Britain in the Trans-Pacific Partnership: Implications for Japan and the Region

27/11/2023    82

Britain is set to become the twelfth member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), launched with a push from Japan in the wake of America’s 2017 withdrawal from the Trans-Pacific Partnership. With China and Taiwan vying for admission as well, international affairs expert Suzuki Hitoshi examines the implications of British participation for Japan and the regional order.

After intensive negotiations spearheaded by Japan, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed by 11 countries in March 2018, replacing the 12-country Trans-Pacific Partnership that collapsed when the United States withdrew in early 2017. The CPTPP came into force in December 2018 for Japan, Mexico, Singapore, New Zealand, Canada, Australia, and Vietnam. The four remaining countries (Peru, Malaysia, Chile, and Brunei) took longer to ratify the agreement, and it was not until July 2023 (with Brunei’s ratification) that the CPTPP came into force for all the original signatories.

As if on cue, Britain added its signature on July 16, having secured entry with strong backing from the Japanese government. Once Parliament ratifies the agreement, Britain will become the twelfth CPTPP member, marking the first expansion of the 11-member framework. What are the economic and strategic implications for Britain, Japan, and the region—including China and Taiwan, which have both applied for membership?

Significance of the Original TPP

The implications for Japan should be considered in the light of Japan’s reasons for entering into the original TPP, whose basic principles and provisions survive almost unchanged in the CPTPP.

The Japanese government made the decision to join the negotiations for a high-level TPP agreement in 2013, about five years after US President Barack Obama brought Washington into the talks. In his April 12 statement explaining that decision, then Prime Minister Abe Shinzō stressed the security implications of the framework, saying, “Participation in the TPP negotiations is central to our nation’s 100-year strategy. . . . In addition to the economic merits . . . I believe there is great significance from a security standpoint in engaging in rulemaking with our ally the United States and other countries that share a commitment to the universal values of freedom, democracy, and the rule of law.”

Abe was asserting that, in addition to promising direct benefits in the form of regional economic growth, the establishment of high standards and rigorous rules covering virtually every aspect of economic activity had important implications for Japanese security. It was quite a prescient observation for its time, before Japan had embraced the concept of economic security—that is, the need to incorporate national security strategy into economic and trade policies at all levels.

Economic Impact of British Membership

Britain’s accession is expected to take effect in the second half of 2024, once domestic ratification is complete. How will this affect our two nations economically?

From the start of negotiations, the significance of the CPTPP has been clear to all the parties involved. As articulated by Japan’s Ministry of Foreign Affairs in its March 2018 press release, the agreement “has substantial strategic significance because it will maintain the high-level content of the TPP agreement, which promotes the liberalization of trade in goods and services and the liberalization and facilitation of investment in the Asia-Pacific region, where there has been remarkable growth, and establishes new twenty-first-century rules in a wide range of areas, such as intellectual property, electronic commerce, state-owned enterprises, and the environment, while creating the foundation for further expanding a free and fair economic order in the region.”

In terms of economic merits, the focus has been on the maintenance of highly transparent, consistent rules, which should boost economic growth in the member countries by creating a predictable environment for business activity. From this standpoint, however, it is hard to see how either Britain or Japan will benefit substantially from the former’s accession, inasmuch as both are already parties to a high-level bilateral trade pact. Concluded on October 23, 2020, the Japan-UK Comprehensive Economic Partnership Agreement is very similar in content to the Japan–EU EPA, which ceased to apply to Britain after the latter’s withdrawal from the EU. As a result, there are very few areas of bilateral economic activity that will get an additional boost from the CPTPP.

In fact, Brunei and Malaysia are the only CPTPP members that have no prior free trade agreement with Britain. This may be why, according to the British government’s own estimate, membership in the CPTPP will boost Britain’s gross domestic product by a mere 0.08% over the next 10 years.

Why, then, were Tokyo and London both so keen on the expansion?

Britain’s Opaque Calculus

On the British side, Chatham House (Royal Institute of International Affairs) has thus far offered the most convincing answer to that question. On March 31, 2023, the institute released an expert comment on the subject with the headline “Real Value for the UK in Joining CPTPP is Strategic.” As explained by the author, Marianne Schneider-Petsinger, membership in the framework will enhance Britain’s influence in the areas of trade and international governance over the long term. The comment adds that the economic benefits of membership could be significantly greater if the United States rejoins the agreement. However, that seems unlikely in the short or medium term; global and regional free trade agreements have become so unpopular with American voters that their very mention is avoided in Congress and election campaigns.

A March 2023 analysis by the Center for Strategic and International Studies, an American think tank, emphasizes the role of Brexit politics. It notes that Conservatives in the government—particularly those who had pushed for Brexit—championed the CPTPP as part of their “Global Britain” strategy, stressing that the agreement offered access to a market roughly on a par with the European Union and would compensate for the losses from Brexit.

Of course, it is difficult to reconcile such hype with the government’s own estimate of a mere 0.08-point boost in long-term GDP growth. Under the circumstances, one may well wonder if Britain is acting on the basis of separate calculations that it has not discussed with Japan or the other CPTPP members (see below).

Partnering to Uphold Standards

What does Japan hope to gain by Britain’s accession, given the meager economic benefits?

