The Centre for Inclusive Trade Policy in conjunction with Chatham House and Resolution Foundation held their first UK Trade Policy Forum since the Covid-19 Pandemic on February 28th, 2023. This forum provided an opportune time to reflect on the aftershocks of the pandemic, Russia’s war in Ukraine and what exactly is happening at Number 10 regarding UK trade policy. There were keen insights on the trade-offs of trade policy options, fairness of trade, the impact of climate change on trade policy, supply chain resilience, the impact of FTAs on food and agriculture standards and a comprehensive discussion on digital trade.
For me, these were some of the key takeaways I got from the day’s conversations.
- ‘All roads lead to Europe’- The UK must find a way to construct and finalise a deal with Europe as its key trade partners especially when it comes to trade in services. The current TCA is under review as its implementation has been marred with frictions. However, the Windsor Framework serves as a beacon of potential partnership with Europe going forward. While the UK is and continues to form partnerships with Australia, New Zealand and has concluded CPTPP accession negotiations, Europe remains a major and closest trading partner that cannot be ignored. Thus, there is a need for a clear strategy to update; and settle on a good working relationship going forward.
- The geopolitical dimensions of trade will be even more critical than normal over this decade. Trade policy has become highly politicised and weaponised for negotiations and other policy reasons beyond fostering trade relations. The sanctions levied against Russia and the increasing concern over policy rivalry with China on everything from semi-conductors to chips; has signalled the shifts we see in trade relations and its impact on the global economy but also domestically. For example, concerns surrounding security, especially, data security with China. Nonetheless, there are other sectors where trade with China is clearly commercially viable and does not raise security concerns, e.g., education, consumer goods, etc.; serve as middle ground sectors that need to be reinforced. In essence, I advocate for a selective decoupling. Thus, a balancing act/framework needs to be adapted for the losses and gains. Especially for the UK, which will need to have multilateral discussions with its allies. Listen to our podcast on the impact of Russia’s war on trade policy here.
- Climate/Environmental Policy: This needs to be embedded into how we discuss trade and not relegated to being an add-on to trade policy. We have experienced the impact of pandemics and natural disasters in disrupting trade and supply-chain efficiencies. Thus, there must be an adaptation of climate policy into trade strategies. The panel echoed a preference for subsidies over other forms of interventions. They argued that subsidies were directed towards decarbonisation as its primary goal. While, securing of value chains serves as a secondary objective, which could make decarbonization costly as we are no longer getting things from least cost sources. They also discussed the importance of implementing the EU’s CBAM as a mechanism of achieving these goals. Hence, I believe adapting their recommendation begins with a domestic approach to integrate these policies together. This is embodied in the USA’s Inflation Reduction Act (IRA), though has elements of protectionism, it does generate investments into green goods. This can serve as a good model to embed climate policy into fiscal and monetary policies. In sum, rather than consider climate as an afterthought, it is more imperative; that it is at the foundation of sustainable trade policy. I recommend listening to our podcasts on climate change and circular economy for more in-depth discussions.
- Agriculture and Trade: The UK agriculture market has been most affected by recent Free Trade Agreements (FTAs). For example, the UK-Australia and UK-New Zealand FTAs are considered ‘ultra-liberal’; as the UK barriers are quite low which has been reciprocated but UK producers stands to suffer from greater costs (although, the idea is that trade will be fully liberalized in 15 years). This has become a huge concern and impacted domestic farmers while the consumers benefit greatly from this deal. If the ratio of consumers to farmers are considered, there is a net gain/benefit from the UK-Australia and UK-New Zealand FTAs for the UK market overall. Moreover, it seems the UK has relaxed certain standards for these FTA which could affect agriculture exports to the EU or other trading partners, because the relaxed standard with Australia means a weakening of regulatory enforcement in the UK. Moreover, agriculture trade is quite opaque in nature, thus, the UK needs a concrete trade strategy. The panellists highlighted the over-reliance on supermarkets to ensure food security; and recommended that the govt. needs to strategise how to strengthen domestic food resilience to help balance out the losses within the industry.
- Digital Trade: There is no question that digitalisation of trade will be defining over the next decade. The big elephant in the room, ‘what exactly is digital trade?’ This is a version of trade that is centred around e-commerce and trade in services. Thus, it consists of cross-border data sharing, user-generated services, digital facilitation (e-documents and signatures). In essence, it streamlines traditional trade. However, digital trade is highly unrecorded because digital intermediaries make it difficult to track. For example, there are markets such as online advertisements and platforms that enable business transactions for free. The discussion highlighted the need for strong government frameworks to regulate this arena and understand the markets and services it covers. Especially, with digital content. The publishing industry seems to be highly impacted as digital trade ignores how the pie is shared; which ensures that publishers are fairly compensated for their outputs. Some countries such as Australia has offered some solutions via its News Media Bargaining Code. There is a growing need for governance around data and coherence in public policy objectives. Nonetheless, we still have a many more questions to resolve before we can accurately decide on an ideal regulatory framework both domestically and globally.
- ‘All eyes on Asia’ – It is evident that there is a growing middle class within the continent, especially in countries like Indonesia, will have a huge impact on trade flows. There will be new consumers of services and could potentially driver greater global integration over the next decade. Also, the question of how to move forward with negotiations with India was discussed briefly. I recommend listening to our podcast on Asia trade policy for a bit more insight (Listen here).
What would I like to see at the future forums? I think in this first forum, there was a lot of focus on UK trade relations with Europe, Asia, and even the USA, which is all relevant given the level of urgency centred across these issues and relations. However, I would like to have a discussion on the potential relations with the Middle East and Africa. For example, in 2022 the UK committed to supporting South Africa’s drive for economic growth; via infrastructure development and provide technical assistance to unlock green-hydrogen opportunities. Yet, it seems as though the progress on moving these relationships forward are not top of mind. Hence, I believe that over the next year, there will need to be significant choices and negotiations to move forward.
Overall, the forum tackled the challenges that currently surround UK trade and global trade policy. The various panels and keynote sessions offered some insight on potential solutions that could be adopted. I personally look forward to the next forum and hope we will see even more progress beyond current realities.