After the referendum vote to leave the EU in 2016 was cast, a new word was coined into our vocabulary, ‘Brexit.’ And although it wasn’t until January 2020 that the UK officially left the EU, our government is now ready to join a club that has around 500 million people in it, has a combined GDP of $13.5 trillion, and generates more than 13% of the world’s income.

So, what is this illusive club? The ‘Comprehensive and Progressive Agreement for Trans-Pacific Partnership’ or CPTPP as it is more commonly known, and it is a free trade agreement (FTA) between 11 countries around the Asia-Pacific region. The UK is on a fast track to join and become the first non-founding country to do so.

Who are the current members and what advantages are there to the UK joining?

The key members are Canada, Japan, Malaysia, and Australia but also countries like Vietnam with whom the UK expects to supply digital technology such as 5G and smart cities. In fact, as part of the drive to help UK technology businesses develop trading relationships with the region, the UK government has allocated £8m to launch the Digital Trade Network.

As with all trade agreements, it’s about reducing or eliminating barriers to trading with each other. That includes tariffs and import charges, however, unlike the EU, the CPTTP is not a single market and therefore trading partners can impose their own standards and protect certain domestic products such as Japan’s rice and Canada’s dairy industry.

Why is the UK involved when it’s not an Asian-Pacific country?

As a former member of the EU the UK has retained FTAs with many of the CPTPP members and is currently negotiating with Malaysia and Brunei while agreements in principle have been reached with Australia and New Zealand in June and October 2021, respectively.

According to the UK government, we want to be known as the European country with the most complementary trading relationships around the region. They also say that the UK has created more technology entrepreneurs outside of the US, China, and India.

This is one of the reasons why they are creating initiatives such as the Digital Trade Network, supporting local businesses who are looking to develop trading partnerships in the Asia-Pacific region.

What are the advantages of belonging to the CPTTP?

The main advantage for the UK is that it gives UK businesses a springboard into the Indo-Pacific economic powerhouse.

With no, or lower duties, and easier cross border clearance, CPTTP gives UK businesses access to new markets. This is good news as the region’s strength as part of the world’s supply chain would allow UK businesses to find high quality supplies at competitive prices and lower trade barriers. And these trade barriers would also translate to UK sales into the region.

Are there any other advantages of the UK being a member?

In addition to support for UK businesses, CPTPP countries will have the same opportunities as domestic businesses when investing in local projects. Given that in 2017, its members accounted for £1 in every £12 of foreign investment in the UK, we expect cross-border investments to continue to grow.

Anything else?

The UK government says that being a part of a dynamic, fast-growing region, with easier trading agreements, will provide potential for future economic growth. This is especially relevant for countries such as Malaysia and Brunei that, so far, do not have an FTA with the UK. There are also the distinct possibility that other economically buoyant countries such as South Korea and the Philippines will join.

What about USA?

Trump withdrew the US agreement to join when elected in 2016 and President Biden, while initially being warm to the idea, has now said it’s on hold for the time being. Should the US change its mind, then this could potentially open a back door trade deal between our two countries. This would then mean that the enlarged CPTTP would account for more than 40% of global GDP – a major force in world trading.

What does membership mean for UK businesses?

As we’ve been saying for some time, this region offers many trading advantages for UK businesses. Malaysia, for example already has a well-established trading route with the UK as well as a strong willingness to do business with us.

At present, the UK does not have an FTA with the country, but would have as a member of the CTPPT, thus increases the opportunities for local businesses. It’s a growing market with low labour costs, highly skilled workforce, and a diverse range of suppliers.

For UK companies looking to source goods or establish a supply chain partner there, the outlook certainly appears promising.

Global purchasing is on the increase and the Pacific Rim is going to be on most importers list. The challenge for local businesses, especially under the current Covid restrictions, is how to ensure supply reliability, consistent product quality and a trouble-free smooth delivery.

This is where Mosaic International can help. We can help you start the process of determining which part of the region your products could enter, who your suppliers should be and how to exploit these opportunities. The reality is this is a medium to long term project – and if you don’t start, you’ll never reap the benefits – as they say: while it is never too late, it is also equally true that it is never too early to start!

If you have suppliers, but you are struggling to carry out audit inspections, we offer a physical supply chain auditor that is ‘on the ground’ in the local territory. We already have an established service in Malaysia, and this will only be expanded throughout the CPTTP region in due course.

For more information about our localised supply chain, visit the supplier auditing pages of our website or contact Kiley Tan on 07885 784783 or kiley.tan@mosaicint.co.uk

The post Life after Brexit? Yes, in the CPTPP appeared first on Mosaic International.

