The Global Britain project is marching on. Earlier this month the UK agreed an historic trade with Japan, with only the finer details left to be tied up. A second round of trade talks with Australia gets under way this week. And discussions with Canada are back on the table.
Progress is easier on free trade agreements (FTAs) that are more a matter of “copying and pasting” those already negotiated between third-party countries and the EU. But experts stress this is no reason to underestimate the benefits of rollovers.
“In a world where there’s increasing economic nationalism, the value of locking in existing market access shouldn’t be taken for granted,” says Stephen Booth of the Policy Exchange think tank.
Even a “phase one” transitional arrangement with Ottawa, for example, would help to preserve the trading relationship carved out in the EU-Canada Comprehensive Economic and Trade Agreement.
Goldy Hyder, president and chief executive of the Business Council of Canada, says: “We need to know what Jan 1, 2021, is going to look like before this year expires. We just want to make sure there’s a clear path forward.”
The UK is targeting a number of trade deals around the world as it prepares to leave the EU at the end of this year.
Japan deal offers stability
A deal with Japan would give businesses continuity in the face of all the Covid-19 uncertainty, according to Minako Morita-Jaeger, a fellow at the UK Trade Policy Observatory at the University of Sussex.
She admits, however, that its significance would be more political: “Japan is a good showcase as the world’s third-largest economy. It demonstrates the UK’s capacity to strike a trade deal as an independent country with non-EU countries.”
But she is sceptical of Trade Secretary Liz Truss’s triumphant claims to have negotiated a better deal for the UK than Brussels won from Tokyo. One particular source of disappointment was the seeming lack of a comprehensive chapter on investment, which Morita-Jaeger says is “completely missing from the agreement, in my reading of the press releases from both sides”.
Another worry is the compromise on agriculture. The UK will be left only with the scraps of the EU’s quotas for reduced tariffs on items such as Stilton cheese.
Nick von Westenholz, director of EU exit and international trade at the National Farmers Union, says: “The concern is that, over time, as the EU and UK increase their exports to Japan, the tariff rate quotas start filling up year on year.”
Coronavirus and Brexit complicate UK-US talks
Other deals that start without an EU blueprint are harder to negotiate. Sources close to discussions with the US, having already thought a deal was impossible before the November presidential election, now say one is unlikely at all, with Washington distracted by the pandemic and the President’s authority to negotiate trade deals up for renewal next July.
“Once momentum goes, it may never return,” they lament, citing three years of talks on the Transatlantic Trade and Investment Partnership, which ended in 2016 without conclusion.
An announcement of a chapter on small and medium-sized enterprises, expected weeks ago, came to nothing.
The Brexit trade talks aren’t helping. Mick Mulvaney, US President Donald Trump’s special envoy to Northern Ireland, cautioned against creating a “hard border by accident” on the island of Ireland via the recently tabled Internal Market Bill. Joe Biden said that if he won the White House, there would be no US trade deal unless Britain honoured the Good Friday Agreement.
Agriculture has been another seemingly intractable stumbling block, with US farm lobby groups calling for a chapter on food standards to be written into a deal. But Truss insists they are “off the table” – an issue for the independent Food Standards Agency.
EU exit could push UK standards closer to WTO
Regrettably for all observers of trade, the issue of hormone-fed beef is likely to rear its head in Britain’s talks with all other countries that do not already have a deal with the EU, such as Australia and New Zealand.
“The UK will be under more pressure to bring its attitude in line with the global centre of gravity,” Booth says.
“Away from the EU’s precautionary principle that you ban things because they might be dangerous and more in line with the World Trade Organisation’s principle that you can’t ban things just because you don’t like the way they’re produced.”
Nonetheless, Elizabeth Ames, chair of the Australia Institute at King’s College London and a former Australian trade negotiator from 2009 to 2015, claims Britain need not worry about Australian food standards or an onslaught of Australian beef, lamb and wheat.
“Australia already struggles to keep up with the demand from east Asia for its products and it takes a long time to set up a logistics chain to export agricultural products safely,” she says.
“Australia also has lots of space so there’s more free animal rearing and the Australian public doesn’t have the tolerance for the sorts of farming practices you see more in the US.”
She predicts an Australia deal could be completed by the middle of next year. Speaking to MPs on Wednesday, she will argue that services and digital trade – instead of agriculture – should be centralised in the campaign for Global Britain.
“There’s a real opportunity for the UK to go further in its services chapters with Australia than it has in other agreements – on regulatory alignment, mutual recognition of qualifications and visa conditions for skilled workers to move between the two countries,” she argues.
Trade with Australia, while not negligible, has plenty of room to grow compared to other large countries like the US and China.
Ames adds: “The best way for the UK to demonstrate to countries that are part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership that it can really be a full participant in the agreement is to make these very high-quality bilateral deals – with Japan, Australia and New Zealand – on digital trade, services and intellectual property.”
But no matter how well the Global Britain project advances, “all trade deals pale in significance compared to the volume of trade we do with the EU”, von Westenholz notes.
He, like most business leaders, would rather have trade deals negotiated well than rushed to validate Brexit. The Government has set an ambition to secure FTAs with countries covering 80pc of UK trade within the next three years.
“There was this enthusiasm for doing quick deals all over the place, which made us very worried,” he says. “As we’re seeing with the US and others, issues come to the fore that are difficult to resolve and need time, and in the worst-case scenario, the two sides may not come to a deal.”
For DIT’s new army of negotiators shaping the UK’s trade fortunes for the first time in 47 years, some busy – and potentially turbulent – days lie ahead.