Scottish Government – written evidence (CPT0045)
Dear Lord Goldsmith
UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Thank you for seeking the Scottish Government’s views as part of your committee’s inquiry into the
UK Government’s proposals for accession to the CPTPP. The attached paper summarises Scotland’s trade interests with CPTPP countries, our views on the process so far, and on the agreement itself.
As detailed in the attached paper, the Scottish Government is keen to ensure that Scotland’s interests are fully taken into account in the UK Government’s plans. While we are keen to increase Scotland’s exports to CPTPP countries, we have a range of concerns regarding the detail of the CPTPP agreement itself, and the UK Government’s ability to protect those interests.
In particular, we have questioned the rationale for joining CPTPP, a geographically distant trading bloc, at a time when the UK Government has erected barriers to trade with our nearest neighbours.
The reality for many Scottish firms is that the EU is, and will remain, their largest export market.
Joining CPTPP will in no way compensate for the loss of such trade as a result of the UK
Government’s reckless approach to Brexit. Furthermore, when the UK already has, or is currently negotiating, trade agreements with all CPTPP members except for two, it is unclear what added value will actually accrue from joining CPTPP.
As with other trade agreements, the Scottish Government’s involvement in the UK’s plans for accession have been very limited. We have consistently made the case for a full role for the Scottish Government in all stages of trade negotiations. As the attached note sets out, that position has not been accepted by the UK Government, with the result that we were not involved in the decision to seek accession, nor are we involved in the accession negotiations, or the crucial detail relating to tariffs and goods market access. We continue to press the UK Government to involve the Scottish Government and other devolved administrations fully in the development of future trade agreements.
I trust that this and the enclosed information is helpful to you and your committee as part of your inquiry. I would be happy to provide further information should the committee require it.
1. The Scottish Government is pleased to provide its views on the UK’s proposed accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Reference is made throughout this response to UK Accession to CPTPP: The UK’s Strategic Approach, which included a scoping assessment, (referred to here as the “Strategic Approach”), published by the UK Department for International Trade (DIT) in June 2021.
2. The Scottish Government has consistently made the case for a full role in all stages of developing and agreeing future trade agreements, a position not accepted by the UK
Government. While the Scottish Government engages with the UK Department for International Trade (DIT) to ensure that Scotland’s interests are promoted and protected, DIT will only consult the devolved administrations on matters it considers relevant to devolved competence.
3. The broad and increasing scope of modern trade agreements means that they deal with and merge a range of reserved and devolved policy areas and touch on many areas of life. Decisions on agricultural tariffs for example cut across areas of developed competence and have implications for the Scottish economy. The decisions the UK Government makes on tariffs and tariff rate quotas could therefore have significant impacts on our economy, yet devolved administrations do not see UK negotiating mandates or have any role in the decision-making process.
4. The Scottish Government provided DIT with a comprehensive submission detailing Scotland’s interests and concerns regarding CPTPP accession. In addition, Scottish Government officials have engaged with DIT officials on the detail of the existing agreement and this issue has been discussed at a Ministerial level through the Ministerial Forum for Trade. Our views are set out below.
5. The Scottish Government published Scotland’s Vision for Trade in January 2021. The Vision sets out our approach to trade and the principles that underpin it. It reflects our belief that how we trade is as important as what we trade, and should be based on the fundamental principles of inclusive growth, wellbeing, net-zero, sustainability and good governance. As these principles inform our interests in all trade negotiations, we have assessed the case for joining CPTPP against them. That assessment, summarised below, has informed our response to the UK Government’s Strategic Approach, set out in this document:
Inclusive Growth | Trade should drive economic development, provide good quality jobs, improve quality of life and reduce inequality.
The Scottish Government is concerned that there is insufficient information in the scoping assessment to |
| assess whether inclusive growth will be ensured. In particular, there is insufficient disaggregation of outputs by different UK nations and regions, within sectors and for different protected groups, as well as a focus on the long term over short to medium term adjustment costs |
Wellbeing | Wellbeing is a critical measure of success for trade policy.
