inability to negotiate trade deals with any countries until after it formally left the EU in March 2019.

On top of that, the terms of the soft Brexit advanced by May would make any negotiations difficult, he said, pointing to the border between the Republic of Ireland and Northern Ireland.

“Let’s say [the UK] do join the CPTPP and we have full free trade in agriculture: a whole lot cheaper Australian and New Zealand products will show up in supermarkets in Northern Ireland, then everyone from the south will drive up to buy their groceries - it just won’t work.”

Finny said it was possible May wanted to tout the CPTPP as a “big-ticket agreement” which the Brexiteers, strong advocates of the country’s ability to negotiate its own deals separate from the EU, could get behind.

However, given the political turmoil in the UK, it was difficult to know whether the Chequers agreement would become a formal negotiating point with the EU given a possible leadership contest.

Even if the UK was to join the CPTPP, Finny said we would still have to negotiate bilaterally in terms of market access as we had with all the other members of the deal.

There were arguments both ways as to whether a bilateral agreement or CPTPP membership would provide a better deal for New Zealand with the UK, he said.

“Obviously there are more people involved in TPP and it might be easier to sell trade-offs because of that wider benefit, but then if there’s negotiating bilaterally with New Zealand there’s a traditional market argument and the fact we’re relatively small in size, so if you open in full to us it wouldn’t be necessarily as risky for UK agriculture...

"I assume we’ll continue to be promiscuous about these negotiations: we’ll try everything with almost everyone.”

Acting Prime Minister Winston Peters told Newsroom that May’s announcement was a validation of the work that the Government had put into renegotiating controversial aspects of the CPTPP.

“It’s a pretty exciting affirmation of the correctness of the amended deal...because there’s no way that the Brexiteers would have been signing up to the old deal.”

Asked about the potential impediments to the UK joining the trade deal under a soft Brexit scenario, Peters said: “I think what you're seeing in terms of UK politics right now is the difference between a soft and a hard Brexit, and we don’t know where they’re going to land.”

He declined to comment on which option would be better for New Zealand, although added it was “not hard to work out”.