Find Prospect's full report, "Brexit Britain: the trade challenge," here
The technical aspects of trade policy have suddenly become a fashionable subject of conversation in the UK. The reason is that under Brexit the UK will lose not only its preferential market access to the European Union but also the access that it currently enjoys to many other markets (from South Korea and Singapore to Mexico and Switzerland) under a network of EU bilateral agreements.
For the government, replacing those agreements has become a matter not just of need but also of national pride. They have nominated a Trade Minister and created a whole new government department to that end. The Minister, Liam Fox, seems determined to emulate the romantic 18th century trade envoys who travelled the world negotiating deals. There has even been talk of using a new royal yacht, the Britannia, as a floating trade conference centre.
Trade policy may have become fashionable, but unfortunately it is neither as straightforward nor as swashbuckling as some seem to think. Bread-and-butter concepts such as size matter—a lot. The world is dominated by trade super-powers (318m consumers in the US, 437m in the EU Single Market excluding the UK, and 1.35bn in China). This is not to suggest, of course, that with 67m consumers the UK will be unable to negotiate bilateral trade agreements. But it means that British negotiators may struggle to avoid agreements that depend on concessions from the smaller partner: the UK.
The new ministry has tried to assemble most of the serving UK officials who have ever had any dealings with trade, regardless of whether or not they have actually negotiated bilateral agreements. They have also sounded out British and foreign officials in Brussels for senior jobs, many of whom have rejected their calls. And in a rather odd move—since the Trade Minister has indicated a willingness to negotiate an early deal with Australia—they have asked Australian negotiators to train the British team, which may give rise to a curious conflict of interest for the Australians.
The British negotiating team will at some point have to face some of the most experienced trade negotiators in the world. So they need to develop their own trade negotiating and regulatory expertise quickly. They should do so not only in relation to bilateral trade negotiations but also in relation to the WTO, since any agreement will need to pass the WTO test to comply with the UK’s international obligations. The good news is that they have some time to do this: since under the EU Treaty the UK is legally prevented from negotiating at all while it remains a member of the EU (until spring 2019 at the earliest) the team now has two years to develop its skills.
Even if they were trained, ready and legally permitted to negotiate, however, the UK teams would still struggle to start preparatory discussions—they lack the basic technical information they will need to have any meaningful talks with any other country in the world, big or small. As of today nobody knows whether the UK will keep the EU external tariff, and it does not know what its external tariffs will be. We do not know what industrial sectors will be protected (presumably through higher tariffs) in the prime minister’s new Industrial Policy. Nor do we know which other sectors will have to be opened up further to competition from abroad to compensate for that new industrial protectionism and avoid compensation in the WTO. We do not know what regulatory models the UK will apply once Brexit comes into effect: knowing the precise regulatory details is essential for others to understand non-tariff barriers in the UK. Last, and crucially, the government has not conducted a consultation of UK business sectors to gain a detailed understanding of the market access, tariff and regulatory barriers that are priorities for them. Furthermore, those priorities will depend to a large extent on the access and extent of regulatory barriers that the prime minister negotiates with the EU itself.
The only sensible thing for the government to do is focus first on establishing the outline, at least, of the UK’s future relationship with the EU. Not doing so will lead to meaningless discussions with third countries, which would anyway come at a cost to the UK as they would aggravate its EU partners. The UK would be very likely to pay a price for any such aggravation in the crucial bilateral negotiations with the EU. This should be avoided at all costs.
The desire to start trade talks around the world and so signal that the UK is open to negotiating deals is understandable. But for now any discussions could do as much harm as good.
To find out more about how you can become involved in Prospect’s Trade Challenge programme, please contact david.tl@prospect-magazine.co.uk
You can also receive the full “Brexit Britain: the trade challenge” report as a fully designed PDF document. To do so, simply enter your email below.
