Trans-Pacific trade deal is the start of something big, says HAMISH MCRAE

The trans-Pacific trade club of which the UK is joining is not a substitute for membership in the European Union. But for a number of reasons, it’s much more important than it seems.

The most obvious of these is that the world outside Europe, and especially the countries around the Pacific Rim, will grow much faster than continental Europe.

In the long run, it’s a good idea to try to build relationships with high-growth markets rather than slow-growth ones.

The name of the club, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, doesn’t exactly roll off the tongue, and the UK is rather far from the Pacific.

There are 11 members and we already do a lot of trading with many of them, including Japan, Australia and Canada, so don’t expect a sudden boost to UK exports.

But with the UK joining, the club will account for about 15% of the global economy, about the same as the EU without us – so not to be trifled with. And while Japan is growing slowly, the rest of the pack is much faster than continental Europe.

Its importance goes far beyond the mechanics of physical trading.

The UK is the first new member since the group came together in 2018. That’s a hugely important signal, partly that the UK is open for business, but more importantly that what started as a Pacific Rim club is open to new members from around the world.

Because, unlike the EU, it imposes few bureaucratic obligations – no commitment to join the euro, adhere to detailed product standards and so on – it will easily grow. In fact, I expect the US to join at some point, as it planned to do when the club was first founded in 2016. – retired in January 2017. It was one of the first things he did.

The other countries went on without America, but it seems crazy that the action of a controversial president would shape trade policies for his successors.

That is especially the case because of what has happened since then in relations with China. Donald Trump imagined he could somehow charm, coax, and bully China into doing more of what he wanted. We now know that the US has gained nothing from that approach and is now pushing back against China in diplomatic, economic and military terms.

So it should encourage its other trading partners to also push back. It already has a trade alliance with two of its neighbors, Canada and Mexico, both of which are also members of the Pacific club.

It has the Aukus military pact with the UK and Australia, much to the chagrin of the French. But it would be prudent to form a much broader alliance with other like-minded nations uncomfortable with China’s expansionist intentions. Actually, China has also applied to join, but I don’t see it standing any chance of being accepted.

The US will always act in its own best interest. The UK, and even other countries, should not expect any special favours. So we shouldn’t see this Pacific deal as a back door to a trade deal with the US, even though I’m right and the US will join. But it will no doubt help advance the UK’s trade and financial relations with America in ways we can’t predict at this point.

That is of profound importance. Not only is the US a much larger economy than the EU. Even without a trade agreement, it is our largest bilateral trading partner, and we therefore have a current account surplus, unlike the EU, where we have a deficit.

Just last week, the government released new figures showing that our total trade in goods and services with the US was up 22 percent in the four quarters to the end of September last year, compared to the corresponding numbers in 2021. It also owns a third of the stock of inward foreign direct investment here, while it accounts for a quarter of our outward foreign direct investment.

So I think the best way to see our membership in this club is as an early marker of a wider diversion of the UK’s economic relationships not just to the Pacific countries, but also and especially across the Atlantic Ocean to USA.

This does not mean that we should give up trade with Europe, which is still extremely important and will continue to be so for the foreseeable future. That wouldn’t make any sense. But I do believe that this deal will prove to be of great benefit to the UK. This could be the start of something big.