Look beyond free trade deals
There is more to trade policy than shiny new agreements
Free trade agreements deliver economic benefits. That is why there are over 400 in force across the world, the majority agreed in the last 25 years. By removing barriers to imports and exports such as tariffs, and restrictions on companies providing services, they can help traders thrive.
There is no shortage of examples.The EU-South Korea deal of 2011 delivered an increase in UK goods exports to South Korea of 54 per cent within three years of implementation. More recently the EU-Canada deal removed restrictions in various areas, which for example allowed UK cheese makers new access to the Canadian market.
However, individual trade agreements such as these are not macro-economic game changers. The UK government’s view is that all future trade agreements the UK may sign on its own after Brexit, including with the US and China, will boost GDP by between 0.2 per cent and 0.4 per cent. That is of course worth having. But to generate further economic benefits you need to put wider measures in place. Only then do you give exporters the opportunities they need.
Within the trade space this can mean using all of the many tools at our disposal. Trade promotion activities can be particularly powerful around the signing of a new trade agreement, telling businesses “here are the new opportunities that UK companies have, and here’s how you can take advantage.” The process should also work in reverse: the companies that seek help should be informing the government about what deals in what sectors with which countries would be most likely to deliver benefits.
This isn’t just about bilateral FTAs, there are many other forms of trade policy which should be fed in this way. You can have smaller agreements like that last year with Taiwan that allowed the export of UK pork there for the first time, or that allow our professionals to operate without new qualifications in foreign markets. At the World Trade Organisation we can push for new agreements between willing members, known as plurilaterals, in subsets of trade policy like trade in services and e-commerce. We can also raise disputes at the WTO where another country acts in a discriminatory way towards our products, for example acting through government the Scotch whisky industry has been successful eight times, helping to protect its exports.
Then there are the related areas, such as making sure our customs and border procedures are streamlined, that we ourselves are open to global talent, and that we are willing to recognise the qualifications of others as being equal to our own. This is not an area where the UK’s recent record has been particularly stellar; we know about the restrictions on visas. But in our pursuit of a customs “single window,” a single electronic point of contact for traders to navigate all government organisations involved in the UK border, we also have a poor record. There has been talk of such a system since at least 2009, but no expectation of implementation before the mid-2020s. Even without trade deals improvements in these areas should add to growth.
All of these activities require government resources, and there is no getting away from one fact: that control of our own trade policy requires the picking of winners and losers. Or to put it another way, control of our own trade policy means that industrial strategy has to come back as well. Of course we have an industrial strategy from 2017, which came after one in 2012, and the “New Industry, New Jobs” approach of Peter Mandelson back in 2009.
None of these documents however said much about the choices we are now confronting. For example, is it more important to the UK to seek tariff free access to EU markets for car makers or passporting for financial services providers, and on a more defensive basis how much are we prepared to offer visas for trade deals, or expose our farmers to greater competition? Not to mention the relative importance of small, medium, or large companies, and niche sectors such as ceramics or craft brewers. Or indeed the sectors that are less obviously connected to trade deals, such as media and pharmaceuticals, where general rules on intellectual property and data are more important.
In an ideal world we would of course get everything we wanted, but that isn’t even possible for the biggest players, the EU, US and China. Choices are going to have to be made as to which agreements with which countries, covering which sectors, and offering what to the other side. This can’t be avoided, for unless they are made we run the risk of trying to do everything and not really succeeding in doing anything.
Trade policy can be seen as the external projection of industrial strategy. For months we have been discussing the trade deals that we may shortly be able to make. It is now time to talk about what they would contain, and that means decisions on the sectors of the future. What’s certain is that we will not get the best from them unless we support new agreements with wider strategic thinking.
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