Expert View

Another Brexiter false promise: trade with rest of world

by Michael Emerson | 14.09.2017

Michael Emerson is Associate Senior Research Fellow at the Centre for European Policy Studies (CEPS), Brussels.

Liam Fox keeps saying that the UK will be able to make fantastic new trade deals with the rest of the world. This is another false promise by the Brexit brigade.

Our international trade secretary cannot legally negotiate any free trade deal until after withdrawal has happened. But Fox has still been able to explore the prospects – and they are not looking good.

Let’s divide the world into three categories:

1. Well over 100 countries with which the EU already has free trade or other preferential agreements actually in force or requiring only final formalities.

Here there is no possible gain. Indeed, we will go backwards unless the UK can rapidly conclude free trade deals after withdrawal. Theresa May’s desire for a transitional deal to avoid a cliff edge when we quit the EU would do nothing to help here, as Brussels can’t commit these other countries. This group includes almost all of Europe, a group of advanced trading nations such as South Korea and Canada, an increasing number of South-East Asian states such as Singapore and Vietnam, and developing countries in Africa, the Caribbean and the Pacific.

2. Countries with which the EU is currently negotiating free trade agreements.

This includes Japan, India, Mercosur (which includes Brazil and Argentina), Australia and New Zealand. The general story here is that these countries will give priority to concluding deals with the EU, and so the only issue is again how far the UK might minimise losses at least for the extra time it will need to play catch up. The prime minister went to Japan recently only to learn there that the EU comes first. India has responded by saying that they want easier immigration rules from the UK. Fox loves to talk about Australia and New Zealand but they are only medium to small players, which want to deal first with the EU. Oh, and Australia wants easier immigration rules.

3. Countries where the EU has no agreements in operation or under negotiation.

The main ones are the US (the TTIP negotiations are suspended), China and Russia This is the only category where the UK can logically aim at getting ahead of the EU. But there are problems with each.

a. US

Donald Trump is protectionist and unreliable in his general trade policy. In any case, it is Congress that has the last word. What’s more, if negotiations begin with the US, its lobbies will be out in force, either to cede no ground on “buy America first” or to promote specific sectoral interests fiercely. Fox learned about chlorinated chicken in Washington recently. If the UK accepts this and US GMO regulations, it will wreck its food exports to the EU.

b. China

China might be willing to cut a free trade deal, but this would wreak havoc in the UK’s industrial base hitting hardest those traditional industrial communities that voted to leave the EU. There should be no illusions that the UK could become China’s manufacturing base of choice for accessing the big EU market. The EU’s rules of origin will stop that.

3. Russia

Russia might also be willing to cut a deal because this would undermine the EU’s sanctions following Vladimir Putin’s annexation of Crimea. But this would mean a 180-degree volte face for UK foreign policy, leading to a total loss of reputation and standing as a close partner of the EU.

Terribly sorry, Liam Fox, your mission is impossible.

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    Edited by Hugo Dixon

    4 Responses to “Another Brexiter false promise: trade with rest of world”

    • The obvious point is that no country will want to spend time and money negotiating with the UK until they know what its status will be. A trade deal where the UK is within the Single Market would be very different from one where it is within EFTA which would be different from being alone.

      Until the final post-transition status is defined, no serious talks will take place.

      • The answer to your question as to why Fox is going around the world looking to hire experienced trade negotiators is simple. The UK has very few people with this experience. For the last forty three years, all of our trade negotiations have been done through the EEC and latterly the EU. There are British people with experience but they currently are employed for the EU. These people are not enough as each trade deal can take typically around seven years to complete. If sides are more convivial, then that time might well come down. Also, the more complex the trade deal is, the longer it would take to complete. Currently, we have enough people to be able to handle two trade deals at once and that we need trade deals with around 65 countries to get to the same position as we currently enjoy the benefits of under our EU membership. The mathematics of this therefore necessitates that we need to hire a lot of people very quickly in order to be able to handle more than two trade deals at the same time. We have to be able to get through the workload or we will find that we will leave the EU with the prospect of the first two trade deals being years down the road. Michael Dougan, the Liverpool university professor who actually lectures on this said that with our current capability, it would take us over two hundred years to complete the deals we currently have under our membership of the EU.

    • I find it difficult to understand why other trading blocks would give a more favourable trading deal to one country than they would to a trading block the size of the EU. In my supermarket, I can already get apples from non-EU countries such as New Zealand and oranges from South Africa. Are we saying that Fox’s team are going to have more clout in negotiations than as part of a 500 million plus trading block?