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David Davis’ trade deal fantasies

by Sam Ashworth-Hayes | 19.07.2016

As chief Brexit negotiator, David Davis is entitled to be optimistic about our prospects. But when he told Sky’s Dermot Murnaghan Britain will get “a very, very large trade area, much bigger than the European Union, probably ten times the size” he veered into make-believe. A trade area that large would be twice the size of the global economy.

Davis’ office explained his comments to InFacts by saying he “was referring to a negotiated trade area. The EU has negotiated trade deals with countries whose total GDP is around $8 trillion… If we get new trade deals with just the US and China then we would have trade deals with economies valued at almost $30 trillion. And at the same time of course we will also be seeking deals with Hong Kong, Canada, Australia, India, Japan, Indonesia – and many others.”

Even without this hang-up, Davis’ vision of his colleague, the trade secretary Liam Fox, “going around the world… making trade deals, huge trade deals all over the place” neglects some practical difficulties. The UK has around 20 active trade negotiators, a new deal with the EU to sort out, and existing trade deals with over 50 countries to replace.

To suggest as Davis has that we will leave to find “fully negotiated” deals with multiple new nations awaiting us is naïve. Davis’ office told InFacts: “Given the time taken for other single countries to negotiate trade deals, this ambition appears to be in line with global precedents (see Chile, Switzerland, South Korea, Singapore).”

In a similar vein, Davis appears to have promised rather more from a deal with the EU than can realistically be delivered. The minister says that “once the European nations realise we will not budge on control of our borders, they will want to talk”, paving the way for single market access without free movement. It would be “irrational” if they didn’t.

The reality is that it would be irrational if they did. Though it would not be in the EU’s interests to punish Britain unfairly, offering the UK a sweetheart deal would encourage eurosceptics in other nations. France’s Front National, for instance, would be emboldened in its calls to end free movement. Other countries looking to relieve themselves of burdensome commitments could threaten to quit the bloc unless they too got special treatment.

Even without these incentives, the EU may not be in the mood to do Britain any favours if  the UK adopts Davis’ advice of negotiating free trade deals with other countries before we leave. As an EU member state, we are not allowed to negotiate free trade deals.  But, according to Davis’ office, “the spirit of EU rules governing trade negotiations is not that countries exiting the EU should be prohibited from negotiating new deals in expectation of that exit – there is clearly no such intention within the rules.”

Davis may be jumping the gun. But whether or not these rules apply to us after we begin the process of leaving is up for unclear, according to Steve Peers, law professor at Essex University.

Finally, Davis feels we might still get a special deal because “everyone knows the balance of trade is in Europe’s favour”. It is true that the EU sells more to us than we sell to it, but that tells us nothing about who benefits more from the trade.

In short, the EU has no incentive to give us a deal that preserves our current level of access to the single market, with no commitment to free movement. At the same time, we are not well placed to arrange new trade deals to cushion our departure from the bloc.

Edited by Hugo Dixon