With Liam Fox, optimism trumps sound judgment on trade
The Trade Bill must focus on standards and rights – not just tariffs and quotas – or the UK will end up with a raw deal, warns Barry Gardiner
I like optimists. On the whole, I am an optimist, and so I entirely understand Liam Fox’s desire to paint a thoroughly positive picture of the UK’s trading relationship with the rest of the world after Brexit. The difference between him and me is that I like to have some rational grounds on which to base my optimism.
Two weeks ago, the Department for International Trade made a mistake. They sent out an official tweet backing a report from the group that now calls itself Economists for Free Trade (formerly Economists for Brexit). The report was optimistic. It talked of an increase in GDP of up to £135bn if we unilaterally liberalised all our markets in the UK and got rid of all the tariffs and non-tariff measures that they and their friends at the Legatum Institute see as barriers to trade.
After the tweet went out, I suspect somebody bothered to read the report, because the tweet was subsequently deleted. The Economists for Free Trade have previously acknowledged that, by liberalising as they recommended, the government would “effectively eliminate manufacturing” in the UK at the cost of 2.7 million jobs. Somehow, I just cannot get optimistic about economic growth that puts 2.7 million people out of work and turns us into a European version of Singapore. That is economic growth that brings wholesale social dislocation and rising economic inequality.
The trouble with the unilateral free trade position is that it sees regulations essentially as a barrier to trade. Whereas in fact, regulations are simply an expression of our values – they are an expression of the sort of society we want to live in.
Do we want to live in a society where health and safety is important? That protects the environment and animal welfare? That has food safety rules? Minimum product standards? That respects people’s rights at work? Of course, rules like this can impose a cost – but abolishing them comes at a hell of a price.
There has been much talk in the last month about regulatory alignment. Wilbur Ross, the US commerce secretary, said the UK needed more regulatory alignment with the US if we were to be granted an early trade deal with them after leaving the EU.
The following week, Michel Barnier said we needed to maintain regulatory alignment with the EU if we were to get a good trade deal with them after Brexit. Everybody talked about the need for regulatory alignment to avoid a hard border in Ireland.
Currently, the ease of market access for UK exports into the EU comes in four ways – the absence of tariffs for UK exports into the EU; the absence of any ‘rules of origin’ requirements; the absence of requirements to prove standards or originating status, and the absence of certification constraints upon services and labour.
These are a result of our participation in the customs union and the single market. When separated into their component parts in this way, it makes it easier to see why regulatory alignment is about more than just tariffs and quotas; it is about standards and rights as well.
It also makes clear that one of the key differences between those who want the UK to pursue a free trade agreement (FTA) and those who propose a customs union is that, under an FTA, there is a limit on the amount of foreign content in exports to the EU. These are the rules of origin, and they are there because our tariffs and quotas can diverge.
And it is this issue of foreign content that may well prove difficult for the secretary of state when we move to debate the trade bill in the new year.
In his profile for The House last month, Fox talked of simply writing the EU’s free trade agreements with non-EU countries into domestic UK law. That is the optimist speaking.
In practice, this would not give UK goods the same access into either the EU or third countries because the limits on foreign content that are applied under each FTA would have to be agreed three ways instead of just two. This diagonal cumulation, as it is called, basically means that you cannot simply roll over, or grandfather, the previous agreement and achieve the same result.
Bizarrely, what the trade bill precisely does not do is set out how the UK will enter into new trade agreements in the future. One could be forgiven for thinking that a department that has been established for more than a year now might have thought that a bill called the ‘trade bill’ would be a suitable opportunity to do precisely that. Business could have been consulted already. And they certainly do need clarity about how our future trade negotiations are going to be conducted.
But in his interview, the secretary of state waved all this away as something to be done “in stages”. A matter where, no doubt with the liberal use of the ‘Henry VIII powers’ he is granting himself, the government will seek to gain approval from business, parliament and devolved nations at the start.
Now if that is not the triumph of optimism over a sound judgment, I don’t know what is!
Barry Gardiner is Labour MP for Brent North and shadow secretary of state for international trade, energy and climate change.
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