What’s next for UK trade?By Sarah Hodes
With a confirmed trade deal with Australia and another on the horizon with New Zealand, what’s next for the UK’s post-Brexit trade policy and partnerships with key developing nations?
With the election of Joe Biden in 2020, many in the UK were hopeful that a more open international outlook compared to that of his predecessor could lead to more mutually beneficial terms on which to agree to a trade deal with the US. Instead, the new administration continues the ‘America first’ agenda initiated by the previous administration, albeit with a friendlier veneer following the President’s declaration of ‘America is back’. Coupled with the ongoing debate on the Northern Ireland Protocol (NIP), to which a vocal Irish American Joe Biden has proven quite allergic, and any hopes of great swathes of British goods traversing the Atlantic seem to have been put firmly on ice.
Meanwhile, the UK and EU are still negotiating aspects of post-Brexit trade, and while there is progress, the mound of agreements still to be made is looming large. There was an agreement reached over the highly contested area of fisheries towards the end of last year, with the Foreign Secretary Liz Truss having taken over negotiations following David Frost’s resignation. The top priority for Truss and the UK is the aforementioned NIP. Truss has threatened to trigger Article 16, which could lead to tariffs, a suspension of the current Brexit trade deal or even a termination of the trade elements or the whole Brexit deal. EU chief Brexit negotiator Maros Sefcovic has indicated that Northern Ireland talks could conclude at the end of next month although experts question this timeline with Truss’s constructive tone. Like Northern Ireland, the flow of goods at the Spanish border of Gibraltar must be negotiated as it is a UK territory that shares a land border with Spain. Although full details have not been announced, the UK and Spain have come to an agreement regarding the Rock which will now be written into a formal EU-UK treaty. Truss’s ability to successfully negotiate the loose ends of Brexit, particularly the NIP, will not only impact future relations with Northern Ireland, Ireland and the EU, but also the US for the rest of the Biden administration, as well as her own political career.
Of course, part of the great appeal of Brexit was to form an independent foreign and trade policy. Indeed, the UK now has the opportunity to reach a free trade agreement with India. Undoubtedly, there are great benefits to be secured. But like with the US and the EU, doing a deal is laced with potentially fatal compromises, politically at least. The main selling point is that India is predicted to become the world’s third-largest economy by 2050, a vibrant and booming market for goods. Yet, India has a history of protectionist trade policy, despite recently finalising deals with the UAE and Russia. India’s unpredictability, such as pulling out of the Regional Comprehensive Economic Partnership (RCEP) free trade deal last minute and failing to complete the final hurdles in a trade deal with Australia, show a state ready to act in its interest at any time, no matter the situation. Unfortunately for the UK, a quick comparison of market size suggests only one winner. Indeed, a major point of negotiation before talks was if the UK would decrease fees for visa applications as it had done for the Australian trade deal but Boris Johnson has stated that the UK will not be forced to ease immigration rules in the hope of securing a trade deal, which could be a red line for Indian PM Narendra Modi. Talks are set to begin early this year, but I wouldn’t get my hopes up given the UK denial of easing immigration.
The most promising option seems to be the UK joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which is currently made up of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. It was announced on 2 June 2021 that the CPTPP Commission had agreed to formally start UK accession negotiations. Becoming a member of the CPTPP represents an opportunity for the UK to join a growing and dynamic free trade area that currently represents around 13% of global GDP and potentially more in the future with the addition of more partners. The agreement would entail the removal of tariffs on 95% of the goods traded between members and freedom to set their new regulations, with member countries holding each other accountable for meeting their own trading rules. Deeper market access would domestically support jobs and drive economic growth as well as create opportunities for businesses. This would be a major win for the UK as it would have control over its regulations which was one of the driving arguments behind Brexit. Current CPTPP members are important investment and trade partners for the UK, and with membership, UK exports to the group could grow up to 65% in the coming years, according to government estimates. CPTPP membership is predicted to support levelling up in every region and nation of the UK, particularly the West Midlands, Northern Ireland, and Scotland which export the most to the CPTPP from the union. According to government estimates, there could be a £261 million combined increase in output for the three nations representing £53m for Wales, £163m for Scotland and £45m for Northern Ireland. This would be of great importance to the government to reason against Scotland voting to leave the UK. The primary downside of the UK joining the agreement would be the cost for businesses to ship such great distances. Former International Trade Secretary and current Foreign Secretary, Liz Truss, had hoped to secure a place in CPTPP by the end of 2022. The CPTPP would not only be a huge win for the UK economy but also for the Conservative Government, serving as proof that Brexit delivered economic growth and opportunity with external trade deals and sovereignty over laws and policy that the Leave campaign specifically fought for.
So far, the UK has managed to roll over several trade deals in place from when it was a member of the EU. It has also managed to secure several trade deals with countries from outside of the continent, in a kind of homage to the Brexit ideal. However, some of the biggest opportunities for trade, namely the US, India and, yes, the EU, are still lacking trade agreements. For all of these, a deal would require substantial compromise. The question, as ever, remains what compromises Britain is prepared to make to show the world its true ‘global vision’.