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The technical aspects of trade policy have suddenly become a fashionable subject of conversation in the UK. The reason is that under Brexit the UK will lose not only its preferential market access to the European Union but also the access that it currently enjoys to many other markets (from South Korea and Singapore to Mexico and Switzerland) under a network of EU bilateral agreements.
For the government, replacing those agreements has become a matter not just of need but also of national pride. They have nominated a Trade Minister and created a whole new government department to that end. The Minister, Liam Fox, seems determined to emulate the romantic 18th century trade envoys who travelled the world negotiating deals. There has even been talk of using a new royal yacht, the Britannia, as a floating trade conference centre.
Trade policy may have become fashionable, but unfortunately it is neither as straightforward nor as swashbuckling as some seem to think. Bread-and-butter concepts such as size matter—a lot. The world is dominated by trade super-powers (318m consumers in the US, 437m in the EU Single Market excluding the UK, and 1.35bn in China). This is not to suggest, of course, that with 67m consumers the UK will be unable to negotiate bilateral trade agreements. But it means that British negotiators may struggle to avoid agreements that depend on concessions from the smaller partner: the UK.
The new ministry has tried to assemble most of the serving UK officials who have ever had any dealings with trade, regardless of whether or not they have actually negotiated bilateral agreements. They have also sounded out British and foreign officials in Brussels for senior jobs, many of whom have rejected their calls. And in a rather odd move—since the Trade Minister has indicated a willingness to negotiate an early deal with Australia—they have asked Australian negotiators to train the British team, which may give rise to a curious conflict of interest for the Australians.
The British negotiating team will at some point have to face some of the most experienced trade negotiators in the world. So they need to develop their own trade negotiating and regulatory expertise quickly. They should do so not only in relation to bilateral trade negotiations but also in relation to the WTO, since any agreement will need to pass the WTO test to comply with the UK’s international obligations. The good news is that they have some time to do this: since under the EU Treaty the UK is legally prevented from negotiating at all while it remains a member of the EU (until spring 2019 at the earliest) the team now has two years to develop its skills.
Even if they were trained, ready and legally permitted to negotiate, however, the UK teams would still struggle to start preparatory discussions—they lack the basic technical information they will need to have any meaningful talks with any other country in the world, big or small. As of today nobody knows whether the UK will keep the EU external tariff, and it does not know what its external tariffs will be. We do not know what industrial sectors will be protected (presumably through higher tariffs) in the prime minister’s new Industrial Policy. Nor do we know which other sectors will have to be opened up further to competition from abroad to compensate for that new industrial protectionism and avoid compensation in the WTO. We do not know what regulatory models the UK will apply once Brexit comes into effect: knowing the precise regulatory details is essential for others to understand non-tariff barriers in the UK. Last, and crucially, the government has not conducted a consultation of UK business sectors to gain a detailed understanding of the market access, tariff and regulatory barriers that are priorities for them. Furthermore, those priorities will depend to a large extent on the access and extent of regulatory barriers that the prime minister negotiates with the EU itself.
The only sensible thing for the government to do is focus first on establishing the outline, at least, of the UK’s future relationship with the EU. Not doing so will lead to meaningless discussions with third countries, which would anyway come at a cost to the UK as they would aggravate its EU partners. The UK would be very likely to pay a price for any such aggravation in the crucial bilateral negotiations with the EU. This should be avoided at all costs.
The desire to start trade talks around the world and so signal that the UK is open to negotiating deals is understandable. But for now any discussions could do as much harm as good.
To find out more about how you can become involved in Prospect’s Trade Challenge programme, please contact david.tl@prospect-magazine.co.uk
You can also receive the full “Brexit Britain: the trade challenge” report as a fully designed PDF document. To do so, simply enter your email below.
[prosform fields="email,forename,surname" signupcode="Trade" countrycode="GB" redirect="brexit-britain-the-trade-challenge-is-yours"]
When you sign up for this free report, you will also join our free Prospect newsletter.
Prospect takes your privacy seriously. We promise never to rent or sell your e-mail address to any third party. You can unsubscribe from the Prospect newsletter at any time
