A new option for British businesses to pivot their supply chains towards the Pacific could be a ‘gamechanger’, trade and customs experts have said.
Experts from the Chartered Institute of Export & International Trade and the Department for Business and Trade (DBT) were speaking on a webinar about the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
CPTPP counts 11 Pacific nations among its members, including Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.
The UK secured agreement from these nations to become a member of the CPTPP in 2023. The deal will start to come into effect in December this year between the UK and countries that have ratified its membership. Currently, only Canada and Mexico have yet to ratify the UK’s membership.
The free webinar was hosted yesterday (13 November) as part of DBT’s International Trade Week.
Cumulation ‘gamechanger’
During the event, the practice of ‘cumulation’ – whereby a product can qualify for preferential tariffs if it incorporates materials from one or more countries that are co-signatories of an applicable free trade agreement (FTA) – was noted as a significant benefit of CPTPP.
“This flexibility is a gamechanger for UK companies as they’re no longer restricted to domestic or single country sourcing,” said Garima Srivastava, the international trade legislation senior advisor at the Chartered Institute.
“UK firms can tap into inputs from multiple CPTPP countries without losing preferential tariff benefits.
“In sectors with complex supply chains like automotive or electronics, cumulation will simplify compliance with origin requirements. Businesses can access CPTPP markets with fewer restrictions.”
‘Additional options’
Olivia Herford, the CPTPP utilisation lead at DBT, noted that the UK has already signed bilateral free trade agreements with multiple CPTPP countries, but agreed that CPTPP’s significance is the “additional options” it gives UK businesses that have supply chains in CPTPP countries.
“The UK already has trade agreements with nine of the CPTPP members… CPTPP does not replace any of these, but it is going to add additional options for trade and provisions on top of these [FTAs].”
Herford noted that businesses will need to be clear whether they are using a bilateral agreement or the CPTPP if they are looking to claim preferential tariffs for trade with a CPTPP member.
Specifying which deals in use
The requirements for compliance with origination rules – i.e. how a business proves the economic origin of their goods in order to claim reduced duties using a trade deal – could differ between bilateral FTAs and the CPTPP.
“What is better will depend on your specific product and supply chain. In lots of cases, tariffs will be zero under both agreements.”
“You do need to specify what FTA you’re trading under if we have a bilateral with that market,” said Daisy Knox, the Mexico lead for FTA utilisation at DBT.
“If you want to use the provisions of the CPTPP, you will need to specify that in rules of origin documentation.”
Knox added that other benefits for goods traders included shared commitments on customs procedures, electronic processing of customs documentation and a “reduced burden” for conformity testing in CPTPP markets.
‘Modern’ services provisions
For services businesses, Knox noted that the provisions of “any FTA are less tangible, but no less important”.
She said the CPTPP was a very “modern FTA” with many services provisions, including fair competition provisions, the removal of market access barriers and increased access for business travel.
She also raised the digital provisions in the CPTPP, including data localisation, and in regard to financial services and telecommunications.
Moving the dial
A majority of the audience at yesterday’s webinar already traded with CPTPP countries (65%), but over half of the delegates (55%) said they were not yet sure whether the CPTPP would lead to an increase in their trade with nations there were members of the trading bloc.
A quarter said they did anticipate an increase in trade with CPTPP countries, with 15% saying they anticipate it will remain about the same. No respondents anticipated a decline.
