The UK's trade priorities after Brexit

I was asked by Prospect Magazine to write about the UK government's trade priorities after Brexit. Here is the full piece.

To Brexit’s dreamiest proponents, the UK’s decision to leave the EU will reignite the Commonwealth as a trading bloc and herald a glorious new era of global free trade. To its fiercest sceptics, it will leave us a minnow with neither the regulatory heft nor market size to negotiate decent free trade agreements (FTAs).

As ever, reality nestles somewhere between the hyperbole. Brexit will be disruptive as we move from the EU’s regulatory orbit and open ourselves to international competition. However, ours is the world’s fifth largest economy, strong in services, engineering, science and digital technology. With skill, boldness and verve, the UK can eventually emerge a nimbler, more dynamic economy better positioned to plug into growth markets, secure value and choice for British consumers, and shape global standards on services. So how should we begin our journey to that destination?

It is to state the obvious, but our urgent priority must be to define our future relationship with the EU in a way that leaves room for a truly independent trade policy. Immediately after the referendum, the most audacious strategists suggested the UK thrash out the terms of that relationship while running parallel FTA negotiations with new partners. The government quickly concluded it lacked the bandwidth for that option and bowed to the EU’s sequencing of the withdrawal and trade negotiations. This has effectively put on ice any meaningful progress in drawing up a proper UK trade strategy. ‘We are keen to work with you’, say many non-EU counterparts, ‘but it is hard to move forward without clarity on the extent of your future ties to Brussels’.

The Prime Minister has laid out her own preference for those ties in the Chequers plan, proposing to bind the UK by treaty to EU rules on goods and agriculture in exchange for frictionless trade. As President Trump’s matter of fact intervention on the issue made clear, this would severely limit the scope and value of any new FTAs we might strike – a view shared by former New Zealand High Commissioner, Sir Lockwood Smith, who told our Trade Committee, ‘If you remain bound into the EU regulatory system you will not be able to have a significant global trade strategy, and certainly not a smart one.’

We must return to the Canada Plus Plus Plus option of a comprehensive EU-UK FTA, and step up progress in establishing our own trading architecture to prepare for any eventuality. The Trade and Customs Bills make way for a UK Trade Remedies Authority (TRA), independent customs regime and the rolling over of those FTAs to which we are currently party as a member of the EU. These steps should be accompanied by a package of measures to aid trade facilitation and turbocharge our business environment to offset any potential increase in post-Brexit tariffs. We should make clear our openness to global talent and innovation as part of a joined-up inward investment strategy and bind these efforts into a compelling vision of the UK’s post-Brexit role as we urgently flesh out the Global Britain narrative.

We are making good progress in submitting our schedules as a fully independent member of the World Trade Organisation. However, we face challenge by nations like the US and New Zealand over the divvying up of tariff rate quotas, which affect the volume of goods third countries can export to the EU tariff-free. These disputes are eminently more soluble if the UK can offer, through ambitious FTAs, the realistic prospect of improved market access to those exporters disadvantaged by Brexit. However, the UK has not presided over its own, fully independent trade policy for forty years and while urgency must be injected into the development of stronger trading links with the likes of the US, India and China, negotiations will be complex and require careful consideration of potential trade-offs.

FTAs are not a panacea, and we should avoid entering into substandard deals out of political imperative. Instead they should be viewed as catalysts through which broader trade objectives can be fulfilled. The government rightly sees Australia and New Zealand as good places to start in this regard. Neither economy is especially large but both have valuable experience from which we can learn. New Zealand was the first country to strike an FTA with China and each Antipodean nation has suggested smarter ways in which we might work together, for example in fulfilling the demands of the burgeoning Chinese middle classes for safe, high quality agricultural produce.

We can also give fresh impetus to Australia and Singapore’s pioneering work at the WTO on e-commerce and the dismantling of barriers to digital trade, playing a more active role in the development of global standards for the kinds of services that now account for eighty per cent of the UK economy. Deeper bilateral ties to these nations would lay a strong foundation for UK involvement in the CPTPP, the ambitious successor of the Trans-Pacific Partnership.

The US and UK have already set up a working group to discuss stronger trading ties post-Brexit. This work needs to be accelerated, energised and given greater profile. Without transparency and informed public debate, intelligent analysis of the pros and cons of any US-UK FTA will be suffocated by a miasma of panic over chlorinated chicken and an Americanised NHS. The Department of International Trade is already investing heavily in more personnel across the United States but to maximise opportunities for UK businesses we shall need much deeper engagement at state level, where services like insurance are regulated.

Finally, we should in time replace unpopular Economic Partnership Agreements, which currently govern our trading relationships with some of the least developed countries, with trade policies that integrate the work of the UK’s internationally-facing departments and fulfil broader security, diplomatic and development objectives. As part of this approach, the UK could offer unilateral preferences and move away from the EU’s hazard-based model of food and agriculture regulation, which seeks to protect European farmers from competition. This would lower prices and increase choice for UK consumers, nurture sustainable value-adding industries in developing countries and allow our own life sciences sector to develop more sophisticated and technologically-innovative ways of managing land.

Charting our new path beyond the EU will not be easy and it is important that we take a clear-eyed, nostalgia-free view of what contemporary Britain can offer the world and vice versa. However, those who believe the UK to be an irrelevance in international trade are wrong. Get our strategy right and Britain can be at the very forefront of the trade in and governance of the new technologies, products and services that will be changing people’s lives in the twenty-first century.

Julia Lopez MP

Hornchurch & Upminster

Member of House of Commons’ Select Committee for International Trade