Any changes to the economy as a result of CPTPP must promote wellbeing and avoid increasing inequality. However, the scoping assessment does not consider wellbeing, beyond GDP growth. |
Sustainability | Trade decisions must be guided by economic, social and environmental sustainability and the interdependencies between these.
The Scottish Government is concerned by the uncertain broader economic, social and environmental consequences of CPTPP and the prioritisation of shortterm market access gains over longer term goals, such as economic, social and environmental wellbeing. |
Net Zero | Trade policy should increase progress towards our target to reduce Scotland’s emissions of all greenhouse gases to net zero by 2045.
The Scottish Government has concerns about joining the CPTPP and the impact this will have on the environment and Scotland’s efforts to effectively tackle climate change, including meeting net zero targets. |
Good Governance | In our decisions on trade we will respect good governance and the international rules-based system at all times.
The Scottish Government is concerned by the potential risks related to human rights of CPTPP. |
6. CPTPP countries accounted for £3.1 billion or 9% of Scotland’s international exports in 20181. In contrast, 43% of our international exports are destined for the EU. The largest destination countries within CPTPP exports are Singapore (23%), Australia (22%), Canada (19%) and Japan (17%).
7. Goods account for 62% of exports to CPTPP countries and services 38%. Beverages (including Scotch whisky) accounted for 29.7% of Scotland’s exports to CPTPP countries, with industrial goods exports including power generating and industrial machinery and equipment and medicinal and pharmaceutical products.
8. In 2018, Scotland’s services exports to CPTPP countries were £1.2 billion, accounting for 10% of Scotland’s international services exports. Significant export interests include professional and business services, asset management and renewable energy services. The main destination countries were Canada, Australia, Singapore and Japan, which together accounted for 88% of Scotland’s CPTPP services exports.
9. As the majority of Scotland’s trade with CPTPP is with countries that the UK already has - or is currently negotiating - a trade agreement with, we have questioned the added value that the UK Government expect to arise from joining CPTPP. DIT noted that the agreement could open up trade with Malaysia and Brunei, with whom the UK does not have bilateral trade agreements. However, we note that neither of these countries have yet ratified the CPTPP agreement.
10. Scotland is keen to see its exports to CPTPP countries increase, five of which are identified as priorities in A Trading Nation, our export growth plan. However, and as set out above, we question whether it is necessary to join CPTPP to do that. Assuming that the UK completes FTA negotiations with Australia and New Zealand, the additional trade benefits of CPTPP accession seem limited. Any potential benefits of joining CPTPP therefore need to be set against expected costs and any potential negative impact on businesses, communities and consumers in Scotland. The scoping assessment itself indicates that, in this scenario, the proportion of tariff-free exports would increase only marginally from 97.8% to 99.9%2. We have also made the point that significant trade gains can result from action to address market access barriers outside of FTAs, something on which we are keen to work with DIT to address.
11. The Strategic Approach argues that the UK will not have to cede control over its laws in joining CPTPP. However, unlike bilateral FTAs, the UK will be expected to sign up unconditionally to all the provisions in CPTPP that have been already been agreed by the founding members. We understand that the scope for seeking any derogations or exceptions to reflect the unique circumstance of the UK or its constituent nations is very limited. We therefore question whether the marginal benefits of joining CPTPP, over and above the current and expected suite of bilateral FTAs, justifies being tied into the legal provisions of the CPTPP agreement, which the UK Government has had no involvement in deciding.
12. The Scottish Government has an established position of seeking to remain aligned as far as possible with the EU, which accounts for 43% of Scottish exports. We are therefore concerned at any provisions within the CPTPP agreement that might lead to divergence from the EU, and which could potentially have a negative impact on our trade with the EU. In particular we have concerns regarding the approach taken in CPTPP to Sanitary and Phytosanitary (SPS) measures, Technical Barriers to Trade (TBT) and digital trade, as set out later in this paper.
13. The static modelling from the UK Government’s scoping assessment claims that joining the agreement could increase UK GDP by an extra £1.8 billion in the long run, equating to an increase in GDP of 0.08%. The sensitivity analysis shows that in the absence of ratification by Malaysia and Brunei, that GDP increase would only be £0.4 billion3. As with previous scoping assessments for trade agreements, this very small economic benefit does not take account of losses through the reduction in access to the EU market, which it will nowhere near compensate for.
