The future of British trade is one of the most important economic questions we face. UK imports and exports are together worth £1.3tn and outside the EU we will in theory have the freedom to strike independent deals. The opportunities and risks now drive furious debate. Sceptics worry all this is coming at the wrong time, with protectionism on the rise around the world. Optimists think we can return to a proud free-trading past. All of us have an interest in securing the best outcome.
The man tasked with delivering that is Liam Fox, the International Trade Secretary. A prominent Leaver with almost religious faith in the project, Fox has spent the past three years travelling the globe (racking up 290,000 air miles) lobbyingfor British business and seeking to lay the groundwork for new agreements. The focus is the emergence of new global markets, cutting-edge technologies—in short, new opportunities for British business in the 21st century. His UK base is a grand room in the Foreign Office, with a globe on the desk, an “I love free trade” mug on the bookcase and an atlas of the world on the coffee table. No doubt that’s sincere, but it would raise eyebrows with the many economists who have pointed out the dangers of pulling out of the largest and most integrated free-trading bloc in the world.
We started from the firm assumption that Britain must remain a leadingglobal trader. “We are instinctively a free-trading nation,” the 57-year-old Scot said when I sat down with him one sunny afternoon in February. “‘Tariffs are taxes’ is a slogan of this room... we are very keen that all the signals we send out as we leave the EU suggest that Britain is a free trading country and will move in the direction of liberalisation.”
Would we ever lower standards to do a deal, say, with the US? “Only if we agreed to them.”
The crucial thing is to look long term. “It’s very important that we start to discuss that there is a world beyond Europe and a time beyond Brexit. So much of our political discourse is based on looking at the world and our trade as it is today without extrapolating it forward.” Lookto the biggest developing economies, a group of which “will have overtaken the G7 by 2050.” This is where growth will be concentrated. For most economists it would be better to negotiate access from within Europe, safeguarding the vast trade we do with the 27. But there is no doubt that UK exporters have excitingnew opportunities.
“What developing countries... need to move to the next level of development is what Britain already produces in spades, the financial services, the banking services, the insurance services. Planning, design, project management... in other words what the world currently demands in the knowledge economy, shelves are already stacked full of it in the UK.”
Fox has previously come in for criticism, some of it justified, for complacency about the challenges of Brexit. But there was no doubting his passion for UK industry.
British exporters have been putting in “a huge performance,” he said, “especially in 2017, we saw British exports rise10.9 per cent when global trade growth was about 3.4 per cent. There is a downside, however, in that a lot of that was produced by our current exporters doing more, rather than new exporters coming in. So if you look at our best performing regions, in the west Midlands [there was a] 15.4 per cent increase in exports, [but the] number of exporters was up 0.9 per cent.” Unless “we bring in new exporters of both goods and services we will not be able to reap the benefits” of global trade.
“Would we ever lower standards to do a deal, say, with the US? ‘Only if we agreed to them’”How do you bring them in? And how do you get the established traders doing more? “We set out our export strategy last year and we based it on a consultation” with business. It came back with “very clear things.” They “said we want to be better informed, so... that meant the regulatory environment... they’d be selling into. They said we wantto be better connected. We may have a big deal that we want to close with another country and we don’t know when ministers will be visiting so that we can lobby [them]. So now we publish our ministerial visitsin advance online. The [next] thing theysaid was finance. UK export finance is a... £50bn facility, of which we’re only using about £20bn at the moment. It’s there to make sure no [viable] British business or export fails from lack of finance or insurance. They said it takes too long to access if you’re a small business.” Lastly, they said “we want an online system where we can talk to companies like ourselves.” There is plenty to be getting on with.
Keeping British businesses on side—and giving them access to the right tools—is a crucial part of the job. But so is striking those deals to open up new markets. Very big promises were made on this front,so what are the goals? “We’ve done the public consultation on the US, Australia, New Zealand, and potentially accessionto CPTPP,” Fox said, referring to the new version of the trans-Pacific partnership, taking in 11 countries.
An “America First” administration will not give us something for nothing. That’s where food standards and the infamous “chlorinated chicken” come in. There is justified concern that in a race to sign deals Britain will accept low-quality produce from overseas. “You obviously have to give ground on something if you want something,” Fox said when I asked generally about concessions in trade. But “we’re not going to be able to compete at the low quality, low cost end of the global market. Our consumers at home wouldn’t tolerate it, and the people we sell to abroad wouldn’t want it. So it makes no sense economically to do that at all.”
What is the ultimate hope? “Since the creation of the World Trade Organisation we’ve seen real liberalising in global goods and the cost of goods trade has gone down enormously... We have not seen the same in services—services are not so liberalised. And yet we are a primarily services economy. And so for us the great prize would be a global agreement on services.” Such an agreement would certainly count as a triumph. To see the appeal consider that services comprise 80 per cent of the UK economy. “There’s no doubt that’s the place for us, where that value for Britain is in the global economy,” Fox said.
“For us the great prize would be a global agreement on services”
“So much is said about ‘gravity models,’” he added, “which tend to be around goods, [and show] that you’ll sell more goods to your immediate neighbours because some of your goods are perishable. That’s a reasonable assumption. But that’s not true in fintech, that’s not true in legal services.” Recent research suggests the gravitymodel does apply in services as a whole: the question is “a disputed point” Fox admitted.
Trade is complicated and there are always losers. But they are vastly outnumberedby the winners. “We’ve seen in the last decade, the last generation, how free trade has taken more people out of abject poverty than at any time in human history. In China. Look at India. Just look at the rise of the world’s middle class. It’s a tremendous achievement.”
Whatever happens with Brexit, thereis no question that Britain will remain a trading powerhouse, as it has been for centuries. “Remember that we’re at the centre of the commonwealth, we’ve got a strong relationship with the US, we’ve got the ‘five eyes’ [intelligence grouping], we’ve got a whole range of different relationships. A lot of countries are looking to us for an example.” Get it right and the benefitsare enormous. Free trade “is the best way to spread prosperity more evenly, to give opportunity to more people, and at the same time improve our own security. And that’s the argument that needs toget made.”
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