Future free trade agreements: US, CPTPP, Australia and New Zealand

This note has been prepared in advance of the General Debate on Future Free Trade Agreements (with Australia, New Zealand, the US and the CPTPP) in the House of Commons on 21 February 2019.

The Comprehensive and Progressive Agreement for Trans-Pacific Trade (CPTPP) is a trade agreement between eleven countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam).

The Government launched consultations on free trade agreements with these countries in July 2018. These consultations ran until October 2018. Due to the large number of responses, the Government has yet to publish its response.

The EU has no free trade agreement with the US, Australia or New Zealand. Negotiations are underway with Australia and New Zealand. The US and EU have agreed to start limited trade talks. The EU has agreements in place, or is in negotiations with most of the CPTPP countries.

The US is the UK’s largest export market (if looking at individual countries rather than trade blocs like the EU). The US accounted for 18% of UK exports in 2017 (£112.5 billion). UK exports to the CPTPP countries totalled just over £50 billion in 2017 (8.5% of all UK exports). Australia, Canada, Japan and Singapore are the largest export markets for the UK amongst the CPTPP countries. Australia accounted for 1.8% of UK exports and New Zealand 0.2% in 2017.

Trade agreements lower barriers to trade between countries. These barriers may be in the form of tariffs (taxes on imports) or non-tariff barriers relating to standards or regulation. Tariffs are generally quite low on average although they are high for some products (often agricultural products). The approach to regulation is likely to be a major issue in trade negotiations with the US. The UK is likely to face a choice between aligning with US or EU approaches to regulation.

Trade agreements are likely to have big effects on particular sectors. Some agricultural imports into the UK from non-EU countries face high tariffs. Farming groups have expressed concerns that free trade agreements could lead to a damaging flood of imports.