Brexit & UK trade, Brexit comment

British trade policy: how to take back control

 

Don’t rush into a deal with China, India or the United States. Make the government machinery more efficient. Formulate a proper trade policy strategy. Engage with civil society, devolved administrations, and be more transparent.

 

That’s the key messages to Whitehall conveyed by the Institute for Government in a report discussing how Britain’s government machinery can effectively cope with the coming transfer of trade policy competencies away from Brussels as the United Kingdom leaves the European Union.

 

Capacity

 

Building trade policy capacity has been recognised as a key priority soon after the referendum to leave the EU in June 2016. The newly established Department for International Trade, currently led by international trade secretary Liam Fox, has worked intensely on developing in-house knowledge about international trade policy making and negotiations. The Foreign and Commonwealth Office has set up a Trade Policy and Negotiations Faculty.

 

“Effective trade negotiators draw on years of experience”, the authors argue, adding that “government should develop a cadre of trade specialists whose career is anchored in this policy area”.

 

That expertise needs to be spread out across the government. “Other departments are building trade capacity too slowly”, the authors deplore.

 

“Implementation of trade agreements almost always falls to the departments that do not have ‘Trade’ in their title”, so the report. These include the Foreign and Commonwealth Office, HM Treasury, DEFRA (agriculture) and a large number of regulators. To make trade policy work requires cooperation “at the highest level” and “cross-departmental cooperation”, the authors say.

 

Effective cooperation also requires devising an overall trade strategy and setting priorities. This process needs to be steered by the Prime Minister’s office, the report stresses.

 

Independence and ownership

 

UK trade strategy needs to make sure it is independent from pressure and lobby groups, long-term focused, and owned by the British body politic.

 

The paper calls for the establishment of an “independent analytical body” that can offer guidance and helps evaluate trade policy. Examples are the Australian Productivity Commission or the United States International Trade Commission. Such bodies “make it easier for government to take on entrenched interests”, the authors say.

 

Government also needs “a method for engaging the devolved administrations”. Drawing from examples of federal states such as Canada, the report cautions that having a structured dialogue with sub-national entities is essential if Westminster doesn’t want to end up in “political hell” over trade agreements.

 

A similarly structured approach is needed to engaging stakeholders: business as well as consumer and environmental groups, the report argues.

 

There’s also the need for “statutory transparency requirements”, the authors say.

 

“Government ministers must be disabused of their view – often repeated, but never correct – that published mandates approved by ministerial and parliamentary colleagues makes negotiators’ jobs more difficult. The opposite is true”, the IfG believes.

 

The paper finally stresses the importance for Britain to properly engage Parliament in trade policy making.

 

Under current UK law, Parliament has the right to refuse to ratify a trade agreement. That is not enough, the IfG believes.

 

There’s a risk “that parliamentary opposition to trade deals will find other outlets”, the authors say, citing the example of how dissatisfaction with NAFTA in Canada in 1993 ended badly for the government. “Denied the ability to veto the deal, Parliament collapsed the Government”, the reader is warned.

 

Priorities for trade deals

 

The IfG team that put the report together says they fear the government could be tempted into seeking to sign trade agreements at any price across the world, and to set the wrong priorities.

 

The group recommends Britain sequence trade agreements as follows.

 

The first priority is to establish independent schedules of tariff and services commitments in the WTO. On this issue, London is “already taking the right approach”, the authors reckon.

 

The other priority is to seek to copy existing EU trade agreements. The focus should be on EEA/European Free Trade Area countries Norway and Switzerland, Turkey, Canada, Singapore, and South Korea. These are the countries with which the EU signed trade agreements with which Britain also has the deepest economic relations.

 

“Replicating these deals will be easiest if the UK makes only minimal changes to the text”, the authors say.

 

In launching new free trade talks, the priority should be on Australia and New Zealand. Though these agreements are not expected to bring much economic value, they are a good way for the government to “build experience by negotiating with like-minded, medium-sized economies”.

 

Most importantly “the UK should avoid sinking resources into negotiations with the BRIC countries (Brazil, Russia, India and China) or the USA”, the authors warn.

 

Washington “can be a swift negotiator, but tends to move most quickly when its partners adopt a strategy of capitulation masquerading as negotiation”, they stress.

 

With China, there is a risk that a deal ends up being one-sided, quoting the Switzerland-China free trade agreement, in which the small European country gave more to China than the other way round, so the report.

 

Clearly, “there’s more to trade policy than trade deals”, as the report says.

 

 

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