31 March 2023

Badenoch downplays claims UK-Asia trade pact will only boost economy by 0.08%

31 March 2023

Trade Secretary Kemi Badenoch has said the UK joining a major Indo-Pacific trade bloc is “about the potential for growth tomorrow” as she downplayed estimates suggesting the deal would boost the economy by just 0.08%.

The UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was formally confirmed in a call between Ms Badenoch and counterparts from the group in the early hours of Friday.

It represents Britain’s biggest trade deal since leaving the EU, cutting tariffs for UK exporters to a group of nations which – with Britain’s membership – will have a total gross domestic product (GDP) of £11 trillion, accounting for 15% of global GDP, according to UK officials.Prime Minister Rishi Sunak said it “will help us unlock the benefits of Brexit for people across the UK”.

Critics say the impact will be limited, with official estimates suggesting it will add just £1.8 billion a year to the economy after 10 years, representing less than 1% of UK GDP.

But Ms Badenoch noted that forecast was based on 2014 figures, and highlighted the deal’s future potential.

She told BBC Radio 4’s Today programme: “Think of it like us buying a start-up. It’s not about what it’s doing today, but about the potential for growth tomorrow.

“And the CPTPP countries have over 500 million people at the moment, and we’re starting trade relationship with them that’s going to go into the future for many decades and deliver a lot of growth to the UK.”

It was put to the Cabinet minister that the CPTPP would not offset the losses from leaving the EU, with the Office for Budget Responsibility suggesting Brexit would reduce the UK’s potential economic growth by about 4% in the long term.

You’re more likely to trade with your nearer neighbours more and more often, so we do need that improved

Ms Badenoch replied that the CPTPP is in addition to the UK’s free trade agreement with the EU, adding: “We’ve left the EU so we need to look at what to do in order to grow that UK economy and not keep talking about a vote from seven years ago.”

Sir Keir Starmer welcomed the UK’s accession to the bloc, but cautioned the net contribution to the economy would be small as he called for a closer relationship with the EU.

The Labour leader told broadcasters during a visit to Plymouth: “I do think it’s an important trade deal, but the yield is very small. Hopefully that will grow over time.

“But the rule in trade is that you’re more likely to trade with your nearer neighbours more and more often, so we do need that improved, that better trading relationship with the EU alongside any other trade deals that we sign.”

Britain is the first new member, and first European nation, to join the bloc – comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – since its formation in 2018.

It follows nearly two years of negotiations, culminating in intensive talks in Vietnam earlier this month, when representatives of the 11 existing members agreed to the UK joining.

While Britain already has trade agreements with the CPTPP members apart from Malaysia and Brunei, officials said it would deepen existing arrangements, with 99% of UK goods exported to the bloc now eligible for zero tariffs.

Ms Badenoch, an avowed Brexiteer, told Sky News: “The bilateral trade deals are different from the multilateral trade deal, you create synergies.

“It’s the first time we’ve joined a bloc like this in about 50 years. There is strength in numbers.”

Labour said it was essential to ensure that UK safeguards on consumer safety, food safety, data protection and environmental protections were not compromised as a result of the agreement.

Key UK exports to the region, including cheese, cars, chocolate, machinery, gin and whisky, will be among those to benefit, while officials said the services industry would enjoy reduced red tape and increased market access.

They added that vital UK sectors, including agriculture and the NHS, will be protected, while animal welfare and food safety standards will be maintained.

Reduced tariffs on Malaysian palm oil, a product blamed for widespread deforestation, have caused concerns of more nature destruction.

But Ms Badenoch said: “Moving the tariff from 2% to 0% is not what’s going to cause deforestation. And actually, the standards which are set by this Government, by the Department for the Environment, is what’s going to dictate what comes into the country.

“But also, being in the trade bloc means that we’re going to have more influence on sustainability.”

The deal represents a continuation of the post-Brexit policy “tilt” towards the Indo-Pacific region initiated by Boris Johnson.

Former prime minister Liz Truss tweeted: “As Trade Sec, I made our application to join #CPTPP two years ago. I’m delighted negotiations are complete, deepening UK access to some of the world’s fastest-growing economies: #GlobalBritain in action and an important counterweight to those who seek to undermine our values.”

Her predecessor Boris Johnson joined in the plaudits.

“I’m proud that the UK will be the first European country to join the Comprehensive and Progressive Trans-Pacific Partnership. This is free trading global Britain in action,” he tweeted.

In a video posted to social media to promote the pact, Mr Sunak said: “That’s an amazing opportunity for British businesses to trade with new markets on the international stage and a huge boost for growth in our economy back home, creating lots and lots of jobs.”

The CBI welcomed the agreement as a “milestone” for British industry, reinforcing the UK’s commitment “to building partnerships in an increasingly fragmented world”.

The best videos delivered daily

Watch the stories that matter, right from your inbox