What Does the UK's CPTPP Membership Mean to the UK-China Trade Relationship?

Within a few days, SMEs in the UK will hear more about CPTPP and the benefits the UK’s membership is expected to bring to them. We learned about it at a recent event jointly organised by Department for Business and Trade and techUK , which delved into the benefits, challenges and opportunities CPTPP offers in the Asia-Pacific region, and heard directly from businesses with firsthand experience operating in those markets. 

As a Cambridge-based service provider focusing on UK-China cross-border businesses, Crayfish.io pays close attention to this. Here’s our take: 👇

CPTPP, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a multilateral trade agreement that aims to reduce tariffs and enhance trade and investment among its member countries. It includes provisions to promote transparent and efficient customs procedures, protect intellectual property rights, and support digital trade. 

This FTA covers more than 500 million people in about a dozen countries, including the UK(from Dec 15, 2024), contributing 15% of global GDP. 

💡The three most significant benefits for SMEs we can envision: 

• Easier Market Access: SMEs will benefit from reduced tariff and non-tariff barriers. Over 99% of current UK goods exports to CPTPP members are eligible for tariff-free trade, facilitating easier exports to CPTPP countries.
• Reduced Administrative Burden: The agreement's commitments to transparent and efficient customs procedures and a dedicated SME chapter will help reduce administrative burdens for businesses across the UK.
• Supply Chain Diversification: UK SMEs can use inputs from all CPTPP Parties in their production, making it easier to qualify for preferential tariffs and diversify their supply chains, enhancing their competitiveness in international markets.

Signing up to CPTPP is a strategic move by the UK government. While the CPTPP membership offers significant benefits for the UK, it may also lead to a rebalancing of trade relationships, including with China. 

💡Three main implications for UK-China trade:

• Diversion - The reduced tariffs and improved market access with CPTPP members may potentially divert some trade away from China to these countries.

• Frictions - The CPTPP provisions on state-owned enterprises and intellectual property could create friction with China, which has different regulatory practices.

• Collaborations - If China successfully joins CPTPP, there could be opportunities for collaboration, which could open new avenues for UK-China trade within the agreement's framework.

That said, it’s generally understood that there exists a gap between FTAs and the materialisation of the expected benefits. The devil is in the details…of implementation. As a UK company, we are aware of the potential challenges along the way.

💡Here are three of the challenges while integrating with CPTPP supply chains:

• Adaptation Costs - The upfront costs of understanding and navigating customs procedures and border issues can be prohibitively expensive for smaller businesses.

• Supply Chain Restructuring - Low incentives to disconnect from the established supply-chain relationships with other trading partners.
• Regulatory Complexity- The increasing regulatory divergence between the UK and EU creates additional complexities for UK exporters, making it particularly challenging for SMEs with limited resources.

Solutions? Most likely, targeted support, including clearer information on exporting procedures, affordable advisory services, and enhanced financial support for export-driven companies.

The practical tips we found most helpful? 'Network' and 'talk to people who've been there, done that'. What do you think?