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

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

Most obvious of those is that the world outside Europe, and particularly the countries round the Pacific Rim, will grow much faster than continental Europe.

On a long view, it is a no-brainer to try to build relationships with fast-growing markets rather than slow-growing ones.

The name of the club, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, does not exactly roll off the tongue, and the UK is rather a long way from the Pacific.

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

However, now that the UK is joining, the club will account for about 15 per cent of the world economy, roughly the same as the EU is without us – so not to be scoffed at. And while Japan is slow-growing, the rest of the pack has far outpaced continental Europe.

The importance goes far beyond the mechanics of physical trade.

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

Because unlike the EU, it imposes few bureaucratic obligations – no commitment to join the euro, sign up to detailed product standards and so on – it will find it easy to grow. Actually, I expect the US to join at some stage, as it planned to do when the club was first formed in 2016. The project, then called the Trans-Pacific Partnership, was agreed by the US, but the incoming President – Donald Trump – pulled out in January 2017. It was one of the first things he did.

The other countries went ahead without America, but it seems nuts that the action of one controversial President should set trade policy for his successors.

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

So it needs to encourage its other trading partners to push back too. It already has a trade alliance with two of its neighbours, Canada and Mexico, both 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 sensible to stitch together a much wider alliance with other like-minded nations that feel uncomfortable with the expansionist intentions of China. Actually China has also applied to join, but I can’t see it having any chance of being accepted.

The US will always act in its own self-interest. The UK, and indeed other nations, should expect no special favours. So we should not think of this Pacific deal as a back-door way into a trade deal with the US, even if I am right and the US does join up. But it will undoubtedly help foster UK trading and financial relations with America in ways we cannot at the moment predict.

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

Just last week, the Government released new figures showing our total trade in goods and services with the US was up 22 per cent in the four quarters to the end of September last year, compared with the equivalent numbers in 2021. It also owns one third of the stock of inward foreign direct investments here, while it accounts for one quarter of our outward foreign direct investments.

So I think the best way of seeing our membership of this club is as an early marker of a wider redirection of UK economic relationships, not only to the Pacific nations but also and especially across the Atlantic towards the US.

That is not to say we should walk away from trade with Europe, which is still extremely important and will remain so for the foreseeable future. That would make no sense. But I do believe this deal will turn out to be of huge benefit to the UK. This could be the start of something big.