By Charlie Elphicke
Britain is and has always been a great trading nation. One of the most exciting Brexit opportunities for our great country is that we will once again be able to set our own trade policy. There has been much discussion about doing deals across the world, yet less articulation of Britain’s post-Brexit trade policy aims and objectives: the terms of trade, who we trade with and the benefit to our nation. And how we seek to change the balance of our industries for our long term economic sustainability and prosperity. Who, what, why and how – these are the key questions for Britain to be ready on day one for trade.
And we don’t need to wait. Nothing is holding us back in defining our trade policy. Detailed legal analysis shows we have the legal power to negotiate our own free trade deals right now. Deals that can come into effect as soon as we finally leave.
Who? Fast-growing economies.
Why? Because the EU’s own forecasts say that 90% of global growth is set to come from outside the EU. Moreover, during the last four decades, the EU has fallen from 30 per cent of global GDP to 15 per cent today, measured by purchase price parity. By contrast, emerging markets and developing economies have gone from 36 per cent of global GDP to 59 per cent. It’s not hard to see where our long term focus should be – forging closer trading ties with fast growing economies, we will be better placed to grow as they grow. In particular ties with the USA, India, China, Brazil and other emerging markets.
Trade is a two way street. To capture the full advantages, it’s important that Britain is open for business. For nations weighing entering agreements with us will also weigh the benefits to them of access to the UK market. Ensuring a pro-competitive, open economy is important for our own prosperity. It is also essential to concluding successful trade deals. This is why it is necessary for the UK to have full control of trade policy in goods and services – a key reason why we must have unfettered control of all our domestic regulatory authorities.
The EU currently accounts for around half our trade. It is and will remain an important trading partner. So it is right that, as a matter of trade policy, we should seek a free trade agreement with the EU for mutual benefit. There has been a lot of discussion about transitional arrangements: Shanker Singham of the Legatum Institute argues convincingly that an effective transitional step would be to seek to maintain a “no tariff for no tariff” agreement with the EU while a full agreement is being negotiated. Once we fully leave the EU, we should seek to step into the EU’s existing trade agreements around the World.
The benefit to our nation. Trade policy is not just about trade deals. It also means that we can decide the tariffs and terms of trade that work best for our own economy. Policy Exchange has highlighted how reducing tariffs on food could mean lower food bills for consumers. The Legatum Institute highlights how we can cut tariffs on unfinished goods to reduce the cost of supplies required by UK industry to make finished goods and boost the employment of UK based workers. The Solar Trade Association argues that cutting high tariffs on solar panels would help encourage the greater adoption of solar energy.
Trade policy is not just about tariffs. It is also about regulatory barriers and behind the border protectionism. These barriers particularly affect UK businesses, especially in the services sector. There is a lot we can do to help our own exporters by making sure that our regulatory system is more competitive. We can also help them understand the many ways they can boost exports through trusted trader programmes and the like.
Fair trade, free trade. The freedom to make free trade agreements can form an extension of our international aid policy. We could adopt a policy of “fair trade, free trade” with the African, Caribbean and Pacific nations that suffer most from poverty. Such a policy – especially for foods and goods we do not ourselves produce – will do much to support the economic development of those nations as well as get a better deal for our consumers.
The How. Trade policy is not just a matter for the Department of International Trade. In deciding the balance of our industries for our long-term economic sustainability and prosperity, many Government departments are involved. Industrial strategy sits with BEIS. DEFRA is responsible for farming. The Treasury worries about banks. DCMS is responsible for tourism and the digital economy. Overall, Brexit negotiations are led by DexEU. Effective co-ordination in a silo system of Government is challenging yet critical. In times past, the link between trade and industrial strategy was well understood: indeed we had a Department for Trade and Industry. As we move forward, the how to best manage overall trade policy needs to be carefully co-ordinated and accountable to Parliament.
There are fewer than 600 days to go until we leave the European Union. The clock is now ticking. We need to be prepared for every eventuality. The right trade policy will enable Britain to grow faster by growing trade with growing nations. The purpose of this series of articles has been to discuss how we can be prepared and ready on day one to manage customs, immigration, Ireland, tax and trade. For the readier we are, the sooner we will be able to embrace the exciting opportunities for our nation that lie ahead.