Whisky industry hails UK membership of CPTPP

However, while applauding ministers for helping secure the Asia-Pacific trade deal, they also urged the government to look again at the tax regime in the UK.

Earlier this month, Jeremy Hunt pushed ahead with a 10.1% hike in alcohol duty, described as a "historic blow" by the industry.

Meanwhile, the Scottish Government has raised concerns over the deal. They have pleaded with the UK Government to "involve us fully in any remaining negotiations before a final agreement is reached."

Trade minister Kemi Badenoch rejected claims that the benefits of CPTPP would do little to ease the economic impact of Brexit.

Analysis suggests the agreement with the 11-member trading bloc will add just 0.08 per cent to UK GDP in the medium term, while Britain’s decision to quit Europe has resulted in a 4% hit.

The CPTPP takes in Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, and will, the government says, give exporters access to a market of around half a billion people. 

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The Department for International Trade said the agreement, which cuts tariffs on exports of food, drinks and car would “deliver new opportunities for growth in a way that is tailored to the UK’s economy and reflects the future of the global economy.”

Currently, there are around 800 Scottish firms exporting to CPTPP countries. Ms Badenoch said the deal would give them “improved access to the countries that will be gateway to the wider Indo-Pacific region which is projected to make up the majority of global growth in the future.”

It will be the first the time UK has had a trade deal with Malaysia, and the government says that this will, in 16 years, lead to tariffs of around 80% on Scotch being eliminated.

It is Britain’s biggest trade deal since leaving the EU, however, official estimates suggest it will add just £1.8 billion a year to the economy after 10 years, representing 0.08% of UK GDP.

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Trade secretary Ms Badenoch said that number was based on 2014 figures.

She told BBC Radio 4’s Today programme: “Think of it like us buying a start-up. It’s not about what it’s doing today, but about the potential for growth tomorrow.

“And the CPTPP countries have over 500 million people at the moment, and we’re starting trade relationship with them that’s going to go into the future for many decades and deliver a lot of growth to the UK.”

Asked about the impact of Brexit, Ms Badenoch replied that the CPTPP is in addition to the UK’s free trade agreement with the EU, adding: “We’ve left the EU so we need to look at what to do in order to grow that UK economy and not keep talking about a vote from seven years ago.”

She told Sky News: “The bilateral trade deals are different from the multilateral trade deal, you create synergies.

“It’s the first time we’ve joined a bloc like this in about 50 years. There is strength in numbers.”

Environmental groups have expressed fears about reduced tariffs on Malaysian palm oil, a product blamed for widespread deforestation.

Ms Badenoch rejected the criticism: “Moving the tariff from 2% to 0% is not what’s going to cause deforestation. And actually, the standards which are set by this Government, by the Department for the Environment, is what’s going to dictate what comes into the country.

“But also, being in the trade bloc means that we’re going to have more influence on sustainability.”

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Responding to the deal, the Scottish Government's Trade Minister Richard Lochhead said it was clear it would "not make up for the damaging impact of the UK leaving the EU and forfeiting access to the European Single Market, which accounted for 43% of Scottish exports prior to Brexit."

He added: “Membership of CPTPP will see some reduction in tariffs, which Scottish businesses will welcome.

"However, the UK Government’s own modelling suggests that over time CPTPP membership will result in a mere 0.08% increase in UK GDP. In contrast the Office for Budgetary Responsibility forecasts that Brexit will reduce the UK’s potential growth by about 4%.

“We need to examine the details agreed so far and would expect the UK Government to involve us fully in any remaining negotiations before a final agreement is reached.  Significant concerns have already been raised with the UK Government that joining CPTPP would open the door to imports produced to lower safety, animal welfare, environmental or labour standards.

“The UK Government needs to undertake, as a matter of urgency, an impact assessment on the cumulative impact of the Free Trade Agreements they are currently negotiating.”

The CBI welcomed the agreement as a “milestone” for British industry, reinforcing the UK’s commitment “to building partnerships in an increasingly fragmented world”.

Labour said that while the agreement represented “encouraging” progress, it needed to see the details.

Shadow trade secretary Nick Thomas-Symonds said: “The Conservative Government’s track record in striking good trade deals is desperately poor.

“Other countries joining CPTPP arrangements have secured important safeguards and put in place support for their producers; it is vital that ministers set out if they plan to do the same.”

The UK is the first new member and European country to join CPTPP. Other applicants for the bloc include Taiwan and China. 

Scotch Whisky Association Chief Executive, Mark Kent said the industry could benefit from further liberalisation in the region: “Exports of Scotch Whisky to the CPTPP countries have grown significantly in the past decade, collectively reaching more than £1.1bn in 2022.

"The UK’s accession to CPTPP will open up new opportunities for Scotch Whisky and other UK products in key markets in the region, including the phased elimination of Malaysia’s import tariff. 

"With the potential for more countries to join CPTPP in the coming years, Scotch Whisky will benefit from further liberalisation in the region.

“We now look forward to continuing to work with the UK government to build on this progress and ensure Scotch Whisky can continue to thrive in priority markets around the world.

"This starts with achieving a good deal in the UK-India FTA, from which a reduction of the 150% tariff could see exports of Scotch Whisky grow to over £1bn in five years, benefiting both Scotch Whisky producers, as well as businesses and communities in India.

“As we look to continue growing our global markets, we remain disappointed that the UK government are failing to deliver on their promise to ensure our tax system is supporting Scotch Whisky, and instead chose to impose a 10.1% tax hike at the Spring Budget. A tax rate that was already the highest in the G7.”