Credits: Ian Taylor
Great Britain still finds itself reeling from the after-effects of Brexit, resulting in the need to forge new alliances to justify its decision to be a stand-alone European giant. Although it is still a bit early to call judgment on the UK’s decision to leave the European Union, one thing is certain: the vision to carry forward the economic course by establishing new trade partnerships with global trade goliaths. The UK finds itself in partnership with Japan, Australia, India, and Singapore, amongst others. These are significant developments considering the world is shifting towards multipolarity.
These trade partners are stretched across the Indian and Pacific oceans, where China currently has a stronghold. A power struggle between the US and China has been playing out across the Indo-Pacific. This began during Barack Obama’s tenure, when the USA publicly 're-balanced’ its stance towards Asia. The Indo-Pacific region is critical for security and trade routes. China has been investing heavily to stamp its dominance. The Belt and Road Initiative is an example. China is investing enormous amounts in Sri Lanka at Colombo’s request, which could see Sri Lanka becoming a focal point for maritime trade. However, India and the USA have expressed concerns that it might be used for military purposes.
The Indo-Pacific region accounts for approximately 60% of the world’s total GDP. Its global economic appeal is self-explanatory. Similarly, four of Europe’s top ten trading partners (China, South Korea, Japan, and India) are in the Indo-Pacific region. The magnitude of its significance is why every major economic player is vying to increase their footprint within, or at least gain access to, the trade network of this ruling group.
The decision to leave the EU meant that the UK had to look for alternative markets for steady economic growth and geopolitical influence. It was previously thought that the dip in exports was because of the pandemic (which was true to an extent), but after COVID-19 ended and the markets were reopened, the volume of goods traded dropped to levels not witnessed since 2015. Compared to other G7 members, the United Kingdom had a slower post-pandemic recovery due to lower trade volume and trade growth rates.
Service trade with the EU (traditionally the UK’s strongest suit) has remained weaker than with non-EU states. Despite the TCA (Trade and Cooperation Agreement) with the EU, the situation is still not favourable. Hence, the UK’s candidacy for agreements like the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) aims to give the UK greater global market access.
The CPTPP permits tariff reduction, which will happen gradually over several years to allow different economic sectors to become accustomed to competition. It has practically zero tariffs on trade except for a few sensitive goods (as defined by the member states). The CPTPP also protects investment against expropriation. Investors will have their investments secured without compromising the principle of fair opportunity for investors from all the member states included in the CPTPP. Investments are likewise safeguarded from expropriation. Investors will have fair opportunities to participate with all the CPTPP members, knowing that their money is secured. Similarly, improved market access is granted to the member states by regulating customs policies and moderating regulatory barriers. Another benefit the CPTPP brings is the blocking of foreign goods. It allows members to accumulate exports and export tariff-free products to each other.
Case studies have shown that previous, completed partnerships were made to salvage the UK’s dwindling economic performance. The UK-Australia Free Trade Agreement (FTA) with Australia allows 99% tariff-free trade. Exports of products like beef, salmon, and cheese have seen consistently decreased tariffs over time. Increased skilled labour exchange and less restrictive visa laws between the UK and Australia will produce a spike in GDP.
Not just economically, but generally, healthy leverage can be gained by employing soft power via cultural exchange programmes and joining other economic partnerships. A judgment on the consequences of Brexit would be premature at this point. However, building ties in the Indo-Pacific region, which is nothing short of the crown jewel of world security, will prove beneficial in the long run.
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