Five Questions about UK trade policy

David Henig raises the five key questions the United Kingdom needs to tackle as it prepares to embark on an independent trade policy post Brexit. Time is running short, and the government is yet to communicate properly about its intentions.

In just six months’ time the UK will, as things stand, have an independent trade policy. The operation of this may of course be constrained by the deal we strike with the EU. In practice, all countries face trade policy constraints  – but unlike them, we don’t really know much about our constraints as we know remarkably little about our future trade policy plans.

To take one example, we know there are consultations starting regarding bilateral trade agreements with Australia, New Zealand, and the US, and joining the Comprehensive and Progressive Trans Pacific Partnership (CPTPP), but we don’t know what we want these agreements to achieve. To take another, we don’t know whether all countries with existing EU trade agreements have agreed that these should apply to the UK from March 2019.

Attention has naturally mostly been fixed on Brexit negotiations, but in Government terms, six months is not a long time. What should we be asking about the UK’s future trade policy?

1. What does the UK want to achieve through trade policy?

This is the big – and unanswered – question. On one level, we can understand that reducing barriers enables greater trade and is therefore economically beneficial. But the real world of trade agreements, global regulations, trade defence, and trade diplomacy to tackle market access barriers presents a huge range of choices that cannot all be pursued simultaneously.

For example, we now know that the US would probably want to include a clause in a trade agreement preventing a similar trade agreement with China. We know that US and EU food regulations are incompatible, and most businesses to date have said they prioritise the EU single market above all else. In terms of how such concerns might interact in practice, we could sign up to a bloc like the Comprehensive and Progressive Transpacific Partnership – known as CPTPP – and accept their rules, including US-style approach on food safety, or have individual agreements with member countries that would probably not require signing up to those food regulations – the outcome of such choices will depend on which competing interests the government wishes to prioritise.

To consider another example, we know that we want to retain existing EU trade agreements, but we also know this will be a problem, in particular when it comes to those with Norway and Turkey.

We could navigate these issues more easily with more granular policy detail, but this has as yet not been forthcoming. Thus we don’t know which sectors or industries will be priorities. We often hear talk about prioritising services, but there is little acknowledgement that this is a difficult sector to liberalise in other countries. Similarly, we hear about the prospect of lowering tariffs for food, but this could come at the cost of the current priority given to developing countries. Some detailed economic analysis of food standards policy would be welcome but is, again, yet to be forthcoming. Without an answer to such policy questions, it is impossible to know what our priorities ought to be.

2. How will priorities be communicated?

It is possible that there is a logic behind the UK government’s trade activities, but that nobody has been told what it is. For example, a priority list for new agreements that includes Australia, New Zealand and the US points to a significant liberalisation in agricultural trade, and it is understandable why the government might want to keep this secret. It is however more likely that the reason for the lack of communication is that such decisions have, by and large, not yet been taken within government.

In this situation, it would be normal to outline a strategy using a White Paper or similar – and this is what we should expect to see in the months to come. Business in particular would be reassured by considerably more open discussion and knowing what government priorities will be.

3. Who will make decisions about trade policy?

Trade policy is almost always an executive branch responsibility, typically scrutinised by elected representatives. As it is usually going to be officials who carry out negotiations, working on detailed questions within an overall framework, this makes sense. However, demands for democratic accountability have been increasing recently alongside the controversies in many countries over CPTPP and now-defunct Transatlantic Trade and Investment Partnership – TTIP – negotiations. Governments are aware that votes on agreements are generally required, and there is a worry that these may, in future, not pass.

There is furthermore a wider question over whether devolved legislatures should have a say, particularly when questions of regulation are covered as much as tariffs.

At this stage, we have no governance model for trade agreements in the UK, though Secretary of State for International Trade Liam Fox suggested some outlines just before the summer.

We have therefore no idea what would be acceptable to parliament in trade agreements on issues that have caused controversy in other countries, such as labour standards, to take one example. We don’t know how much say parliament will really have.

We also don’t really know if Whitehall departments have agreed between themselves who does what: who leads the negotiations, especially if they become particularly technical regulatory discussions, and who ultimately makes the choices?

4. What has the government learned from EU negotiations?

Brexit negotiations can be seen as the first major bilateral talks the UK government has carried out in many years. Most commentators have seen significant flaws in the UK’s approach, notably in terms of a lack of clarity or realism in aims, and a somewhat arrogant approach. There are concerns that these flaws will lead to bad trade agreements, which could then be voted down in parliament if the government fails to build cross-party coalitions.

It will take time for the UK to become experienced in trade negotiations; the apparent lack of awareness of this is particularly concerning.

5. If we are in a lengthy transition period with the EU what does this mean for trade policy?

The UK government’s trade work programme appears to assume that the UK will be able to negotiate trade agreements over the course of the next couple of years, and introduce them after the Brexit transition period ends. Despite warnings by the countries with whom preliminary talks have started that talks cannot be finished before our final deal with the EU is known, or until the UK establishes trade policies, this has remained the working assumption.

As it becomes ever more likely that the UK will remain in a customs union with the EU for a number of years after 2019, one wonders when there will be a response in terms of changing priorities.

There is much that can be done in trade policy short of trade agreements, in terms of aiming to tackle market access barriers or influencing global regulations. This may be less glamorous but is equally important but has never been extensively discussed by the UK government.

Communication, communication, communication

More than two years after the Department for International Trade was set up we know very little about their plans. This may be excess secrecy, or it may be a lack of detailed plans; quite possibly it is both.

Given the improbability of securing quick trade agreements, what would be most welcome is more communication. That is what business is asking for most, and could help create a unified approach to trade.

The alternative is to risk a continuation of the current situation, which at times feels like the government versus the rest of the country.

 

 

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