UK in the TPP11?

Japanese PM Shinzo Abe has welcomed Britain’s possible entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

PM May is looking to seal as many trade deals as possible before the scheduled Brexit in March 2019.

Background

The Trans-Pacific Partnership (TPP), also called the Trans-Pacific Partnership Agreement, is a defunct proposed trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and United States signed on 4 February 2016, which was not ratified as required and did not take effect. After the United States withdrew its signature, the agreement could not enter into force.

The original TPP contained measures to lower both non-tariff and tariff barriers to trade and establish an investor-state dispute settlement (ISDS) mechanism. The U.S. International Trade Commission and the World Bank found the final agreement would if ratified, lead to net positive economic outcomes for all signatories.

The remaining nations negotiated a new trade agreement called Comprehensive and Progressive Agreement for Trans-Pacific Partnership, also called TPP11, which incorporates most of the provisions of the TPP and which enters into force on 30 December 2018.

Analysis

Prime Minister Shinzo Abe told British Prime Minister Theresa May on Saturday that he welcomes Britain’s expression of interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, an 11-nation free trade agreement that will enter into force on Dec. 30.

In a meeting in Buenos Aires, Abe said the two countries are “the most powerful flag bearers for free trade,” and that Japan wants to cooperate with Britain in strengthening the free trading system that is rules-based and open, according to the Japanese Foreign Ministry. May was quoted by the ministry as saying Britain hopes to launch discussions going forward about entry into the accord.

Abe meanwhile asked May to ensure transparency, predictability and legal stability about Britain’s planned exit from the European Union in late March. May reassured Abe that Britain’s departure from the single European market would not inconvenience Japanese companies operating in the country, according to the ministry.

The eleven countries' combined economies represent 13.4 percent of the global gross domestic product, approximately US$13.5 trillion, making the CPTPP the third largest free trade area in the world by GDP after the North American Free Trade Agreement and European Single Market.

In the meeting on the fringes of a Group of 20 summit, Abe and May agreed to step up cooperation in advancing the vision of a “free and open Indo-Pacific,” a move apparently aimed at countering China’s rising assertiveness in the region. The leaders affirmed close coordination in maintaining the international order based on the rule of law in the East and South China seas - a veiled criticism of China’s militarization of disputed areas of the South China Sea and Beijing’s attempts to undermine Japan’s administration of the Senkaku Islands in the East China Sea.

Abe thanked May for dispatching vessels to monitor U.N.-prohibited ship-to-ship transfers of petroleum products to North Korea, as part of sanctions to compel Pyongyang to give up its nuclear weapons and ballistic missiles. Abe won May’s support for Japan’s efforts for the early resolution of North Korea’s abductions of Japanese in the 1970s and 1980s.

In a separate meeting, Abe and European Union leaders reaffirmed the importance of Japan and the 28-nation bloc completing domestic procedures for a Japan-EU FTA by the end of the year for the early enforcement of the pact, said the Japanese ministry.

In talks with European Council President Donald Tusk and European Commission President Jean-Claude Juncker, Abe sought the European Union’s support for Japan’s hosting of a G-20 summit in Osaka next year.

Assessment

Our assessment is that Britain will look to secure as many trade deals as possible before its projected exit from the EU in Match 2019. We believe that Britain will consider joining the TPP11, as it accounts for close to 15% of World GDP and provides access to key Trans-Pacific economies such as Australia and Malaysia.