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Rishi Sunak announced this morning that the UK has signed the biggest trade deal since Brexit. The government hopes the agreement will help open up new opportunities with Indo-Pacific countries.
The UK will be the first non-founding country to join the Comprehensive and Progressive Agreement on the Trans-Pacific Partnership (CPTPP), an 11-country trade bloc in the Asia-Pacific region.
The Prime Minister claimed the new deal would add £1.8bn a year to the UK economy by the end of the decade, but even by the government’s own calculations this would amount to just 0.08% of UK GDP.
It sheds new light on the free trade agreements governments have signed since Brexit, and how the benefits from those agreements stack up with the potential benefits of staying in the EU.
How many trade agreements has the UK signed?
Since officially leaving the EU on 31st January 2020, the UK has in principle trade deals and agreements with 71 countries.
But most of them are just ‘rollover’ agreements, meaning that rather than creating new trade agreements, they replicated the terms of trade the UK had when it was a former EU member. .
Of the UK’s 71 trade agreements, only three (with Japan, Australia and New Zealand) can claim to offer new opportunities not previously offered while part of the single market. ), only two of which contain significant changes.
The trade deal between the UK and Japan, signed in October 2020, was the first to differ from existing EU trade agreements, but experts say the differences from previous incarnations are minimal.
“To be honest, there are slightly different chapters in digital trade, but in reality there is no difference at all in the overall relationship between the UK and Japan,” said Stephen Hunsaker, a trade expert at research agency UK. says. in a changing Europe.
“The two real key countries are Australia and New Zealand. These two deals were made from the ground up and are probably the biggest we have seen so far with the UK joining the CPTPP. .”
How is it going?
The UK trade deals with Australia and New Zealand, signed in December 2021 and February 2022 respectively, have been hailed by governments as ‘world-class deals’ that will enable more than £10.4 billion in additional trade.
The deal would guarantee zero tariffs on all UK exports to Australia and New Zealand and 99.5% of Australia and New Zealand exports to the UK.
The deal also removed some visa rules, allowing young people to work and travel in Australia for up to three years, and find similarly qualified and skilled occupations in New Zealand.
But critics have described both deals as largely underwhelming, with former prime minister Liz Truss blaming senior Tory lawmakers for failing to realize the advertised gains of Brexit. has been severely criticized by
Former environment secretary George Eustis said at a Commons debate in November that the deal reached with Australia was “not really a good deal for Britain” because it could affect British farmers. not,” he said.
His comments followed criticism from key figures in Britain’s agricultural sector, who said the trade had left UK supermarkets flooded with cheap, low-quality meat and farmers already facing inflation and labor shortages. He warned that pressure on the
Trade with Australia has been criticized for being “too friendly” to Australia, experts say, and tariffs on goods traded to and from Australia are already so low that eliminating them entirely would be largely ignored. It was seen as a possible move.
Dmitry Grozovinsky, a former Australian trade negotiator, said at the time that it was like “a landlocked Switzerland trying to get rid of its navy.”
Mr. Hunsaker said I: “Australia had already eliminated most of its tariffs on the UK, so there wasn’t much to concede. It was seen as a pretty good deal for Australia.”
In any case, it is still too early to say how tangible benefits the Australia-New Zealand trade deal will bring to the UK.
Over the long term, the government expects a trade deal with Australia to add £200m to £500m a year to UK GDP (about 0.01 to 0.02% of GDP), with New Zealand projected to do the same. doing.
This means that the UK’s accession to the CPTPP, which is expected to boost GDP by 0.08% annually over the next decade, is a pretty big deal.
But critics say all three deals will do little to offset the estimated 4% drop in Britain’s potential economic growth brought about by Brexit, according to projections from the Office for Budget Responsibility (OBR). pointed out. government.
Hunsaker, from Britain in a changing Europe, said: I It could be at least a decade before the UK starts to feel the effects of both the Australian and New Zealand agreements.
“What people don’t realize with these trade deals is how long it takes and how gradual these changes are. As far as GDP is concerned, it’s pretty small anyway,” he said. I.
“What was more significant about these two transactions was that they helped the UK ascend to the CPTPP. But they were seen as important agreements to be made in order for the UK to have a better influence on its Trans-Pacific Partnership.”
What other trade deals are on the horizon?
Experts believe the UK’s new trade deal with the CPTPP could strengthen the UK’s geopolitical standing and pave the way for trade deals with other countries.
Minako Morita, a senior fellow in international trade at the University of Sussex, said the new deal would bring limited economic benefits but should be seen as a “geopolitical strategic interest” for the UK.
“The main economic benefit from this will depend on the future expansion of the CPTPP,” she said. I“The UK already has free trade agreements with 9 of its 11 member states, but other major powers could potentially join and that’s where the value lies.”
The UK already has trade agreements with Australia, Canada, Japan, Mexico, New Zealand, Singapore, Chile, Peru and Vietnam, which are the majority of the CPTPP’s 11 member states.
However, more economies are likely to join the block, potentially giving the UK access to new markets. Costa Rica, Uruguay and Ecuador have applied to join his CPTPP, while Thailand and South Korea have expressed interest.
China has also submitted an application to join the CPTPP, but several member states have rejected it. In a surprise intervention on Friday, former Prime Minister Truss urged “the UK government to oppose such proposals now or in the future”.
But the two biggest potential trade deals for the post-Brexit UK lie outside the CPTPP, with neither deal signed with India and the US.
President Joe Biden has ruled out the possibility of a free trade deal between Britain and the United States in the near future, but the prime minister has made it a key political target for newly elected Commerce Secretary Kemi Badenok. , has set up a possible trade deal with India.
Mr Sunak’s ambition to sign a deal with India by Diwali last October collapsed at the last minute, but ministers said they could sign a deal with a country that could be touted as a key Brexit benefit. hopes for
According to Hunsaker, a deal with India would deliver “great Brexit promises” that no free trade deal signed by the UK so far has been able to deliver.
“I think it could even be bigger than the CPTPP, based on the strength of the UK’s relationship with India and the size of the UK as a trading partner. It’s been — I mean, it’s big,” he said. I.
A potential deal with India is likely to increase Indian exports of textiles, food and beverages, pharmaceuticals and IT services, and the UK automotive, agro-food, machinery and pharmaceutical sectors could also benefit. .
But perhaps the biggest benefit of a trade deal with a big power like India is that it cements Britain’s position on the world stage and enhances security amid heightened global tensions.
“We are not only aligned economically, but also politically with countries such as the United States, Australia and New Zealand,” Hunsaker said. “But India?