Political editor David Williamson looks at whether membership of a Pacific trading bloc could provide a way for Britain to ensure its economic future after exiting the EU
THE UK Government has reportedly held informal talks about the country joining a Pacific trading group which includes Australia, Mexico, Singapore and Canada.
Joining the Trans-Pacific Partnership would be an audacious move – and not just because the UK borders neither the South China Sea nor the Pacific Ocean.
President Trump – who promised an “America First” foreign policy – pulled out of the agreement last year.
Pursuing talks about joining the TPP would be a way for Britain to send a message to the rest of the world about the seriousness of its global trading ambitions, that it is ready to jump in where an increasingly protectionist US has walked away.
Right at the moment when the UK and the EU are due to start talking about future trading relationships, a push to join the TPP would send a signal to negotiators that Britain is looking at opportunities far beyond Brussels.
But critics say the move “smacks of desperation” and point out that the UK’s trade with TPP countries is nothing like that with the EU and the USA.
So what exactly is the Trans-Pacific Partnership? There are 11 members of the TPP – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It was championed by President Obama, who was excited at the prospect of bringing together countries with a combined GDP of almost $28 trillion. It was also seen as a way of challenging China’s growing dominance in the vast region.
Members seek to cut tariffs and boost trade, but Mr Trump pulled the US out amid concerns about the effects of greater competition from low-wage economies on America’s blue-collar workers.
The remaining members are working to finalise the agreement, which could eventually lead to a giant single market.
But could the UK really join a Pacific trading bloc? UK Trade Minister Greg Hands told the Financial Times that geography should not be an obstacle. “Nothing is excluded in all of this,” he said.
“With these kind of plurilateral relationships, there doesn’t have to be any geographical restriction.”
International Trade Secretary Liam Fox said it would be “foolish to rule anything out”.
However, some say joining the TPP should not be seen as a solution to the challenges of Brexit.
The FT pointed out: “All 11 TPP countries combined accounted for less than 8% of UK goods exported last year, while in comparison Germany alone accounted for 11%.” In 2016 Wales had exports of £8.9bn to the European Community but just £1.4bn to Asia and Oceania and just £124m to Latin America and the Caribbean.
A key concern is that if the UK leaves the EU’s Single Market and Customs Union, it will no longer benefit from trade deals the union has struck with important economies.
Ben Cottam, of the Federation of Small Businesses in Wales, stressed that access to EU markets will continue to be “vitally important” post-Brexit .
He said: “We know that many SMEs in Wales have taken the opportunity of engaging in export activity or increasing existing export activity in the past year, with the value of Welsh exports up by £2.6bn in September last year compared to the same period the previous year. Almost 60% of Welsh exports go to EU markets and these will continue to be vitally important post-Brexit and are particularly important to SMEs.
“However, we also know that businesses are increasingly prospecting for opportunities in new markets much further afield, including Pacific and Asian markets. Of importance to those businesses is having support from governments, whether in Wales or London, to help them realise these opportunities.” Labour MP Chuka Umunna, a leading supporter of the Open Britain campaign, was unimpressed with the talk of TPP membership and encouraged people to ask whether leaving the EU will be “worth it”.
He said: “The EU already has or is negotiating trade deals with most of these countries, all of which are being unnecessarily put at risk by the Government’s decision to leave the Single Market and the Customs Union. In any case, no matter how many air miles Liam Fox racks up, the fact is that new trade deals will not come close to making up for lost trade with the EU after a hard Brexit.”
The Welsh Conservatives have welcomed the prospect of new markets opening up beyond the EU. A spokesman said: “We need to be global in outlook after Brexit and TPP could open up new export opportunities in major economies like Australia, Japan and Mexico. In recent years we have become too reliant upon exports to the EU, and Brexit will be an opportunity for growth in new regions.
“Clearly these are only preliminary discussions at this stage, but we cannot afford to be insular in our thinking – especially if we want to transition smoothly into a new era of prosperity.”
Professor Patrick Minford of Cardiff University, one of UK’s most prominent eurosceptic economists, said he would “absolutely” welcome the TPP talks going forward.
He said: “It could easily fit into talks about new free trade agreements because it’s quite a comprehensive one. It certainly makes some sense…
“Everyone has been obsessed with our relationship with Europe, but that’s really something that just gets in the way at the moment. We would like to resolve it so we can get on with this broadening of trade…
“The problem is that the EU doesn’t want us to do any of this because it undermines their market position in the UK fundamentally.”
However, Plaid Cymru described talk of joining the TPP as a “farce”.
A spokesman said: “If this wasn’t such a serious issue you would have to laugh at this farce. The Westminster Government is hellbent on taking us out of the European Single Market, insisting on barriers to trade and economic co-operation wherever they can.
“But now, incredibly, Tory ministers want to join a free trade bloc in the Pacific Ocean thousands of miles away, while turning their backs on our closest trading partners. While the Tories lead the UK along the road to economic ruin, Plaid Cymru will continue to fight for our place within the Single Market and Customs Union, securing vital trade links with the EU and the 200,000 Welsh jobs linked to it.”
Swansea West Labour MP Geraint Davies described the idea as “bonkers”, saying the “Tories want UK to leave the world’s biggest market where we shape the rules to join a smaller one on the other side of the world where we don’t”.
A Welsh Government spokesman said: “The priority should be securing a future trade position with the EU, which currently accounts for around 60% of Welsh exports.”