14. The Strategic Approach states that CPTPP will help businesses in every nation of the UK and that the UK will use trade policy to create local jobs in all parts of the UK. However the scoping assessment does not produce outputs disaggregated by the different UK nations and regions. While sectors set to benefit and lose - including in terms of GVA and employment - are outlined, some impacts may be masked within aggregate impacts. We therefore call for more detailed assessment in this area.
15. The Scottish Government is concerned at the uncertain broader economic, social and environmental consequences of joining CPTPP and the prioritisation of short-term market access gains over longer term goals, such as economic, social and environmental wellbeing. We also have concerns about the longer term consequences of CPTPP accession, for example related to a movement away from the precautionary principle, or potential risks to digital rights. We have asked the UK Government to provide reassurances that these potential longer term impacts have been assessed and weighed against short term gains.
16. In terms of impacts on individuals, while we welcome the finding of limited disproportionate impacts in the long term for those with protected characteristics in
the labour market, short to medium term adjustment costs, which may disproportionally affect groups more marginal in the labour market, should also be considered. Wider impacts should also be considered in terms of working conditions, economic empowerment and wellbeing, with consideration of positive as well as negative impacts. The Scottish Government has repeatedly called on the UK Government to collect detailed disaggregated data on the impact of trade policy on different groups, including their roles as exporters, producers, workers, consumers and public services users.
17. As our Vision makes clear, wellbeing is a critical measure of success for trade policy. Any changes to the economy as a result of CPTPP must promote wellbeing and avoid increasing inequality. While the scoping assessment finds long term gains in welfare, the model only considers changes in income. The Scottish Government has therefore asked the UK Government to outline opportunities from the CPTPP to increase individual wellbeing, going beyond GDP growth.
Specific Issues
18. The Scottish Government has repeatedly said that negotiations on offensive interests need to be balanced against protecting domestic producers from competitors who are not subject to the same labour, welfare or environmental standards. Any benefits to Scotland’s food and drink sector must not be offset by an influx in agri-food imports produced to lower standards. As the Trade and Agriculture Commission report highlighted, agri-food imported into the UK must be equivalent to UK domestic standards of production, as a minimum.
19. We have therefore asked the UK Government to engage with us on this in detail as they develop their market access offers to CPTPP countries. However, they have declined to involve devolved administrations in those decisions.
20. As already stated, the majority of Scotland’s goods exports to CPTPP are to those countries where the UK already has trade agreements. In potential trade terms, Malaysia is the only significant country that the UK does not already have (or is not currently negotiating) an FTA with and only accounts for 0.7% of our international goods exports. As Malaysia has not yet ratified the CPTPP, any potential benefits in terms of trade with Malaysia may not materialise for some time.
21. We have asked the UK Government to commit to regulating in line with the precautionary principle to prevent environmental harm and maintain high regulatory standards in areas such as food safety, energy, animal welfare, and climate.
22. The Scottish Government is therefore concerned that the CPTPP approach to regulation moves away from the precautionary approach taken by the EU, and instead places the onus on end users to prove harmful effects of a product.
23. CPTPP provisions relating to regulatory coherence are non-binding and take the form of voluntary cooperation. As stated in Scotland’s Vision for Trade, setting out shared policy commitments with like-minded countries can support a positive trading environment, and Scotland is seeking opportunities for regulatory cooperation which can help to facilitate trade.
24. However, to achieve the sustainable and inclusive economic growth which Scotland seeks, any agreement on regulatory cooperation must prioritise the public interest, and must not prevent us from regulating in a way that achieves our public policy objectives. It is essential that Scotland only enters into regulatory agreements that are in our long-term interest and on terms that work for Scotland.
25. We have significant concerns with the approach taken in the TBT chapter regarding national treatment of conformity assessment bodies. We are concerned that this applies uniformly across the economy, which could lead to opening up of sectors and increased competition. We have raised these concerns with the UK Government and asked to see any assessment of the likely impact of this approach on UK producers.
