UK in the Bloc: CPTPP expansion benefits all parties

The UK’s accession to one of the world’s biggest free trade agreements can unlock further growth along the Asia-Pacific corridor.

By Ian Tandy MBE, Co-Head of Global Trade Solutions, Asia Pacific, HSBC

One of the world’s biggest – certainly the most modern – free trade agreements have a new member: the United Kingdom formally joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 15 December 2024. 

The accession of the UK took CPTPP’s members to 12, with the new entrant joining Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. With the UK in the bloc, it accounts for about 15% of global GDP. 
Having led trade finance businesses in both the UK and in Asia-Pacific, I have seen firsthand the scale of potential for increased trade and investment within these diverse and exciting markets.

The UK is an attractive trading partner for many of the other members – Asian members in particular will welcome the improved access to the world’s sixth-largest economy and its deep financial markets. For UK businesses there are exciting potential benefits too, not least improved access to the region’s expanding manufacturing industries and its increasingly affluent and digitally connected consumers. 

Taken as a whole, the agreement marks a critical element in the UK’s relationship with the Asia-Pacific region, where more than half of global growth already originates. 

A future-facing free trade pact
Older trade agreements have often had to grapple with the demands of modern economies, such as the shift in relative importance of services versus goods, and the particular dynamics of digital trade. But one big advantage of CPTPP is that it is designed precisely with these in mind. 

That matters for the UK especially, given that the country is the world’s second-largest exporter of services. And digital trade – UK businesses exporting services remotely to CPTPP countries – is also a substantial activity. The CPTPP agreement, with its more manageable requirements in matters such as where data can reside, allows information to flow more easily between members. 

It also points to significant growth potential: none of the CPTPP members currently ranks in the top 10 for UK services exports. Singapore – which acts as a gateway to ASEAN for many firms – stands out as one of the fastest-growing services markets for the UK, having grown by 147% from 2013 to 2023. A boost from CPTPP membership points to opportunities for a range of businesses, from financial services to logistics, as well the burgeoning ‘new economy’. 

Goods still matter, of course. Through CPTPP the UK’s exports of goods to member nations are now practically all tariff-free. The UK government has assessed that the long-term boost to UK exports to CPTPP countries could total US$3.1bn . Many UK firms that lean into ‘Brand Britain’ – covering everything from cars and machinery to pottery and Scottish whisky – stand to benefit from improved access to CPTPP markets. 

Simplifying supply chains
Entering new markets can often be challenging, and one of the most useful aspects of CPTPP is how its provisions take into consideration the concerns and challenges faced by small and medium-sized enterprises (SMEs) in its member economies. 

Meanwhile, for larger businesses, one of the biggest benefits is in relation to international supply chains. The pandemic and geopolitical uncertainties have demonstrated the need for ever-greater resilience when it comes to such links, and CPTPP will play an important role in smoothing the way for new improvements. 

A big reason for that is the modern approach taken to rules-of-origin provisions in CPTPP, which allow contributions from all members to be aggregated. In other words, if parts of a product are made in five different CPTPP countries, those parts can collectively form the mandated CPTPP proportion of the final product. 

It’s been pleasing to see that international firms’ to make use of the CPTPP is on the rise – up over 10% year-on-year according to the HSBC Global Connections survey in 2023. While that’s encouraging, there’s more to do for banks like HSBC, in partnership with policymakers, to explain in detail how specific provisions in the agreement can support business growth, especially for SMEs.

CPTPP also marks a landmark moment for relations between the UK and two ASEAN countries in particular – Malaysia and Brunei. The two have never been part of a trade deal with the UK before, and this is particularly important in the context of Malaysia, which is fast becoming a hub for semiconductor manufacturing, and where annual two-way trade in goods and services with the UK is already US$6.9bn. 

Right before its sixth anniversary, CPTPP expanded to include the world’s sixth-biggest economy. The benefits all round could be set to multiply.