Today
Tue 22 June 2021

Sam Bright summarises the key issues with the UK’s attempts to forge new economic alliances after leaving the world’s largest trading bloc

Brexit was heralded by its proponents as the beginning of a free trade nirvana, whereby the UK could cast off the shackles of the European Union and partner with rapidly-growing economies across the world.

Nearly five years after the vote, this promise hasn’t been realised. In fact, newly-released statistics from the Department for International Trade paint a pretty bleak picture. Amid the Coronavirus pandemic, exports in March this year were down by 18.1%, while exports to the EU fell by 16.5% in the final quarter of 2020 – compared to the previous year – while exports to non-EU countries were down by 15.9%.

So – pandemic aside – what has gone wrong?


Australia

There has been a much-publicised row in Government in recent days about the vaunted post-Brexit trade deal with Australia.

As documented by Otto English, the deal looks set to open the UK market to Australian farmers. Not only would this competition potentially put many domestic producers out of business, or at the very least reduce their revenues, Australian meat is treated with growth hormones that have long been banned in the EU.

And for what? The Government’s own figures suggest that a trade deal with Australia would facilitate exports that would add 0.01% to GDP (about £500 million) over the next 15 years. Not exactly a game-changer for the lagging British economy.


USA

Similar issues have been raised in the case of the United States. The American meat market employs lower standards than the EU, with chlorinated-washed chicken being the most vivid example.

The United States, especially in the Trump era, has been strict about the terms of its trade deals, and it’s thought that access to UK farming/agricultural markets would be a precondition of any Atlantic agreement.

That’s if the deal happens at all. While an agreement with the US was seen as the jewel in the crown of Brexit, the Biden administration has seemingly put negotiations on the back-burner, crystallising Barack Obama’s promise that Britain would be “at the back of the queue” for a trade deal, if Brexit went ahead.

Even it is signed, the agreement is only expected to boost GDP by up to 0.16% “over the long run”, according to the Government’s own analysis.


Japan

Technologically-advanced, developed and culturally romanticised, Japan has also been held aloft as an example of a model economic partner of ‘global Britain’.

The problem is, the UK’s trade deal with Japan is actually not as extensive as the new agreement between Japan and the EU. As highlighted by the New European, the Government estimated that the EU-Japan trade deal would boost the UK’s economy by somewhere between £2.1 billion and £3 billion. However, the UK post-Brexit partnership is only expected to bring in £1.5 billion.

As Professor Han Dorussen notes, the EU-Japan agreement is “not only closely aligned with the UK’s economic and political interests, British diplomats also played an important role in negotiating [it].”

Talk about self-sabotage.


India and China

Post-Brexit trade negotiations have been a desperate effort to align the UK with as many large economies as possible. At the forefront of this endeavour has been the courting of India and China, representing the fifth and second largest economies in the world respectively.

However, this pursuit of trade appears to have blurred the Government’s priorities in other areas. Reports in recent days have suggested that Boris Johnson opted against shutting the UK’s borders to India sooner, amid a surging variant of COVID-19 in the country, because he was worried about jeopardising a prospective trade deal.

“It’s very clear that we should have closed the border to India earlier and that Boris did not do so because he didn’t want to offend Modi,” a source close to the Government’s COVID decision making told The Times.

Meanwhile, concerns over China’s human rights record have intensified to a point where a trade deal with the country is currently off the cards.


The European Union

It shouldn’t be forgotten that the most important post-Brexit trade deal is the one that has been signed with the European Union – our closest neighbour.

Judging by the effects of the agreement, it hasn’t been an overwhelming success. Indeed, as predicted, our post-Brexit settlement with the EU has created problems in Northern Ireland, thanks to a complex tapestry of customs regulations that is limiting trade and reanimating cultural tensions in the country.

Meanwhile, the British fishing industry has suffered the effects of additional barriers to trade, with many other sectors of the economy similarly castigated by the penalties imposed by Brexit.

By the beginning of February this year, the UK had signed 64 trade or continuity agreements – fewer than we had access to within the EU.

This process has been long and arduous – a far cry from the promise of former Secretary of State for International Trade and ardent Brexiter Liam Fox, who pledged to sign 40 free trade deals the ‘second after’ Brexit.

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