“We’ve just agreed to one of the biggest trade deals of all time!” declared British Prime Minister Rishi Sunak in a rare moment of triumphalism after weeks of unremittingly bad news for the British economy.

“This will give us tariff-free access to some of the fastest growing economies in the world,” added Sunak, hailing the United Kingdom’s agreement to join the Comprehensive and Progressive Agreement for Transpacific Partnership, or CPTPP — a trade pact between 11 Pacific rim countries — as “an amazing opportunity” and “a huge boost.”  

But opinions were divided over this development.

Supporters of Brexit, Britain’s withdrawal from the European Union, welcomed the deal as a chance to profit from the decision to leave by joining a dynamic group of countries on the other side of the world: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It’s a region set to account for 54% of global economic growth and around half of the world’s billion middle-class consumers in the decades ahead.

But skeptics said the U.K. would have been much better off staying with the EU. Professor David Collins, a trade expert with City University in London, is in the former camp, regarding CPTPP membership as a very big deal indeed.

“The political significance is huge and I believe that in the longer term the economic significance will also be massive,” Collins said. He sees this as a seismic shift — and not just for the U.K.

”You’re talking about the symbolic re-orientation of the global economy towards the Pacific, and the U.K. being very much a part of that,” he said.

It was former U.S. President Barack Obama who helped launch the original Pacific accord as part of his pivot to Asia. Then, Donald Trump pulled out of that deal as soon as he became president, claiming it would expose the American economy to unfair competition and accelerate the industrial decline of the United States.

But now the United Kingdom has joined the CPTPP in order to pivot away from Europe, and Collins believes it will, in time, prove a big success.

“U.K. trade with the Pacific region will vastly exceed that with the EU because the EU is in a period of economic decline and these parts of the world are in periods of economic growth,” he said.  

Geography matters

But pro-EU economists have been lining up to downplay the importance of the Pacific pact.

“I think this is not going to have much economic significance at all,” said Peter Holmes, Emeritus Reader in Economics at Sussex University. “CPTPP is big, but this trade bloc is a long way away, and countries overwhelmingly do more trade with countries that are nearby. Big and near is what makes a good trading partner.”

Holmes believes that applies not just to manufactured goods, but also to services, which account for the lion’s share of the U.K. economy. Because even services often require some physical interaction or at least the ability to communicate easily within the same time zone.

Holmes strongly doubts that the U.K. will make up for lost trade with its EU neighbors by forming an alliance with far-flung economies. On the government’s own figures, CPTPP membership is expected to add just 0.08% to the U.K.’s economy over the next decade, while lost trade with the EU could cut anticipated GDP by 4%. 

Minako Morita-Jaeger of the U.K. Trade Policy Observatory is also scathing about the new deal.

“In terms of economics, what we can expect is really limited, “ she said. “Even though we have left the EU and are losing trade as a result, the EU will remain the U.K.’s most important trading partner. Geographical proximity matters.“

A potential U.S. re-engagement?

If, however, the United States — the world’s biggest economy — were to join the CPTPP, could that not change the picture? Supporters of the new pact claim that as more and more countries sign up to the new bloc, calls within the U.S. to join are likely to intensify, especially since China has applied to join and could gain a stranglehold over the Pacific trading system if it succeeded while the U.S. remained aloof.

The U.S. might also adopt the Pacific pact as a way of pushing back against China. Collins at City University believes it could happen sooner than many analysts imagine.

“I think there will come a time when the U.S. will see that CPTPP membership makes sense. And, yes, I do believe that at some point in the next 10 years, the U.S. will sign on,” he said.  

If the United States were to join, along with a string of other countries like India, South Korea, the Phillippines and Indonesia, the CPTPP could become the world’s dominant trading system profoundly influencing the direction and pattern of global commerce.

Peter Holmes of Sussex University, however, is not persuaded. He doesn’t believe the United States is going to give momentum to this process.  

“The Biden administration has made it clear that it is not interested in joining,” he said. “And another Trump presidency would be likely to feel the same. All parts of the American political spectrum are now much more skeptical about signing deep, binding free trade agreements than was the case in the past.” 

The response from the business community

As the analysts wrangle over the likely size and importance of the CPTPP, it is worth noting the reaction of those who are intended to be the main beneficiaries of British membership — British exporters.

Some businesses expect to do well out of the deal. Scotch whisky makers welcomed the fact that their product will now see the gradual elimination of a 165% tariff in Malaysia. And the Standard Chartered Bank expects to benefit from “enhanced access to some of the world’s most dynamic markets.” 

But the general reaction of British business has been muted.

Take Clevedon Fasteners, a champion exporter. The small rivet manufacturer based in the English Midlands sells its products to more than 40 countries around the world.

The company’s boss Steve Hardeman, who voted for Brexit, described the new trade deal as “symbolically important” but conceded that “it is not going to make much practical difference for us. We sell to 10 of the existing members of this bloc and quite freely, since the UK already has bilateral free trade agreements with nine of them.”

Anyway, like a lot of bosses of small companies in the U.K. right now, Hardeman is more concerned about developments on the home front.

“We had to take out loans to get through COVID and those were at 0.1% interest at the time. They’re now 4.6%. Our energy bill has gone up by 320%. The government then put the minimum wage up by 9%. The government doesn’t pay that, we pay that,” he said. “And they’ve stuck corporation tax up from 19% to 25%. So there’s a hostile business environment here at the moment.”

So, is Hardeman, therefore, not in the mood to celebrate the CPTPP deal? “I am not. I am not. You’re dead right,” he said.

He admits that U.K. membership of the Pacific Rim bloc could have huge potential — but potential alone doesn’t pay the bills.