26. The Scottish Government is concerned at the potential impact of CPTPP accession on ensuring Scotland’s SPS system is protected and that Scotland retains the right to regulate imports and apply provisional risk management measures in line with the EU precautionary principle. We are concerned that the CPTPP SPS chapter may undermine Scotland’s right to regulate, and that it is not sufficiently ambitious in tackling global SPS issues such as animal welfare and antimicrobial resistance. We have called on the UK Government to include commitments to tackling antimicrobial resistance in all trade agreements.
27. As SPS is a devolved responsibility, we have called on the UK Government to ensure that the interests of the Scottish Government, and other devolved administrations, are represented in the accession process and that the UK Government fully engages with the devolved administrations throughout all stages of the process. Trade in Services
28. Analysis of the existing CPTPP agreement shows that member countries include an array of non-conforming measures, meaning that liberalisation is not consistent within sectors, across countries or across sectors within individual countries. This means that CPTPP accession will not necessarily increase market access for all service providers.
29. As the CPTPP adopts a ‘negative listing’ approach, it will be important to engage the Scottish Government and other devolved administrations fully in the process of identifying those services that should be listed.
30. We are also concerned that the services chapter of CPTPP locks in existing market conditions and also future market reforms through a “ratchet” clause, which can make it difficult to increase the level of regulation in a particular sector, or to reverse deregulation, therefore potentially constraining future government policy.
31. The agreement also includes a future most favoured nation (FMFN) clause, requiring members to offer the same level of market access as they have agreed to offer nonmembers. This may make it more difficult to secure bespoke trade deals with both members and non-members, as any advantage is diluted or negated. For example, if the UK’s FTA with Australia grants the UK preferential market access compared to Australia’s CPTPP partners, Australia may, as a result of FMFN, have to grant the same terms to those partners on a non-reciprocal basis, diluting or negating the potential gain to the UK. Business Mobility
32. Clear visa requirements and application processes are helpful in moving towards removing mobility based barriers, but access to information in English and online application and payment (if this is not already available) also assist businesses quickly and efficiently navigate and comply with mobility rules.
33. It is vital that the right to regulate and provide public services is protected. In particular, we have consistently made clear to the UK Government that the NHS must be protected from enforced privatisation, competition or fragmentation, either by design or due to a failure to identify unintended consequences. This includes the price the NHS pays for medicines. Any changes to patent protection, which may delay the introduction of generic medicines for a branded product could likely lead to a rise in the NHS medicines expenditure and have knock on financial implications for NHS budgets.
34. As outlined in Scotland’s Vision for Trade, the Scottish Government takes a digital rights-based approach to digital trade, rooted in our priority of establishing an ethical digital nation. This means that any developments on digital trade must balance the demand to sustain the economy, whilst safeguarding social and environmental wellbeing. Digital trade provisions in the CPTPP must balance economic and social considerations, upholding data protection and digital rights.
35. CPTPP provisions on data, by applying traditional trade tests to any future data regulatory change, may make it harder for the UK to stop data flows with CPTPP signatories in the future or to otherwise change its domestic policies on data. The complexity of these requirements could restrict future policy development. Any restrictions of data exports put in place by the UK, which result, for example, from the
UK’s unilateral adequacy arrangements, or steps taken to ensure interoperability with the EU’s data protection regime, could be subject to challenge under CPTPP. We consider that this could make it more difficult to change UK regulations on data protection in the future.
36. This could also make it more difficult for the UK to maintain a positive EU data adequacy decision, given that this decision will be subject to review, with a need for ongoing consideration of any shifts in EU standards. Loss of data adequacy with the EU in the future would create a significant barrier to trade for businesses. The Scottish Government would oppose any moves to facilitate the free flow of data which would make it more difficult for the UK to maintain a positive data adequacy decision with the EU. Investment
37. In Scotland’s Vision for Trade, the Scottish Government explicitly recognised widespread concerns about the current Investor-State Dispute Settlement (ISDS) system. We called on the UK Government to reject the classic private arbitration model, and actively contribute to the development of international best practice and the consideration of alternative models of dispute resolution.
