UK’s priority to boost global trade after Brexit

For Britain to use EU withdrawal as a chance to rethink the basis of UK trade policy and explore a UK-specific vision; it will have to navigate a path through a new international trade relations landscape.

The most immediate challenges confronting the UK comes from its reduced negotiating power, time pressures, and concerns that the EU will play hardball with the UK to discourage other member states from taking steps like the UK. Divorces are painful, but doesn’t have to be messy – good planning, prioritising tasks, and ability to learn how to live apart yet cordially isn’t that hard. Greenlanders show post-divorce relations can be cordial enough. Nevertheless, they were too small to have been magnanimous for the EU. Therefore a very less comparison is possible between the two.

Ideally, Britain would like to use this withdrawal from the EU as a chance to rethink the basis of UK trade policy and explore a UK-specific vision; it will have to navigate a path through a new international trade relations landscape. Theresa May’s assertion that ‘Brexit means Brexit’ brings assumption that the UK will not remain part of the customs union given that the UK cannot directly negotiate trade agreements with third countries, either in the WTO or bilaterally if it stays in the customs union. This doesn’t serve one of the ambitions of ‘taking back control’.

This article looks into leading think-tanks to get an overview of what are the priorities for the UK before it exits the EU over the next two years. It focuses on what the trade experts deem urgent and feasible regarding negotiating and resetting its place in international trade landscape. Experts at Chatham House highlight that negotiations with the WTO and the EU are the most important targets. Analysts stress that in developing a trading strategy, navigating the detail of specific agreements while striving to manage its strategic objectives is urgent and challenging. The UK needs to reset its place in the WTO before leaving the EU; negotiate FTAs with the major trading partners; and join the TTIP agreement.

WTO

UK Trade Policy Observatory underlined resetting the UK’s place in the WTO crucial and urgent before it leaves the EU. It can risk being in an ambiguous position, despite applying the same tariffs and customs procedures, potentially inflicting legal and diplomatic complexities and possible trade conflicts. So this needs a rapid and active diplomacy with partners in the EU and the WTO. WTO’s recent agreement to slash red tape and cut costs coming into force is somewhat good news for UK Government Brexit negotiators set to face tough talks on the exit.

Key trading partners and emerging economies

The UK will need to engage with 163 WTO members (including the 27 EU member states). It is easier said than done. Experts observe that there are 20 potential new UK FTAs, including China, India, Brazil and various ASEAN members among the emerging markets, as well as the USA, Australia and New Zealand among developed economies. Open Europe suggests establishing FTAs with the US and China would bring the UK’s share of trade covered by FTAs to over 81%, close to Norway.

In setting the criteria for selecting which FTAs to prioritise, experts underlines that the size and diversity of markets, the size of barriers to trade and investment, the growth of domestic demands in areas of British competitiveness, as well as potential partners’ complementarities with UK economic structures matter most. This means negotiating agreements with English-speaking countries could be prioritised. Commonwealth is one potential source of priority partnerships. Because in agreements with the countries where the UK has language, and cultural relations, or the legal system and trade objectives are similar, there are few chances of misunderstandings and mistakes.

Of interesting arguments to ease UK’s burden of negotiation could be applying to join an existing mega-regional agreement like the Trans-Pacific Partnership (TPP), if this gets to the point of signature or implementation, of course. Although the UK will not get to have a say here at this point, experts suggest that signing TTIP at a stroke could be a way of doing a better deal than falling under US’ the most-favoured-nation (MFN) status and scrambling a new deal with the EU.

Trade-offs

To conclude UK’s trade strategy must calibrate to its economic strength, and with a careful assessment of national priorities. When negotiating agreements, it will need to make trade-offs between its core strategic objectives. Mainly because trade agreements almost all the time involve the exchange of goods and ‘service’, including people. Because immigration was one key demands of the British people, it can be a sticky point.