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Tory politicians have much to learn about trade policy

The government is poorly prepared to negotiate deals after Brexit

By Guy de Jonquières  

Are we in for a rude awakening in trade negotiations with larger powers? Michael Kappeler/DPA/PA Images

Christmas is the season when miracles are supposed to happen. But the most extraordinary divine intervention will be needed if the hopes, dreams and promises about Britain’s trade future after Brexit being bandied about on the election campaign trail by Conservative politicians are to come true.

They say, for instance, that if re-elected they can wrap up a trade deal with the European Union within months after Brexit and that it will be easy because the UK starts with market regulations identical to those of the EU. Trade policy experts, however, are near-unanimous in dismissing such claims as false or wildly unrealistic.

There have been few more blistering indictments of the government’s approach than in Friday’s resignation letter by Alexandra Hall Hall, Britain’s Brexit envoy in Washington. It accused political leaders of using “misleading or disingenuous arguments” about Brexit and of failing to tell the public honestly of the challenges Brexit posed.

But there may be another, even more disconcerting, explanation for politicians’ muddled approach to trade policy: that they do not actually know what they are talking about. That is perhaps not surprising. The UK has little recent experience of doing trade deals: the last time it struck one was before it joined the Common Market in 1973, since when the European Commission has done all the negotiating on its behalf.

Instead of raising unrealistic expectations, politicians need to start confronting some basic realities about trade policy. If they do not do so now, the next government may have to learn its lessons the hard way, in trench warfare with formidable battle-hardened negotiators in Brussels, Washington and other capitals.

The first lesson is that all negotiations require compromises and trade-offs. That, it seems, is news to cabinet members. One senior Tory former minister says most do not yet grasp that the more Britain seeks to diverge from European Union laws and regulations after Brexit, the less access the EU will offer to its market.

Controversies about US demands to raise pharmaceuticals prices are warning signals the government should heed

That ought to be obvious, since the UK for many years led the drive to create those regulations. If it wants now to ditch them—one of the main reasons advanced for Brexit—it faces years of arduous effort to devise mechanisms, such as mutual recognition and conformity agreements, that satisfy the EU that British products and services meet its standards. Otherwise, UK exports would be at a severe disadvantage on European markets.

The second lesson is that before you start negotiating, you need to set clear goals and priorities. What do you most want from other countries—so-called “offensive” interests—and what are your key “defensive” concerns, the national sectors you most want to protect? And how far are you ready to give way on the latter in order to gain the former?

Little suggests that the government yet knows the answers. The best way to discover them is to consult widely, with businesses, consumers, politicians, farmers, local governments, civil society groups and other constituencies, to determine what they do and do not want. That is necessary both to set realistic negotiating objectives and to build coalitions to support and lobby for whatever deals are reached.

However, complaints are widespread, especially in business, that Whitehall is not consulting seriously. Perhaps that is because the message from many businesses is not one the government wants to hear: that what most of them want is for the UK to stick as close as possible to EU rules after Brexit, not to chase after trade deals with other countries that may yield little. Nor, it seems, has there been much discussion of these issues in cabinet; when there has been, such as on food standards, it has revealed disagreement as much as unity.

As a result, policy risks being made in a vacuum, with little relation to the nation’s economic and commercial needs, by a government that is internally divided about what it wants. That would be a recipe for trouble in the future.

The third lesson is that all trade policy is at heart about domestic politics. That is because so much of it touches on highly sensitive popular nerves. Heated recent controversies about US demands that Britain agree to raise pharmaceuticals prices and adopt American food safety regulations as part of any trade deal are warning signals that the government should be heeding. Instead, it chooses often to obfuscate.

The fourth lesson is the need to maximise policy transparency. The days are long gone when governments could hammer out trade deals behind closed doors. Nowadays, they face relentless pressure to explain what they are up to and to carry public opinion with them.

Much of that pressure comes from an army of activist movements, ranging from anti-capitalist organisations to trades unions and campaigners for animal rights, development or environmental causes, which have swarmed around almost every major international trade negotiation for the past 20 years.

Those movements are often well-funded, highly organised and skilful at public relations and lobbying the general public, the media and legislators. Some are not above grabbing headlines by spreading false “facts” and rumours, knowing that the more negative publicity they generate, the more supporters they are likely to attract and the more influence they stand to gain.

Governments around the world have learned that they need to devise strategies to counter opposition from activists by making their own voices heard and persuading the public that they are acting in the national interest. So far, they have not fully mastered that trick. The British government, however, does not yet appear to recognise that it needs to learn it.

Much of its effort to win over public opinion consists of little more than slogans such as “Global Britain” and “Trading with the world.” It has failed so far to explain why it is prioritising trade deals with some countries, such as the US and Australia, above others, what specific commercial gains it hopes they will generate, how it plans to achieve them and what it is willing to offer in return. It is also still unclear what rights parliament will have to scrutinise, amend or veto any deals that are struck.

Reaching satisfactory deals with larger countries, such as the US, with greater economic and political firepower than Britain—in negotiations where size and strength matter—will be hard enough. But doing so without setting clear goals, formulating coherent strategies and preparing the ground at home will be harder still.

For those reasons, some trade policy analysts suspect that the UK will need to scale back its ambitions for a comprehensive trade agreement with the US and settle for a bunch of modest mini-deals instead. That would be a setback for the government’s hopes of creating “Global Britain.” But given the manner in which the government is going about that task, it could well be a blessing in disguise.

*The fourth paragraph of this piece was amended shortly after publication

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