The £12 trillion trade deal is another comically exaggerated Brexit ‘benefit’

There’s been much hype and talk of a trans-Pacific partnership bonanza, writes Sean O’Grady. Now, what do they say about something that sounds too good to be true?

Business and trade secretary Kemi Badenoch flew over to New Zealand to sign the CPTPP agreement (PA Wire)

You may have noticed that Global Britain, as we must now call ourselves, has just joined one of the biggest free trading blocs in the world – the trans-Pacific partnership, or Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to give it its full title.

Kemi Badenoch, the business and trade secretary, flew over to sign the treaty at the Partnership’s registry in Auckland, New Zealand (the CPTPP’s rough equivalent of the EU’s HQ in Brussels), and she’s been beaming across all media outlets ever since.

As a dedicated Brexiteer she is understandably pleased to be able to show that: “We are using our status as an independent trading nation to join an exciting, growing, forward-looking trade bloc, which will help grow the UK economy and build on the hundreds of thousands of jobs CPTPP-owned businesses already support up and down the country.”

That may be true – it’s not actually a bad thing that the UK has managed to get some sort of trade deal – but boy has this been overhyped. It’s been referred to, or inferred to be, repeatedly, as a “£12 trillion trade deal”, which just sounds like such a dazzling huge sum of money that Britain is in for a bonanza the like of which we’ve never seen before.

What do they say about something that sounds too good to be true...?

It is a big number, I grant you. We can all envisage what a million pounds is. A billion is a thousand of these. A trillion pounds is a thousand billion pounds. Or a million million. And £12,000,000,000,000 is what we’re talking about here.

It’s a meaningless sum too, in this context, because all it is is the total of GDP of CPTPP member states, such as Japan, Canada, Australia, Indonesia, South Korea, Singapore and so on. It’s about four times the UK’s total national income. And it’s not all headed our way. Obviously.

The comically exaggerated claims for the CPTPP suggest a certain amount of nervousness on the part of the dwindling troupe of Brexit cheerleaders about the success of the experiment. The reality, on the government’s own figures, is that the deal will add about 0.08 per cent to Britain’s national income, after a decade or so.

Perhaps that’s a “static” assessment based on current economic trading patterns and takes insufficient account of the amorphous psychological effects on business practices and confidence. But even if you quadrupled it it would be pitifully small. By contrast, we’ll lose about 4 per cent of GDP from Brexit over the next decade and a bit.

I’m not often given to quoting internet memes, but I saw one over the weekend that made the point very well. In terms of a loss from every £100 of British national income, it showed four £1 coins from the Brexit effect, and eight pennies as the benefit from the CPTPP. So a slightly mitigated net loss of £3.92 for every £100 the nation earns.

The CPTPP economies are massive, fast-growing and dynamic, just as Badenoch says, but that doesn’t mean the UK will automatically be able to capture markets, boost experts and create jobs. At the moment the UK sells more to Germany than the entire CPTPP, and that’s unlikely to change just because we’ve signed up to the framework.

Indeed, given that the CPTPP is mostly about goods rather than services, and the UK is predominantly a services nation rather than one that depends on manufacturing or agriculture, the short- to medium-term potential is fairly limited. In the longer term that might change, and things could deepen, but it’s not certain – and might take a decade or two.

We will benefit from some changes to “rules of origin”, but again it looks modest – if we import, say, batteries from Japan for a car made in Britain and then export back to Japan (an unrealistic scenario).

It’s also only fair to point out that the UK already had rolled over old EU agreements with most of them (Peru, Vietnam, South Korea), two mildly upgraded ones (Canada, Japan) and two genuinely new ones (Australia and New Zealand). The only jurisdictions not covered were Malaysia and Brunei. Hence, again, the fairly small marginal advantage.

Badenoch herself seems to hint at the real weakness in the deal, which is that it is simply no use if the UK is unable to take advantage of it. To her, it’s about buccaneering business people getting on a plane to Hanoi or Mexico City. Well, maybe. To me, this is about the structure of the deal and how poorly it suits the UK’s future needs – nothing on AI for example, or financial services and fintech.

At the moment, with no deals at all in place, Germany enjoys a much larger market share of exports in all these markets than the UK does, because… well because they are an industrial and trading house and Britain isn’t anymore. Signing a trade agreement doesn’t guarantee anything.

Perhaps, if China – the real superpower – joined, as economies evolved, the benefits of British membership of such a dynamic group would become apparent – in 40 or 50 years, say, as Jacob Rees-Mogg once suggested.

Yet one of the more covert reasons for joining CPTPP seems to be to stop China getting in, which would be a bit counterproductive in economic terms. It would also make the UK the kind of awkward squad member it once was in the EU. Global Britain isn’t so very different, after all.