UK in the Bloc: CPTPP expansion benefits all parties

With the UK’s new access to CPTPP, the available Vietnam-UK free trade agreement, and the country's strong fundamentals, Vietnam continues to stand out in the region, offering more preferential trade opportunities for its partners across the globe, write Ian Tandy, co-head of global trade solutions, Asia Pacific at HSBC and Surajit Rakshit, head of global trade solutions at HSBC Vietnam.

The UK’s accession to one of the world’s biggest free trade agreements can unlock further growth along the Asia-Pacific corridor including Vietnam.

One of the world’s biggest – certainly the most modern – free trade agreements has just gained its newest member: the United Kingdom formally joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on December 15, 2024.

The accession of the UK will take CPTPP’s members to 12, with the new entrant joining Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. With the UK in the bloc, it will account for about 15% of global GDP.

Having joined trade finance activities in both the UK and in Asia-Pacific, we have seen firsthand the scale of potential for increased trade and investment between the two markets.

The UK is a highly attractive trading partner for many of the other members – Asian members in particular will welcome the improved access to the world’s sixth-largest economy and its deep financial markets. And for UK businesses there are exciting potential benefits too, not least improved access to the region’s expanding manufacturing industries and its increasingly affluent and digitally-connected consumers.

Taken as a whole, the agreement marks a critical element in the UK’s relationship with the Asia-Pacific region, where more than half of global growth already originates.

A future-facing free trade pact

Older trade agreements have often had to grapple with the demands of modern economies, such as the shift in relative importance of services versus goods, and the particular dynamics of digital trade. But one big advantage of CPTPP is that it is designed precisely with these in mind.

That matters for the UK especially, given that the country is the world’s second-largest exporter of services. And digital trade – where businesses in the UK export services remotely to CPTPP countries – is also a substantial activity.

The CPTPP agreement, with its more manageable requirements in matters such as where data can reside, allows information to flow more easily between members.

It also points to significant growth potential: none of the CPTPP members currently ranks in the top 10 for UK services exports. Singapore – which acts as a gateway to ASEAN for many firms – stands out as one of the fastest-growing services markets for the UK, having grown by 147% from 2013 to 2023.

A boost from the CPTPP membership points to opportunities for a range of businesses, from financial services to logistics, as well the burgeoning ‘new economy’.

Goods still matter, of course. When CPTPP comes in force for the UK, the country’s exports of goods to member nations will be practically all tariff-free.

The UK government has assessed that the long-term boost to UK exports to CPTPP countries could total £2.6 billion. Many UK firms that lean into ‘Brand Britain’ – covering everything from cars and machinery to pottery and Scottish whisky – stand to benefit from improved access to CPTPP markets.

On the other side, the UK is also an important export market for Asian countries with a wide range of products such as fruits, seafood, rice, rubber, metals etc. In 2023, while Vietnam’s exports to other markets witnessed a drop, its exports to the UK increased by 11%. According to the data of Vietnam’s General Department of Customs, in 11 months of 2024, Vietnam’s exports to the UK continues to grow by 19,5% compared to last year.

Simplifying supply chains

Entering new markets can often be challenging, and one of the most useful aspects of CPTPP is how its provisions take into consideration the concerns and challenges faced by small and medium-sized enterprises (SMEs) in its member economies.

For larger businesses, one of the biggest benefits will be in relation to international supply chains. The pandemic and geopolitical uncertainties have demonstrated the need for ever-greater resilience when it comes to such links, and CPTPP will play an important role in smoothing the way for new improvements.

A big reason for that is the modern approach taken to rules-of-origin provisions in CPTPP, which allow contributions from all members to be aggrated. In other words, if parts of a product are made in five different CPTPP countries, thoseeg parts can collectively form the mandated CPTPP proportion of the final product.

It’s been pleasing to see that international firms’ intention to make use of the CPTPP is on the rise – up over 10% year-on-year according to the HSBC Global Connections survey in 2023. While that’s encouraging, there’s more to do for banks like HSBC, in partnership with policymakers, to explain in detail how specific provisions in the agreement can support business growth, especially for SMEs.

Vietnam in particular has benefitted from the implementation of CPTPP. Vietnamese enterprises now have more opportunities to access high-quality markets such as Japan, Canada, Australia, and now the UK.

Statistics from the General Department of Customs show that the total import-export turnover to CPTPP markets in the Americas soared by 56.3%, from $8.7 billion in 2018 to $13.6 billion in 2023.

In the same period, Vietnam’s exports to these markets nearly doubled, from $6.3 billion to $11.7 billion. Vietnam’s trade surplus in these markets also nearly tripled from $3.9 billion to $11.01 billion.

Into 2025, with the UK’s new access to CPTPP, as well as the available Vietnam-UK free trade agreement, thanks to all strong fundamentals that the country owns, Vietnam continues to stand out in the region, offering more preferential trade opportunities for its partners across the globe.

Now in its sixth year, the CPTPP is expanding to include the world’s sixth-biggest economy. The benefits all round could be set to multiply.