One reason for this is the new and largely unprecedented customs red tape and mountains of paperwork that has encouraged them and many others to explore opportunities in the Far East, and Southeast Asia in particular.

Why Southeast Asia?

As we’ve been saying for some time, Southeast Asia offers many trading advantages for UK businesses. It has an already well established trading route with the UK as well as a strong willingness to do business with us.

It’s also a growing market with low labour costs, a highly skilled workforce, and a diverse range of suppliers. For UK companies looking to source goods from Southeast Asia or establish a supply chain partner there, the outlook certainly appears promising.

In fact, only recently, the UK government stated that a trade deal with the region is a top priority as part of its ‘global partnership’ programme.

To put this into perspective, in 2019, the UK clocked up a $35 billion trade in goods with the region. However, it must be said, that despite our government saying that ‘trade is a strong driving force in the UK, and we are extremely proud of our history of free trade’ Covid-19 and Brexit has had a major impact on us striking new trade deals in Southeast Asia.

Supply chains

Another challenge facing UK businesses wanting to establish a reliable supply source in the region, is how to ensure supplier reliability, consistent product quality and a trouble-free smooth delivery.

This has been emphasised by the fact that since March 2020, and the outbreak of the Covid-19 pandemic, existing UK importers have been prevented from visiting the area to carry out supplier audits.

And despite the UK starting to unlock, travel restrictions remain in place for most countries for the foreseeable future. At the time of writing, Malaysia is on the UK government’s amber list.

This means that only essential travel is permitted (visiting a supplier to undertake an audit is unlikely to come under this category) with all travellers having to self-isolate for 14-days in a state designated facility – at their own cost, currently around £800.

Does this mean UK importers are currently unable to quality control their supply chain in Southeast Asia?

Supplier audits – a detailed analysis of a supplier’s systems and processes – are an integral and essential part of the total supply chain. With UK businesses now looking to this region for further expansion, Mosaic International has highlighted the need for a more reliable and robust audit process to be established.

The UK government is keen to establish trade deals with the 10-member countries that make up the Association of South East Nations (ASEAN) and we are keen to help UK businesses trade successfully with this blossoming territory. However, as we have seen over the past 18 months, the region has been effectively off limits.

Supplier audits

We are pleased to announce the launch of a new service that provides a solution to what will be an ongoing problem.

We have developed an ‘on the ground’ supplier audit service, that is physically based in the local territory of your supplier. That means no more having to rely on temperamental technology and time consuming video conferencing.

Initially, this new service will focus on Malaysia, but we expect it to be expanded throughout the region over time.

How does it work?

Having a locally based supplier auditor offers major advantages; they can immediately respond to changing circumstances, such as a global virus pandemic, transport blockages, natural disasters, or political upheaval, as well as changing tariffs, new legislation, and trade agreements.

One of the biggest advantages is that they understand the local culture. This gives our clients a major competitive advantage. Those businesses that have been dealing with this region for some time will know how different working practices are here compared to the UK.

Culture can be a stumbling block when trading with Southeast Asia. Not everyone speaks English (also documentation may not be available in English) and there is a very different way of working. We also find that communication is less direct and confrontational than what we are used to in the West.

Your local auditor

This is where a locally based auditor really comes into their own. They can quickly pinpoint potential issues enabling clients to respond immediately and put remedial processes in place.

A good example of this is pricing. Asian suppliers are reluctant to reduce staffing levels during an economic downturn, as experienced during the recent Covid-19 pandemic. This can, therefore, have a knock-on effect of increasing the contracted price.

Our local supplier auditor will pick this up and recommend action to be taken.

There is no doubt that global purchasing is going to increase in the future and Southeast Asia is going to be on most importers list. This means, that with more metrics monitoring and an absolute need to nurture a third-party relationship, a local supplier auditor is the key to increasing margins and avoiding reputational damage.

Our ‘on the ground’ supply chain auditing service covers critical areas such as:

• Safeguarding your reputation with customers
• Ensuring legal compliance, especially regarding data protection
• Securing adherence to environmental issues, in particular zero waste disposal
• Inventory management, including packing, storage, and transportation
• Quality control to an agreed standard
• Implementation of new working practices, to ensure compliance and improve efficiency
• Measuring supplier performance using KPI’s

To discover how you can ensure a reliable and compliant supply chain process direct from Southeast Asia using a Mosaic International locally based auditor, click here, or contact us on 07885 784783 or kiley.tan@mosaicint.co.uk

The post Is there life after Brexit for UK importers? appeared first on Mosaic International.