38. No future ISDS system should prevent the UK and Scotland from making laws on health, social, environmental and economic matters. The Scottish Government’s position is that the inclusion of the ISDS system in CPTPP could have a material impact on making laws on health, social, environmental and economic matters. Any future ISDS system should be transparent, based on judicial procedures, and permit meaningful representations by all parties with a potential stake in the matter.
39. The Geographical Indication (GI) provisions within the Intellectual Property chapter of the CPTPP do not work for Scotland, and will conflict with the UK GI system. Any agreement with CPTPP countries should therefore include provisions to ensure all our Scottish GIs are recognised and that effective enforcement mechanisms are strengthened.
40. We welcome the statements in the Strategic Approach indicating that the price the NHS pays for medicines will not be affected by accession. However we are concerned about the potential consequences of Article 18.53 (Measures Relating to the Marketing of Certain Pharmaceutical Products) of the CPTPP agreement in particular, and have asked how the UK Government can ensure medicine pricing is protected in its proposed accession to CPTPP.
41. Equal treatment and non-discrimination already forms part of existing domestic procurement legislation obligations on how buyers treat bidders from other countries. The proposal in the Strategic Approach to ensure UK businesses receive fair and non-discriminatory treatment when competing for the procurement opportunities covered by each party’s schedules would be in keeping with that obligation. The Scottish Government therefore supports this proposal and expects the UK Government to ensure that public services are protected in negotiations on CPTPP accession.
42. The Scottish Government’s chief concern with CPTPP is that the UK will not be able to shape the text to reflect its own priorities, such as environmental and human rights standards. We do not consider that the CPTPP has sufficient provisions on the environment and climate, or meaningful enforcement mechanisms for those it has.
43. As stated in Scotland’s Vision for Trade, we believe that trade should be used as a lever to increase progress towards net zero targets and improve our international environmental impact. We have questioned how CPTPP can do this, as the agreement does not prioritise tackling climate change or meeting climate targets. The environment chapter does not refer directly to climate change and only includes voluntary measures for lower emissions, with no clear benchmarks or timeframes.
44. In terms of human rights, we recognise the UK Government’s commitment to continue to encourage all states to uphold international obligations. We note, however, that there was no human rights assessment in the scoping assessment. We have asked the UK Government to undertake human rights impact assessments and engagement with NGOs/human rights defenders prior to CPTPP accession. CPTPP should be used to create a dialogue around human rights, with a view to raising standards, establishing or promoting forums for dialogue and sharing best practice.
45. The UK Government should also provide support to businesses to ensure they do not inadvertently contribute to human rights abuses as part of supply chains following accession to CPTPP. In addition, the UK Government should commit to using trade remedies to uphold human rights with CPTPP countries, by applying trade remedies to any imports using forced labour.
46. While we welcome the UK Government’s commitment to seek to use CPTPP to support women's economic empowerment, trade agreements must not constrain the
Scottish Government’s right to take action to defend and promote the wellbeing of Scotland’s people. Any provision agreed to in CPTPP must not weaken or reduce existing protections in relation to gender equality.
47. The scoping assessment states that there would be negligible impact on developing countries. While that is to be welcomed, there is limited detail on how that conclusion has been reached. The Scottish Government has some concerns that the lack of flexibility in CPTPP for least developed countries could increase differential impacts of trade on developing countries. We have encouraged the UK Government to seek to ensure flexibility for least developed countries included in any FTA that the UK signs and also called on the UK Government to undertake and share analysis of the impact on these countries
48. It is important to recognise that there is a significant economic disparity between some of the signatories of the CPTPP. We are concerned that some will benefit from the agreement to the detriment of others, without there being any remedy to this within the agreement. Degradation of developing country preferences and margins should be avoided and we note the UK Government is currently consulting on a new Developing Countries’ Trading Scheme.
49. While we welcome that members of CPTPP must adopt or maintain internationally recognised labour rights, the Scottish Government is concerned about how this will be monitored and enforced, particularly as there is a high bar for enforcement through the dispute mechanisms. For example, acceptable conditions of work are determined by the party, rather than based on international standards. We would expect the UK Government to publish an impact assessment of CPTPP’s impact on labour at home and abroad, alongside commitments to mitigate any impacts.