Global Britain: What are the UK’s trading opportunities outside the EU?
For the first time in 40 years, the UK will forge its own path as an independent trading nation. This will bring with it a plethora of new opportunities and challenges, writes Dods Monitoring's Nabil Rastani.
With an estimated 90 percent of global growth taking place outside of Europe, the Government is seeking to build a multifaceted approach to trade in order to tap into these lucrative opportunities. This has culminated in the Global Britain strategy.
Fundamentally, Global Britain seeks to reorient the UK’s trading policy away from European by expanding ties with the US, developing markets as well as integrating itself within multilateral arrangements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). But as trade negotiators are increasingly discovering, building an entirely new trade policy is both a lengthy and arduous process.
US / UK Trade - “it’s going to be huge”
For many in the Government, a US deal would achieve more than merely economic yields- it is a point of ideological contestation.
A newly forged trade agreement would help cement the UK’s identity as an Atlanticist state, underpinned by a neo-liberal framework. This would be in stark contrast with the traditional internationalism espoused by the European Union.
A deep and comprehensive trade agreement could see a boost in exports for a plethora of sectors, including agriculture, aerospace and pharmaceuticals. Indeed, it is expected that if a deep FTA is achieved, the UK’s GDP could grow by 2 percent in the long-term.
In trading with America, the UK may discover how aligned with Europe it really is
However, in attempting to achieve a US trade deal, the UK is increasingly discovering just how aligned it is with Europe on a number of issues. Tensions with Johnson and Trump over Huawei’s access to 5G networks, as well as the UK’s shaken commitment to the JCPOA illustrate this. This may undermine the speed by which a trade is achieved.
To add, Trump’s America First doctrine could complicate matters further. Trump’s 2017 Trade Policy Agenda called for a more “aggressive approach to trade”, whilst utilising “all possible leverage to encourage other countries to give U.S. producers fair, reciprocal access to their markets”. Such a protectionist approach to trade could come at the expense of UK industry and consumers.
Arguably, the most controversial element of a US-UK trade deal are the implications that an agreement could have on the UK’s healthcare policy environment, in particular the extent to which pharmaceutical firms can achieve increased market access of the NHS. Negotiating issues like drug pricing will certainly receive a significant backlash from civil society.
A pivot to Africa?
Commentators are increasingly referring to this as the ‘African Century’ owing to the continent’s abundant natural resources and access to the fastest growing middle classes in the world. The recent UK-Africa Investment Summit represents the culmination of Global Britain’s pivot to Africa.
Currently accounting for just over 2 percent of UK exports, there is plenty of room for the trade increase with Africa. While raw goods such as fresh fruit currently dominate African trade, energy is increasingly playing an important role in UK-African investment. Especially in the form of energy transformation.
A major win for the UK would be capitalising on the opportunities espoused by the African Continental Free Trade Area which will create the world’s largest free trade zone. This integration of African markets would help simplify trade negotiations and consolidate a rules-based model of trade for the entire continent.
Stumbling blocks to trade with Africa
Despite the numerous opportunities presented from trade with African states, stumbling blocks exist. Central among them is a weak commitment to the rule of law, poor governance and limited access to physical infrastructure. All of which means that the implementation of any negotiated trade deal could be significantly hampered, thereby reducing the attractiveness of these markets for UK businesses to export into.
A multilateral approach? CPTPP
CPTPP is a multilateral free trade agreement covering 11 countries including major economies such as Japan, Canada, Australia and Mexico. On 6th February 2020, the International Trade Secretary reaffirmed the UK’s commitment to joining CPTPP.
The UK’s accession to CPTPP could play an important role in increasing the quantity of UK machineries, vehicles and pharmaceutical products which are exported into the Pacific region. Moreover, the liberalisation of trade could also increase the supply of goods currently imported from CPTPP in high quantities.
When it comes to trade, distance matters
Research has indicated that distance remains a considerable factor in limiting the flow of goods and services between states. Indeed, industries tend to invest less in markets which are further away, due to the physical and non-physical costs associated with distance and time zone differences. Consequently, even if a trade deal were to be struck with CPTPP, logistical issues could limit the extent to which it could offer an effective alternative to EU membership in terms of goods and services.
A new world order? The decline of international trade
The gradual erosion of global governance in an age of populism has impacted the prospective efficiency and vivacity of Global Britain. Indeed, the proliferation of trade conflicts and geopolitical tensions have resulted in the ‘de-globalisation’ of the international economy.
As this is a constantly evolving phenomenon, its implications are yet to be fully analysed. Regardless, de-globalisation represents a watershed moment in global politics that the UK Government will need to adapt to in order to pursue sustainable international trade agreements.
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