Yahoo Finance ‘Teeny’ benefits of proposed Pacific trade deal dwarfed by hit from Brexit
A new Pacific partnership hailed by Boris Johnson as a key to post-Brexit prosperity has been branded “a drop in the ocean” after official figures showed the government expects it to increase GDP by just 0.08 per cent - less than one-fortieth of the expected economic hit from leaving the European Union.
And Labour warned that the benefit could slump to just 0.017 per cent (£400m) if Malaysia continues to hold out against ratification of the deal, according to figures from the Department for International Trade.
The forecast £1.7bn annual increase in UK exports to countries like Malaysia, Singapore and Australia from membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) contrasts with the £2bn hit in sales of food and drink products alone to the EU in the first three months of this year.
The figures emerged as a new poll found that Britain remains bitterly split over Brexit, five years on from the historic 52-48 vote to Leave on 23 June 2016.
The Savanta ComRes survey suggested that the UK would now vote to Remain in the EU by a majority of 51-49 per cent, but would reject the opportunity to rejoin by the same wafer-thin margin.
Less than a third of respondents (31 per cent) said that Brexit has been a success, with slightly more (34 per cent) branding it a failure. But there was a clear majority (51 per cent) who believed the experience has left the UK more divided, compared to just 13 per cent who said it was more united.
Writing in The Independent, polling guru John Curtice, of Strathclyde University, said that people who reached voting age since 2016 backed Remain by a margin of more than two to one, meaning that there was probably no majority for Leave when the UK finally exited the EU on 1 January.
“Far from being ready to ‘move on’, voters are still deeply divided on the wisdom of the decision to leave the EU,” said Prof Curtice.
And Brexit minister David Frost - the architect of the PM’s EU trade deal, who is currently embroiled in a bitter row with Brussels over Mr Johnson’s customs border in the Irish Sea - admitted that Leavers did not anticipate relations with the remaining 27 members would be as “relatively difficult” as they are now, telling MPs that it was reasonable to expect them to remain “a little bumpy for some time”.
A report by the UK in a Changing Europe thinktank found declining trade with traditional partners across the EU, with Danish exports falling 17 per cent over the long term and the UK slipping from fifth to eighth position in national trade with Germany.
Despite this, Mr Johnson claimed that the decision to leave the EU was now “part of our history” and said that the UK had benefited through being able to put in place a new immigration system, sign a free trade agreement with Australia, make plans to set up freeports and begin negotiations to join the CPTPP.
“This government got Brexit done and we’ve already reclaimed our money, laws, borders and waters,” said the prime minister. “The decision to leave the EU may now part of our history, but our clear mission is to utilise the freedoms it brings to shape a better future for our people.”
But Tory grandee and former deputy prime minister Lord Heseltine, now president of the European Movement, said: “Five years on, Brexit is far from ‘done’. It has only just begun and the forecast is ominous.
“Storm clouds are gathering on the horizon, chief among them the threat to the Good Friday peace agreement in Northern Ireland. The fishing industry has now voiced its betrayal and the Australian trade deal will slowly erode the competitiveness of British farmers over the next 15 years. Meanwhile, the financial services industry quietly moves its activities to Europe in order to escape the continuing Brexit uncertainty.”
Official estimates of the potential boost to the UK economy from CPTPP membership were branded “teeny”, as it emerged that Liz Truss’s Department for International Trade (DIT) estimates it will add just £1.8bn - or 0.08 per cent - to UK GDP in 15 years’ time.
London School of Economics trade expert Dr Thomas Sampson told The Independent that this contrasted with the 4 per cent hit to GDP form Brexit forecast by the government’s independent Office for Budget Responsibility.
“A small gain is better than nothing,” said Dr Sampson. “But any potential gains from joining the CPTPP are teeny compared to the costs of Brexit and there is no realistic possibility that CPTPP membership can offset the economic costs of Brexit.”
As @FaisalIslam has said, the forecast benefits of joining CPTPP depend heavily on increased trade with Malaysia. So what if Malaysia keeps refusing to ratify? Read the small-print on the last page of the DIT document. The UK growth benefits fall to £400mn, just 0.017% of GDP. pic.twitter.com/r6UtRonBjm
— Emily Thornberry (@EmilyThornberry) June 22, 2021
Launching negotiations to join the CPTPP on Monday, Mr Johnson said membership would “open up unparalleled opportunities” for British businesses, while Ms Truss said that the region is “where Britain’s greatest opportunities lie”.
But Labour’s Emily Thornberry said that the projections published by DIT raised questions over whether membership was worth the risk of undercutting UK farmers and exposing the government to legal action from corporations challenging social and environmental protection’s under the partnership’s Investor-State Dispute Settlement (ISDS) mechanism.
“Labour welcomes any trade agreement that will create jobs in our country, help our exporters do more business abroad, and support our economic recovery, and if the CPTPP can offer those benefits, then as a country, we would be foolish not to think about joining,” said the shadow trade secretary.
But she added: “We have to be sure that the benefits are worth the risks, and if those benefits could be as low as a 0.017 per cent increase in GDP, then that is alarmingly small compared to the price we are paying to join.”
Liberal Democrat trade spokesperson Sarah Olney said the government should be focusing on the “mountains” of Brexit red tape depressing commerce with Europe ahead of the more limited benefits of the proposed partnership with far-flung CPTPP members.
“It is shocking that the government is presenting these negotiations as a free trade triumph when the expected benefit to our economy is a drop in the ocean,” she said.
Meanwhile, campaigners from Global Justice Now warned that polluting corporations would use the ISDS mechanism to challenge climate protections in the courts, in what director Nick Dearden branded “an act of environmental vandalism in the year we host COP26”.
But a DIT spokesperson insisted that joining the CPTPP “will not affect our high environmental protections, animal welfare and food standards”.
“ISDS provisions exist to protect British businesses and investments abroad,” the spokesperson said. “It is normal to have these provisions in trade and ISDS does not, and cannot, force the privatisation of public services.”
The spokesperson added: “This part of the world is where Britain’s greatest opportunities lie. UK exports to CPTPP nations are set to increase by 65 per cent until 2030 and, in addition to this growth, comparative static analysis shows an additional increase in trade by £3.3bn as a result of UK accession.”
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