To understand this, we need to grasp Japan’s basic “CPTPP strategy,” which happens to be the subject of a lengthy report published in June 2022 by the Asia Pacific Initiative. The authors of this report emphasize the CPTPP’s role as a partnership of countries that respect the rule of law and as a model for high-level rule-making. One of Japan’s key roles, they argue, is to uphold those high standards and use them as a benchmark for upgrading the Regional Comprehensive Economic Partnership, a less rigorous Asia-Pacific framework that excludes the United States and strongly reflects the rule-making proclivities of China, its most powerful member. The report stresses the fundamental incompatibility between China’s internal regime and the CPTPP’s rules and concludes that China is more interested in influencing or bending those rules than in reforming its own systems to conform with them. From this we can conclude that a key component of Japan’s CPTPP strategy should consist of rejecting China’s candidacy for CPTPP membership.

In this context, Japan sees Britain as a reliable and powerful partner that will back its own efforts to uphold and preserve the CPTPP’s high standards. But can Japan really count on Britain’s support where the issue of China’s membership is concerned?

The British government has outlined the case for joining the CPTPP in several documents published online by the Department for Business and Trade. They refer to the CPTPP as the gateway to a region that will account for more than half of the world’s middle-class consumers in the years ahead. Such figures appear to validate the Brexiteers’ claims of access to a “huge market” that makes up for the losses incurred by Brexit. But they are only arrived at by including China and India in the calculations.

China and Taiwan

While Britain doubtless agrees in principle on the need for a rigorous rules-based international order, its attitude toward China could soften over time. Such factors as disappointment in the size of the CPTPP’s impact, a sinking cabinet approval rating, and a stagnating British economy could make the government more receptive to China’s suit. Japan needs to be aware of this risk.

In the past, Britain came to Japan’s rescue when trade tensions with Europe threatened Japanese auto exports. Ignoring the backlash from other members of the European Community, Britain opted to partner with Japan—viewed by so many as an economic menace—and welcome the very manufacturers that had driven the British auto industry to the brink. With the help of generous government subsidies, Nissan opened a new plant in Britain in the late 1980s, and other Japanese manufacturers followed. Before long, made-in-Britain Japanese cars became popular in countries like France, Germany, and Italy.

At the time, Britain’s strategic flexibility was a revelation for the Japanese. But should we not consider the possibility that Japan could, like continental Europe, find itself the victim of such flexibility? Would Tokyo be able to hold firm if London were to do an about-face and abruptly come out in support of China’s admission into the CPTPP? (Let us not forget how Japanese companies with bases in Britain were “betrayed” by the about-face of Brexit.)

It has been suggested that China has no real intention of fighting for membership in the CPTPP, given the incompatibility of the framework’s standards with Chinese laws and systems, and that Beijing’s sole purpose in applying was to impede Taipei’s application by beating it to the punch. If that analysis is correct, then the aforementioned concerns may never come into play.

However, Japan will need to carefully consider the issue of Taiwan’s accession. In Japan, there is enthusiastic public support for expanded trade and investment with Taiwan, particularly since TSMC (Taiwan Semiconductor Manufacturing Co.) began building its new plant in Kumamoto. But what if TSMC ends up laying off workers at its Taiwanese facilities as a result of that investment? Some analysts believe that Taiwan has more to lose than to gain from membership in the CPTPP. Were Taiwan to gain admission and experience an economic downturn as a result, it could be a major political setback for Taiwan’s pro-independence forces, one that Beijing’s propaganda machine would be quick to exploit. That would be bad for regional security. Japan and Britain must calculate carefully and ensure that membership in the CPTPP confers concrete benefits on Taiwan, as well as advancing their own national interests.

Ukraine and Beyond

It is also important that Tokyo and London align their policies on support for Ukraine, keeping in mind China’s statements of solidarity with Russia in the wake of the latter’s illegal aggression. Since the beginning of the war, Britain has provided Ukraine with comprehensive support, including arms. Japan is not in a position to assist the war effort in that manner. What it can do, however, is provide support and guidance for Ukrainian initiatives to root out corruption, in accordance with the CPTPP’s chapter on Transparency and Anticorruption.

Ukraine’s interest in the CPTPP takes a back seat to its primary objective of gaining admission to the EU. But that goal is still a long way off, as no country can become a member of the EU without acceding to all its policies. In the meantime, Japan and Britain alike can provide strong backing for domestic reforms, using the CPTPP’s rigorous standards as a benchmark. We should step up such support now, without waiting for a ceasefire, since reform takes time, and any movement in that direction will make it easier for Japanese companies to operate in Ukraine by enhancing the transparency and predictability of the business environment.

Japan and Britain share important goals with respect to the CPTPP, and cooperative ties between the two countries have already deepened as a consequence of Britain’s application, extending even beyond the civilian economy. The agreement between Japan, Britain, and Italy on joint development of a next-generation fighter jet may represent the next frontier in economic and technical cooperation between our two nations. The expanded CPTPP attests to the strong bonds Japan and Britain have forged to date and lays the foundation for even closer ties by clearly articulating a common stance on the path to stability and prosperity in the Asia-Pacific region.