The Week in Trade: UK general election, EU trade deficit shrinks with China and CDS in focus

Fri 24 May 2024
Posted by: Benjamin Roche

A major turning point in UK politics this week, as the next general election was announced for 4 July. It’s also another week of news on the trade tensions between the West and China, as the Asian nation indicated it would respond to EU investigations into unfair trading practices with a major tariff boost on car imports.

The big picture: The moment we had all been waiting for – prime minister Rishi Sunak called the next UK general election. Delivering the news in less-than-ideal weather, Sunak threw down the gauntlet to his rivals, not least Sir Keir Starmer, namechecked in his speech.

As we covered yesterday (23 May) in our report on the announcement, it appears likely that the result of the election could mark a change in direction for FTA negotiations, even reshaping some existing agreements. Director of the UK Trade Policy Project David Henig said:

“If there is to be a change of administration, I’d expect Labour to review these and all other negotiations against broader objectives, and potentially put greater focus on negotiations with the EU, Switzerland, and Turkey.”

Should Labour triumph, that potential shift towards Europe could mean work on a new sanitary and phytosanitary (SPS) trade agreement with the EU – though as Politico reported recently, the condition could be UK acceptance of European Court of Justice (ECJ) oversight, which could have political implications.

Good week/bad week: The EU received positive news about its trade deficit in goods with China, which hit its lowest quarterly level in nearly three years. Stats this week put the deficit at €62.5bn, a 10% drop on the previous quarter.

A further bad week for those in favour of tariff-free trade, as China indicated it’s ready to strike back against new US tariffs and EU investigations on its auto exports with a 25% car tariff, according to Bloomberg.

How’s stat? 2.3% – the latest UK inflation figure, published yesterday. It is 0.3% shy of the Bank of England target of 2%, but was hailed as a return to normal by Sunak shortly before he called the election. Services inflation of 5.9% was much higher than the 5.5% predicted by the Bank, however, and could limit the scope for imminent interest rate cuts.

The week in customs: This week, IOE&IT expert Matt Vick has been answering new questions each day on submitting export declarations using the Customs Declaration Service (CDS). The deadline for migration to CDS from the old Customs Handling of Import and Export Freight (CHIEF) system for export declarations is 4 June.

The government issued a reminder on Tuesday about the deadline, while noting that those who can’t make the migration “because of an HMRC IT issue that won’t be resolved by 4 June” can apply for an extension to 4 July.

What else we covered this week: A report jointly authored by academics from the universities of Oxford and Nottingham argued that the UK should do more to fight modern slavery in its trade deals in the Indo-Pacific. It noted that bilateral trade can exacerbate the incidence of forced labour in countries with weak protections for workers, particularly “where trade involves production of primary goods and products intensive in unskilled labour”.

Our member-exclusive Commodity in Focus feature looked again at copper, whose price is surging as demand swells on the crest of the green transition. Members could also get detailed insight on using the Integrated Online Tariff in our Ask the Experts feature on the subject.

We had a Daily Update explainer on the new EU Entry/Exit System, which some fear could hit tourism and trade when it’s introduced. Foreign secretary Lord David Cameron expressed his concerns by saying that “after Ukraine, this will be point two or three” in his meetings with EU ministers.

True facts: It’s exactly 180 years since the day when Samuel Morse sent the first telegram – a step without which we might not be able to read the IOE&IT Daily Update today.