Joining Indo-Pacific trade bloc could only boost UK GDP by £1.8bn – and no deal with US anytime soon
The government has signed an agreement to join an Indo-Pacific trading bloc, although the estimated benefit could only be £1.8bn in GDP.
In announcing the formal plans to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Rishi Sunak administration highlighted the £12trn value of the combined GDPs of all the member nations if the UK is included.
But the government already has free-trade deals with all the member nations, aside from Brunei and Malaysia.
Politics latest: Chances of free trade deal with US ‘very low’
Chances of a trade deal with the United States were also talked down as being unlikely anytime soon.
And analysis provided to the government estimates the new agreement will boost UK exports by £1.7bn, imports to the UK by £1.6bn and GDP by £1.8bn in the long term.
Speaking to Sophy Ridge on Sunday, Trade Secretary Kemi Badenoch said these figures needed to be examined in the context of the benefits of being a member of a trading bloc.
She said: “The contents of the free trade deals that we have with these countries is different from what we’re getting with CPTPP.
“That’s why it’s called the comprehensive – as well as progressive agreement – for the trans-Pacific partnership.
“There is one additional country, which is Malaysia, that we have no agreements whatsoever with, but it isn’t just about whether or not we have an agreement.
“We’ve got agreements with many different countries – it is about the size, shape and scale and the cumulative impact of things like rules of origin, which are pooled between this trading bloc.”
Asked about the likelihood of an agreement with the US, Ms Badenoch said: “The US is not carrying out any free trade agreements with any country, so I would say very low. It all depends on the administration.”
She added: “But for now they said that that’s not something that they want to do, and we need to respect that.”
It is not the first time the government has lauded its own efforts with CPTPP, with Ms Badenoch and Mr Sunak praising the UK being accepted into the bloc in March.
The UK was already set to benefit from its agreements with the CPTPP regardless of the next phase of membership, with exports estimated to rise by 65% by the start of the next decade – valued at £37bn.
Ms Badenoch pointed out that the Indo-Pacific is forecasted to be where half of global growth will come from by around the middle of the 2030s, and will continue growing into the middle of the century.
Outside the UK government, there was more of a muted welcome for the UK’s joining the bloc.
Chris Devonshire-Ellis, the chairman of Dezan Shira & Associates which works with investors across Asia, spoke to the Nikkei overnight.
He said: “The impact appears mainly cosmetic, for the UK to show it made a trade deal after Brexit.”
Labour’s shadow trade secretary, Nick Thomas-Symonds, said progress in the Indo-Pacific was “long overdue”.
He added: “The government’s own assessment says CPTPP is worth just 0.08% to UK GDP.
“So ministers also need to set out how this will help the economy and what support will be given to businesses to access any export opportunities.
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“The government’s trade record is: OBR predict UK exports to fall by 6.6% in 2023, a hit of over £51bn; No promised US or India trade deals; Their own MPs criticising the Australia deal.
“This costs the UK growth and jobs – making the Tory economic crisis even worse.”
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A leak inquiry will take place following reports that economic growth forecasts have been reduced by the government’s financial watchdog.
Bloomberg reported that the Office for Budget Responsibility (OBR) had reduced its growth forecasts in data sent to Chancellor Rachel Reeves last week.
Reduced growth could force the government to cut further spending or increase more taxes.
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The next forecast is set to be published in March – with the process supposed to remain confidential until that point.
The inquiry was confirmed by James Bowler, the most senior civil servant in the Treasury.
He told the House of Commons Treasury Committee: “We will undertake an inquiry, and I’m happy to communicate the outcome of that.”
The government’s attempts to grow the UK economy have proved difficult since the election last year, and businesses have complained about measures introduced in Ms Reeves’s first budget.
Part of Labour’s plan involves increasing house building and development, although these plans were not included in the forecasts for last October’s budget.
Mr Bowler sought to play down the fact that a leak inquiry was happening meant that what was reported by Bloomberg was true.
Asked by committee chair Meg Hillier about the inquiry, the civil servant appeared to indicate about 50 people in the Treasury would have been able to see the forecasts.
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Bank of England issues growth blow
He said an investigation into OBR officials would likely also happen, although the body is independent of government.
Downing Street has tried to remain bullish about the economic situation.
A Number 10 spokesperson said: “In recent weeks and months, the [Organisation for Economic Co-operation and Development] and the [International Monetary Fund] have upgraded our growth forecast over the next three years.”
They added: “The government remains relentlessly focused on growth as the only way of sustainably raising living standards and delivering the investment that we need in our public services.”
Read more:
Growth forecasts cut in blow for Reeves
Starmer has growth battle on his hands
Reeves calls in bank chiefs for growth talks
Both bodies mentioned slightly increased their growth forecasts, but they still remain below 2%.
Last week, the Bank of England halved its growth expectations for the UK – saying it would only increase by 0.75% in 2025, before increasing to 1.5% for the next two years.
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The OBR’s forecasts have a more direct impact, as the Treasury use them to measure if they are meeting their fiscal rules.
GDP figures are set to be published tomorrow, which will show how the UK economy was performing to the end of 2024.
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